10/09/2007
Illusion of payrise
High inflation Major cause: Restructuring Strong currency cannot offset domestic pressures on prices. DBS analysis. Oct 8, 2007 Singapore exchange rate policy struggles with inflation Commentary by DBS Group Research (source: The Edge daily)
SINGAPORE’s CPI inflation hit a 12-year high of 2.6% year on year (y-o-y) in July. While this was partially due to a two percentage point hike in the GST in July, some structural changes in the economy are also at play. Apart from imported inflation, which can be addressed with the exchange rate policy, much of the current inflationary pressure stems from domestic sources.
Plainly, exchange rate policy is not very effective in dealing with domestically driven inflation. Policymakers will need to utilise non-monetary policies to complement the exchange rate policy if inflation is to be kept in check.
The above is part of an article posted in littlespeck.com.
What is actually affecting the people today is that their income is shrinking. Yes, they are getting a huge pay cut without knowing it. And to maintain their same purchasing power, a huge pay rise is necessary just to go back to square on.
The illusion of huge pay rise is as good as watching David Copperfield and his magic show. It is all an illusion. There is no pay rise for those who got a pay rise, except those who got a very substantial payrise.
Those who got little or no payrise is getting a paycut.
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2 comments:
I don't know where DBS/littlespeck gets all that hot-air fancy economic theory from, but I can tell you it is totally false, and wrong. This is the stuff govt's accountants put out to dupe the public into believing that inflation is somehow "beyond anyone's control".
> High inflation Major cause: <
There is only ONE (yes, ONE) cause to a general increase in the price level throughout the economy: an increase in the money supply, especially in the increase in credit money (money created when it is borrowed and spent/invested in the economy aka fiduciary media). Go to the MAS website and look at the figures, you'll have your answer.
I spotted this almost a year ago, and have been screaming about it. (of course it won't make any difference to the way things are. I just like screaming. In my next life I will be a rock star, screaming on stage, and getting mobbed by horny groupies after the concert)
At the root of it is the USD—the world's de-facto reserve currency, which can be printed any-old-how-when-needed.
The damn currency is on the way to becoming banana money, Benanke pushed the self-destruct button a few weeks ago to "cure" the fallout in the sub-prime lending market, by INCREASING the money supply AGAIN. That is like trying to cure cancer by adding more cancer.
It'll take a govt with nerves of steel to cure this. What MAS needs to do is to RAISE interest rates, RAISE the commercial banks reserve ratios. It is either take the pain now, or wait for the whole thing to crash and take massive pain (also creates massive opportunity).
all of us should share this same passion, to scream and kpkb here for your pet subject.
we can't do anything about how things are happening around us. but there is nothing to stop us from venting our disgust at some things.
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