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2/25/2011

When supply and demand are not elastic

The basis of a free enterprise economic system is based on the elasticity of supply and demand. And there must be plentiful of supply, ie choices, and plentiful of demand, ie people can afford to buy whatever they want. Without this elasticity, a free enterprise economy is doomed for self destruct. Today we are seeing more and more evidence of what an uninterrupted and skewed economy can become a living hell to many and heaven to a few. Hey, isn’t that a truism, that only a few will be in heaven and the rest be in hell? Take drinking water as an illustration. If the supply of drinking water is controlled by a mean owner, he can literally sell a cup of drinking water at $100 or at whatever price he demands. Everyone kwai kwai must pay. It is only the wisdom of time that govts of today imposed regulations on the distribution of essential and basic goods and services. Of course the temptation of free enterprise and the grostesque profits it can make often proved too tempting that devious reasons were used to perpetuate free private enterprises. The mantra of market forces know best and are best for buyer and seller is the wisdom of today. This is the biggest myth that the masses have been led to believe. For many economies, or many goods and services, the perfect market condition is just not there. The result is abuse of the free enterprise system. There are times when control and regulations must be imposed, with good intention as a prerequisite, to ensure a fair and equitable system for the people in general. A time has now come to upturn the concept of property speculation in a small piece of rock. Properties cannot continue to be speculated simply for profit basis. It is an essential piece of basic needs and must be heavily regulated. Unrestrained property speculation for profits only benefitted the few who will get richer at the expense of the larger majority. Making matter worst is that foreign speculators in the name of investors, came in to profit and disappear with their gains and leaving the locals with a baby that becomes a heavy burden for life. The madness of property speculation, of property as a good investment, has transformed itself into a dangerous animal to the demise of many average home owners. With so many negative factors that will only contribute to higher and higher property prices, a fundamental change in housing policy must be looked at now. It is no joke when a person has to work his guts out, for the rest of his life, just to have a roof over his head. It does not make sense anymore.

14 comments:

Wally Buffet said...

The evil empire as you put it, although using banana currency, has a reach far larger than its borders.

It is no secret that the North African and Middle East unrest was indirectly the result of the Fed's QE2. If they couldn't bring down governments by force or by other insidious means, they now have found a new weapon of mass destruction, perhaps even unwittingly. Destabilizing countries with a tsunami wave of easy credit will drown nations targeted, it seems.

High commodity and oil prices breed staggering inflationary pressures on many countries and people, losing faith in less "secure" and unproductive investments have turned to properties even knowing the pitfalls of a serious downside. After all, every one has to have a roof over their heads.

In Sinkapoore, interest rates are so ridiculously low that one cannot but suspect that it's kept that way to encourage property speculation. This moderating of inflation by currency adjustments against a "basket" of currencies is hogwash. Raise interest rates by 100 basis points and the effect can immediately be seen with a violent turn around.

The property bubble bursting worldwide will be the precursor of the next Great Depression.

The sub prime mortgage crisis that started the mini recession just not too long ago was a warning sign that many just laughed off.

Well, they may just be laughing themselves to Hell's Gate.

Hehe. :o)

Anonymous said...

I agree that interest rates are kept ridiculously low to encourage speculation in properties and stocks.

In the old days of small local banks operating here, you could more or less shop for interest rates that are much higher than the big banks. The competition is obvious and customers benefit. Now, there are only three big local banks setting the pace and I do not know for how much longer they will remain at three.

Notice also how much bank charges and fees have risen over the years. It is a cartel to say the least.

Anonymous said...

When supply can be controlled, the theory of supply and demand is hogwash.

Chua Chin Leng aka redbean said...

Depends on which side one is. On the right side, it is a very rewarding proposition. On the wrong side, very painful.

Wally Buffet said...

Since I can't read someone's mind, how can I be on the right side whilst he's giving red herrings in the direction of the wrong side?

Anonymous said...

Wow! Wally Buffet's last post(question) is interesting. Anyone can answer it?
Or can any of our political and or business leaders?
Mr Wally must share with us the Answer when You get it.
Please!

Matilah_Singapura said...

redbean:

> The basis of a free enterprise economic system is based on the elasticity of supply and demand. <

It doesn't happen very often, but bingo in this case. The whole article is flawed because the very first assertion (claim) is erroneous.

"elasticity" or lack thereof has got nothing to do with it. at the heart of the free enterprise system is THE PRICE MECHANISM -- which is reflexive - i.e. price affects individual behavior - expressed collectively, individual behavior -- expressed collectively -- affects price.

Anonymous said...

"With this elasticity, a free enterprise economy is doomed for self destruct"

I am confused. Should it be 'without' rather than 'with'? Please enlighten me.

Chua Chin Leng aka redbean said...

Thank you for pointing out the typo error anon. Amended. Should be without. Thanks again.

agongkia said...

hehe..talking about supply and demand and free enterprise ....
I just had my supper dinner at a satay stall at a coffeeshop in Changi Road.There is no price stated but a signboard is prominently displayed.
"PRICE-subject to change according to customer's attitude."
Heng Ah..Being confident of my "betterer" attitude,I thought I may have a chance of enjoying a stick of satay at maybe 25 cent per stick .
Despite smiling all the way begging(not ordering) for 10 stick of satays,they still charge me at 55 cent per stick.
How come ah?my attitude bad meh?

Anonymous said...

Maybe the satay vendor thought that your (overly?)good and courteous manifestations were play-acting just to have his/her goods cheap. However, by charging You more, he or she had slighted You by implying You're not up to the required standard.
It may be akin to sweet talkers who say or promised many things but never act upon them or deliver.

agongkia said...

anon 1212.
hehe.
YOU ,and the satay girls are not wrong to come to that conclusion.The word attitude to them could mean that they must be tip,or even tip more if one wants to let them consider one as having good attitude .Smiling won't work on them anymore.

Chua Chin Leng aka redbean said...

Agonkia,

They must have sized you up and write you a bill that is affordable. Just like medical bill, $8 is affordable, $24.8m is also affordable.

You should be happy that their mean testing is credible and see you up. No subsidy for you even if you want to lower your expectations.

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