Tag Archive | "inflation"

Increasing food costs will deter eating, help S’poreans fight obesity

Increasing food costs will deter eating, help S’poreans fight obesity

Tags: ,


Look on the bright side of inflation, Singaporeans urged.

maxwell-hawker-centre

Singaporeans from all walks of life, who are looking for an efficient weight management programme, are feeling relieved.

This after health authorities have found a winning message for inflation as it will be a good thing in a bid to help Singaporeans curb their enthusiasm for food.

One health authority spokesperson, Qu Jian Fei, said: “You see, alcohol prices go up, people drink less. Cigarette prices go up, people smoke less.”

“So when food prices go up, people eat less also. This will help Singaporeans maintain their weight. Inflation is a good thing health-wise”

One local, Chi Dong Xi, said he agrees that, therefore, the sight of fat Singaporeans is a sign that things are not going so badly: “I like how in Singapore there is always a silver lining for everything.”

At press time, Singaporeans are suggesting lowering the salaries of Members of Parliament so that they do not attract opportunists to run for political office.

 

 

 

 

 

 





Rising food costs will deter eating, help S’poreans fight obesity

Rising food costs will deter eating, help S’poreans fight obesity

Tags: ,


Look on the bright side of health, Singaporeans urged.

hawker-centre

In a bid to help Singaporeans from all walks of life curb their enthusiasm for food, the health authorities are working hand-in-hand with the economics authorities to market inflation as a good thing.

A health authority spokesperson, Qu Jian Fei, said: “You see, alcohol prices go up, people drink less. Cigarette prices go up, people smoke less.”

“So when food prices go up, people eat less also. This will help them maintain their weight. Inflation is a good thing health-wise”

One local, Chi Dong Xi, said he agrees that, therefore, the sight of fat Singaporeans are a sign that things are not going so badly: “I like how in Singapore there is always a silver lining for everything.”

At press time, Singaporeans are suggesting lowering the salaries of Members of Parliament so that they do not attract opportunists to run for political office.

 

 

 

 

 











S’poreans in disbelief over $300 million asking price for bungalow

S’poreans in disbelief over $300 million asking price for bungalow

Tags: ,


They say, “I cannot believe it!”

nassim-road-bungalow

Local property tycoon and chairman of Wing Tai Holdings, Cheng Wai Keung, is hoping to sell off his massive bungalow at 33 Nassim Road.

His asking price? S$300 million.

This caused Singaporeans from all walks of life to express disbelief and shock at the amount.

Because it is too low.

A 40-year-old Singaporean property speculator, Mai Fang Zhi, said, “Come on lah, these days one HDB flat, which is basically four walls and two toilet bowls, in some ulu place, can command up to $1 million already.”

“$300 million for a bungalow sounds too low to be true. I cannot believe it!”

The bungalow, which reportedly has a tennis court and swimming pool built into it, is supposed to attract rich Russian or Chinese speculators.

However, they might not be enticed to buy this property as it might cause an erosion of wealth instead.

Another Singaporean, Jiang Niao Hua, said: “At the rate inflation is going, $300 million would probably be enough buy a HDB flat in 15 years’ time.”

Explaining inflation in Singapore

Explaining inflation in Singapore

Tags: , , , , , , , , ,


Inflation today has its roots in the 2008 recession.

By Yuen Yiling
Edited by Fang Shihan

FEBRUARY’S CPI data showed inflation slowing down just a little, to 5%. Not quite the level that would register as ‘healthy’, but not enough for an online screamfest circa 2008.

One source of inflation is expansionary monetary policy. When central banks raise money supply so borrowing money becomes easier, this allows people and businesses to have more available cash, leading to increased demand for goods and services. When the increased demand cannot be met by supply, prices rise, leading to inflation.

While Singapore does not fiddle with monetary supply, favouring tweaking the exchange rate instead, other countries do. And as an import-heavy economy, any monetary policy in economically powerful countries has an impact domestically.

To understand the monetary drivers of inflation in Singapore, let’s do some time travelling to the 2008 economic crisis. Back then, Lehman Brothers had just collapsed (leading to the minibonds protests in Hong Kong and Singapore), the collapse of the financial system was imminent and there was talk of a global economic slowdown.

