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11/26/2010
Good news or bad news?
When I read the mypaper this morning, the two news that hit me were, one, property prices could rise higher, and two, Singapore's household debt low. And these are front page news. So, what is the message?
Low interest rate and high liquidity will push property prices higher. Nothing can be done about it. It is beyond our control, market forces at work. And the consolation part, Singaporean household debt is low. This means Singaporeans can afford to take on more debt, pay for higher price properties.
Add the two together, what can we expect? Boom time Charlie for the developers and property speculators.
Great news!
ReplyDeleteNot just ggod news!
Boom time for the National Development and the Ministry!
Boom time for developers.
Boom time for speculators!
Boom time for capitalists
SO JOIN IN THE DEVELOPMENTS,
JOIN IN THE SPECULATIONS.
AND MAKE YOUR PILE AND STASH!
SIN IS PARADISE FOR ALL!
Boom time for speculators -- yes.
ReplyDeleteFor developers: it depends. High land price - no good. Healthy demand -- good. Yes, Singapore with a MAS under Goh and finance under that Fabian socialist Tharman, has been "printing money" just like everyone else. That 20bil "stimulus" nicely went into stocks and real estate.
anon 1042:
Boom time for capitalists
Actually, no. True-blue capitalists hate inflation. More correctly it is boom time for socialists. The idea of inflating money supplies is a socialist idea. Capitalists were labelled as "hoarders" -- they save money. So the socialists thought it a great idea to go to govt controlled "soft" currency aka FIAT currency to "punish" the capitalists "hoarders". Now the govt could print up all the money the country needed to do whatever -- pay for welfare, pay for warfare.
Most (classical) capitalists prefer hard money, slowly appreciating asset values, and "reasonable" interest rates -- 6-9%, because these "crusty old rich guys" know the only way to wealth is through real savings, investment, productivity. The basis on how the "tiger" economies got rich, and how the west got rich centuries ago: REAL SAVINGS.
At present the saving rate in say China, Singapore -- all the "creditor nations" of the world is over 30%. Compare to western debt-ridden countries -- 2-4%...if you're lucky.
Asian countries that inflate (ALL of them do) are sabotaging themselves by debasing the value of their citizens savings -- savings which will be available to invest in productive activities. In the long term inflation makes countries uncompetitive and unproductive. In the short term, you might think debasing your currency makes your exports more "competitive".
But that comes at a price: your citizens LOSE their purchasing power, and soon life in your country becomes unfordable. It starts with real estate, stocks and sometime commodities, and then spreads throughout the economic system. The last price to rise is that of labour -- i.e. wage rises. Once that happens, bosses start cutting back on staff.
Now those unemployed people cannot pay their loans (default) and cut back on expenditure (consumption). High prices mean high debt. Business cannot service their loans (default). Banks start to fail, economic system melts down.
Lucky for the whole of humanity, a super hero comes to the rescue.
"This is a job for Helicopter Ben"
Haha...
ReplyDeletethe actual world is different from the theoretical one.
Over 2 decades ago, Tokyo Property Bubble bursted, just years back, subprime problem in the US.
Singaporeans have been talking about property bubble bursting in their faces for years too.
We see gold prices shooting for the sky.
HOWEVER, we also see all those bubble bursts, subprime and financial problems have so far little or no effect on the affected entities, financial houses, the regulators and the Authorities(Government). The stock prices and hence indexes are blooming and as You put it, 'Boom time Charlie for developers and property speculators".
What else do we see? Long queue to buy houses, more cars on the road, more shopping complexes carrying more branded goods.
Disadvantages to capitalists???
No, no, no! CAPITALISTS TODAY BENEFIT THE MOST AS THEY HAVE MORE CAPITALS TO SPECULATE. AND THE WEALTHY AND POWERFUL FRATERNITIES KNOW BETTER THAN OTHERS HOW TO CO-OPERATE, JOIN FORCES TO ENRICH THEMSELVES AS WELL AS PROTET EACH OTHERS' INTERESTS. In short, capitalists gain most whenevr speculations make money.
Oh Yeah!
ReplyDeleteAnd that's how the Saying the Rich gets richer and the poor gets poorer came about.
It's all because the politically powerful and the financially strong are always able to look after each others well.
patriot
so some extent true. I think it is fair to say, if you are going to make money you have to adapt to the situation.
ReplyDeleteBTW, most old-fashioned capitalists -- the ones who believe in savings -- have locked up their dough in "non-inflatables" like precious metals, and revenue-generating (lots of nice cash flow)land -- agriculture, mining. Their "theory" will give them the "ammo" to to buy stuff (for hard cash) when everything starts tumbling downwards.
Loose money invites speculation. That's the only game to play.
I would have thought most Singaporeans already arry a HDB millstone around their neck, in the form of a housing loan of several hundred thousand dollars each.
ReplyDeleteReading what mypaper reported, does that imply that HDB loan is not debt? Can some bean enlighten me please?
patriot,
ReplyDeleteYes indeed. What happens when there is lots of money inflation: it becomes more "lucrative" to buy and sell paper, and to create more "investment products" by creatively bundling up debt to sell.
Since money printing depends on "debt as asset", the shit only worlds if DEBT is maintained as an "asset", so it makes it necessary to be as creative as possible with the debt and CONN PEOPLE into believing it has "value". Hence the wild, ever expanding market in derivatives.
Money printing drives a rift between the productive economy and the financial economy. Under "normal" circumstances, these two economies are integrated and function as one: financiers sourcing and selling capital and structuring debt, the producers ensuring that goods and service are available to consumers so human life can continue.
When there is excess liquidity caused by govt, it becomes more "profitable" to play in the financial economy -- with rapid rises in asset values, day-trading etc etc. The production economy suffers -- who the fuck wants to play there when they can make billions in hedge funds?
Today, the Americans still believe that the bigger the debt you can aquire, the more worthy is your net worth. The banks won't let you a dime if you can't afford it. So if a bank is willing to lend you $10m, it means your credit worthiness is first class even if it means you have incurred a $10m debt. Good enough to owe so much!
ReplyDeleteSingaporeans should be encouraged to take up more debt, but don't call it debt, call it asset or credit worthiness.
Singaporeans may be asset rich but money poor. It is virtual wealth. Seriously the prices of houses don't mean a hoot to a man on the street. He may get to sell high but he still have to buy high, or continue financing his loan. Unless he is leaving the country altogether, or is a rich tycoon with lots of other homes to spare.
ReplyDeleteI see this as the government giving an opportunity for banks to increase their interest rates. Already the prices of housing is high and putting a burden onto many people. With higher interest rates, the man on the street will be impacted, and many young couples will be bogged with the higher interest rates and rising housing costs. All these perhaps to ensure a Singaporean is 'slaved' and forced to work until death.
Where is that report that says nse Singapore has the highest saving rate, worked the longest hours but the lowest in savings? Appreciate if someone can put the link here.
Kaffein