Earlier that year in QE1, the central bank began their first round of quantitative easing (ie. printing more money), bought government bonds and financial assets to increase the money supply and reserves of the banking system. This, they presumed, would stimulate lending and further economic activity. However, a year later in October 2010, the US recovery was still weak, unemployment was high at 9.6%, and inflation was low at 1.1%.

This policy had a global impact. The presence of more dollar notes led to a fall in the value of the US dollar and this made the purchasing of foreign assets, cheaper. Great if you’re a Singaporean company buying out another company in the US, Or if you’re an internet shopper who’s shipping in a carton Victoria’s secrets underwear.

At the same time, the US was in a low interest rate environment, having slashed rates significantly to stimulate lending since the crisis began. Interest rates in the US stood at 0.19%, in contrast to SIBOR (Singapore Interbank Offered Rate) at 0.29%. This drove investors to borrow money from US banks, so they could park it in banks in emerging markets which had significantly better interest rates.

Combined with the presence of weak currencies in the developed world, ‘hot money’ began flooding in towards the developing world. Or, countries with better growth prospects like Singapore.

As a result, banks here depressed interest rates (over-supply of money from abroad) which lowered the costs of borrowing. This in turn released further liquidity into developing economies.

In October 2010, inflation in China hit a 25 month high at 4.4%. Investors from the developed world keen to seek more bang for their buck invested in commodities, equities and other asset classes such as property. This drove up prices, thus contributing to goods inflation. As an importer of intermediate and final goods globally, Singaporean firms and consumers faced higher prices.

Besides consumers, labour markets also faced tightening, due to the increased demand for goods and services arising from ample liquidity in the economy. Unemployment had fallen across Asia, reaching 2.1% in Singapore, and 4.1% in China. With too many jobs and too few workers, (real) wages began to rise.

Subsequently, wage pressures intensified due to both rising demand for more workers to produce more goods and the expectation from workers that the cost of living would increase. Rising wages led to increases in the cost of production, further fuelling goods inflation.

What drove inflation from then on was the vicious cycle driven by expectations of inflation – expecting higher prices, workers will ask for higher wages, leading to higher prices being realised, and workers expecting even higher prices.

Wages are currently not indexed to inflation. The policy of having the variable component of wages was implemented to take companies through tough times (by decreasing it), but never to help workers maintain their spending power income , or nominal income (by increasing it) during periods of high inflation.

The experience of monetary inflation is not unique to Singapore, but a phenomenon throughout most of Asia that had recovered from the downturn before the US did. It is also a manifestation of policy choices.

One way to dampen the cycle of ‘hot money’ flows is to allow currency appreciation, as MAS did in April and October 2010. As the Singapore dollar strengthened, local assets and goods became more expensive. This put a dampener on investors who were seeking to purchase assets in fast growing economies, thus reducing the inflow of ‘hot money’. A stronger Sing dollar also led to more expensive exports, putting brakes on the economy. Overall, this eased pressure on prices.

Another policy options include implementing capital controls to limit the amount of ‘hot money’ entering a country, or raising reserve requirements (like China) to hold back bank lending and asset purchases, or raising interest rates which would increase the cost of borrowing and limit it. Clearly, the choice of policy will be influenced by political and circumstantial considerations and will vary across different countries.

Is HDB a good investment? Part 2

Is HDB a good investment? Part 2

Tags: , , , , , , , , ,


Cooling the risen dragon – not so easy

Cooling the risen dragon – not so easy

Tags: , , , , ,


Monetary policy looks good on paper, but may have little effect on the ground.

Fang Shihan reports.

  • The first storey of a warehouse in the outskirts of Kunming. Yang Bo(see story) purchased a similar unit in another neighbouring building. With the subway system to be completed in two years time, investors are expecting these properties more accessible and to be fully occupied. Picture by FANG SHIHAN.
  • Rows of warehouses occupy the outskirts of Kunming. Picture by FANG SHIHAN.
  • Kunming Central. While it used to be a sleepy town 10 years ago, Kunming now is a bustling metropolis. Picture by FANG SHIHAN.

“THE RICH people buy up so many houses here that they’re driving up inflation!” remarks Hao Fei, 27, an English teacher at the Henderson Foreign Language school in Kunming, Yunnan.

Property is hot in China. Not only because social norms dictate that a male must own his a house before he’s deemed worthy enough to take a bride, but also because of rampant speculation.

Hao Fei bought his apartment 4 months back for 400,000 yuan (S$78,000). He reckons that he could sell it off for 500,000 yuan now. With a middle class salary of 6,000 (S$1,175) a month, he’ll take 30 years to pay off his bank mortgage.

He’s unhappy, however, that he is living in an asset worth half-a-million.

“Of course I can sell my house and earn a profit. But where will I live? Houses everywhere are getting more expensive as well!”

Nearer to the heart of Kunming, where the likes of KFC, the Big M and yes, even Breadtalk have sprouted within walking distance of each other, apartments owners literally live in million-yuan homes.

Little wonder then, that cash-rich Chinese are riding the bubble by buying their second and third houses. After all, what’s a million-yuan when the returns could potentially amount to 1.5 million yuan.

Government measures to cool the property market have been effective, but inflation is still rampant. Overall inflation remains high at 5.1% while food inflation stands at 10%.

According to Professor Zhang Jian Hua at Yunnan University, the crux of the problem lies in China’s lax monetary policy.

As a reaction towards the flood of liquidity unleashed by US’s own loose monetary policy during the recent depression, the Chinese government is now taking measures to rein in easy money, partly to curb property speculation.

“Property is not so easy to buy if you don’t have guanxi. The bulk of the warehouses in this estate have been reserved for friends and family of the developer. Outsiders like us have to pick from the leftovers.” – Yang Bo, business developer

Previously, homebuyers only had to pay 20 to 30% of the sum upfront and take a bank loan for the remainder. This now only applies to first-time buyers. Individuals looking to buy their second house now foot 50% upfront while third-timers pay the full sum in cash. But that’s only for housing. Speculation is still rampant in the commercial sector.

Yang Bo, 32, owns a chain of music schools in and around Kunming. He’s just bought the first floor of a 6-storey warehouse, intending to use the space as a warehouse retail outlet for his pianos.

“The developers wanted me to foot an additional 300,000 yuan when they agreed on 5 million yuan a few days ago. Now everyone’s holding back on their sales, hoping for the prices to increase.”

Still, he says the terms are good. With a 16% cashback incentive payable over two years, he says that by jumping in early, he’s saved himself 814,400 yuan.

“Property is not so easy to buy if you don’t have guanxi. The bulk of the warehouses in this estate have been reserved for friends and family of the developer. Outsiders like us have to pick from the leftovers. But it’s still a good deal because the area is near the distributorship cluster.”

An oversupply of liquidity over the past two years has also led to rising food prices, indicative by the Consumer Price Index (CPI) which stands at a 28-month high.

Lowering the logistical costs of agricultural produce and releasing some state food reserves, the government has managed to stabilise the prices of grain and cooking oil. Wholesale prices of vegetables have even gone down, according to Xinhua.

“That’s still not addressing the problem” says Professor Zhang.

With price controls in place, the Chinese farmers working with already low profit margins have even less incentive to be productive. He insists that there should be more investment in the agricultural sector instead. But such a policy would not have an immediate effect.

Remarking rather pessimistically, he mentions that it would also be half a year before current monetary policies have a tangible impact on the daily lives of the ordinary Chinese.

The People’s Bank of China (PBOC) has hiked the reserve rate ratio (RRR) for the sixth time this year. Banks now have to park 18.5 percent of their reserves with the central bank. This decreases the level of liquidity or put simply, gives banks less money to lend.

Speculators may now find it more costly, or even impossible to get a loan because the banks are, well, short of money.

Other policies such as the oil price hike (in anticipation of rising demand) and gradual appreciation of the Yuan (to fight imported inflation), and the recent rise in interest rates (leading to less incentive to borrow and more incentive to park one’s cash in the bank) too may look to be effective in combating inflation, but could in fact make little difference on the ground in the short run.

Can China sustain this rate of economic growth while keeping inflation at bay? While the authorities insist that existing monetary policies should serve to slow down speculation while maintaining fiscal growth, reality seems to suggest otherwise.

The liquidity crunch unfortunately still does not address problems such as the one Yang Bo is facing. Developers are hoarding property in the hope of future price increases – this has little to do with how easy or difficult it is to obtain loans.

Trending Videos