Reasons for Singapore’s Inflation Scare

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#1
This article is worded so humorously that it hurts my rib just reading the sarcastic part of it. Big Grin

Oops, The Economy Broke: Reasons for Singapore’s Inflation Scare
By Ryan Ong – Wed, Apr 25, 2012 12:00 AM SGT

http://sg.finance.yahoo.com/news/oops-ec...00931.html

How Bad Is Our Inflation?
The consumer price index (CPI) checks the price difference of a market basket of goods over time. So a CPI of 5.2% suggests, in a very simplified way, that most of what you buy will cost 5.2% more.
Unless you’ve gotten a matching raise in your pay, it means you now have less money. And apart from everything costing more, the inflation eats into your bank savings. Your bank’s interest rate (even for fixed and structured deposits) are nowhere near the 5.2% inflation. So if you have a savings deposit, you may as well lock your money in a room with a lighter and an arsonist.


The CPF may also lose its efficacy as a retirement fund. The CPF interest rate is 2.5%, and the inflation rate is 5.2%. As a retirement provision, that’s about as effective as a paper umbrella in a tsunami. But of course, the government will take action to rectify this soon.
Right?
Hello, government? Is anyone awake in there? Because we need to fix the reasons. Like the…

1. Insane COE Prices
As of April 18, COEs for larger cars hit $91,000. Reuters pointed out that a Toyota Vios, which cost $77,000 at the start of the year, now costs $107,000 (including COE). That same amount could land you a Porsche in some parts of Europe (and a complimentary AK-47 in Russia, because YOU try owning a Porsche in St. Petersburg).
Come August, the government also intends to drop the vehicle quota to 0.5%. This will raise COE premiums even higher; presumably, it’ll match the admissions rate of hysterically giggling car buyers at IMH. Because the bad news is, there will always be situations when a car is necessary; no matter the price. Certain lines of work, along with family requirements, will continue to pressure people into buying cars.
And because the COE is an unavoidable, artificial addition to price (increasing price without adding real value), it’s a major contributor to inflation.


2. Overheated Property Market
Nice try with the new measures, HDB. Sadly, chucking an ice cube at Fukushima would have been a stronger cooling measure.
The ABSD has dissuaded foreign buyers, but it’s channelled demand into the rental market. Foreigners are now pushing rental income to new heights, and that’s led to property speculation (shoebox flats anyone?) Likewise, the cash over valuation (COV) of resale flats is now less realistic than Transformers 2.


And have you seen Sky Habitat? The property developers forgot to include a disclaimer. Something like:
“Please note that your purchase signifies market collapse, uncontrolled inflation, impaired judgement, or all of the above”.
There has also been news of HDB flats reaching the $900,000 mark, and even heartland homes aren’t the low-cost bulwarks they used to be. Until some control is placed on COV, and further cooling measures kick in, housing’s going to keep raising our cost of living.

3. Higher Transport Costs
Government policies have made cars unaffordable, while raising public transport costs. It’s like the person-in-charge Googled: “Inflation and How to Cause It”, and started taking notes.
SBS is already intending to pay bus drivers 16% more, which should raise transport fares. Part of the reason is to, you know, cope with inflation. Then there was Comfort and it’s minions other cab companies; they raised fares as well. To cope with inflation.


Now, take a step back and reread those reasons. Do you see a problem here?
Transport companies are coping with inflation by…contributing to said inflation. That’s like trying to solve groin pain by having doctors take turns kicking you in the nuts.
But hey, at least higher transport costs have had benefits. Like making the MRT more reliable, or making bus captains more polite. And I’m totally not being sarcastic there.

4. Rising Food Prices
Singapore imports a lot of food. Look at our land space; if we planted one shoot of kang kong it would die of claustrophobia. But in particular, the global recession and rising cost of fuel (which affects the import cost of foodstuffs) take a lot of blame.
Where local policies contribute is property. As rent rises, so too do food prices. Supermarkets need to charge more to maintain inventory, and hawkers need to pay their stall rent. The practice of subletting hawker stalls is especially problematic: That’s when a stall holder pays maybe $700 a month for the stall, but charges someone $2000 a month to operate it. Wave at Holland Village, people.


As it is, restaurants need as much reason to raise prices as North Korea needs to launch a missile. But the rental market is heating up, and landlords are basically sharks with legs. As surrounding rents go up, they’ll try to match it, which prompts F&B tenants to skyrocket prices.

5. Absurd Optimism
Inflation seems to be getting worse because of our laid back attitude. We’re taking little action because we can’t seem to acknowledge how bad it is. Here’s a quote from Channel NewsAsia:
“However, analysts said Singapore’s inflation rate is not a cause for alarm as the government had already warned that price gains would be steeper in the first half of this year.”
By contrast, that’s like saying you don’t have to be alarmed that your car is going off a bridge, so long as the screaming passengers in the back “already warned” you. Early warning doesn’t mean we shouldn’t freak out.
The Monetary Authority of Singapore (MAS) will probably allow the Singapore dollar to appreciate, as a way to combat inflation. This is effective as a stopgap measure, but it doesn’t address deeper flaws in the system.


Another problem is MAS’ method of measuring core inflation: It excludes housing and private transport. Since these are are a major cause of inflation, the method results in optimistic numbers and homeless Singaporeans. It’s like getting lung cancer, but having the doctor congratulate you because hey, apart from your lungs, you’re fine.
MAS is expected to take corrective action in October. But the immediate solution seems to be crossing our fingers really hard. Let’s all sit back and think happy thoughts, and pretend inaction isn’t part of the problem.
(Yup. And let's continue to ask PM Lee what is he having for breakfast and lunch while not addressing the real issues. Yay...)

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#2
In life, it is easier to poke fun than solving the problems.
If the entire platter of the above ascribed problems is passed to me, I doubt I can solve much.

Even for subletting, would you deny an old folk who is subletting his hawker stall and collecting rent to survive?
The law of no subletting, to be implemented in the next few years, is meant to eliminate the middlemen. But, at the same time, some old folks who are collecting rents to make a living will have to either go back to old trade(but health not permitting...) or return the stall.

Confirm sure got hoo-ha in a few years time. Gov is heartless, ill treat old folks, taken away their stall and force them to collect paper cartons...
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#3
Quote:Even for subletting, would you deny an old folk who is subletting his hawker stall and collecting rent to survive?
The law of no subletting, to be implemented in the next few years, is meant to eliminate the middlemen. But, at the same time, some old folks who are collecting rents to make a living will have to either go back to old trade(but health not permitting...) or return the stall.

According to this story:

http://www.straitstimes.com/Parliament/S...74369.html

It only says that subletting will not be allowed for the *new* hawker centres. So it does not seem that existing stallholders are prevented from continuing to sublet.
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I do not give stock tips. So please do not ask, because you shall not receive.
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#4
(27-04-2012, 05:36 PM)d.o.g. Wrote:
Quote:Even for subletting, would you deny an old folk who is subletting his hawker stall and collecting rent to survive?
The law of no subletting, to be implemented in the next few years, is meant to eliminate the middlemen. But, at the same time, some old folks who are collecting rents to make a living will have to either go back to old trade(but health not permitting...) or return the stall.

According to this story:

http://www.straitstimes.com/Parliament/S...74369.html

It only says that subletting will not be allowed for the *new* hawker centres. So it does not seem that existing stallholders are prevented from continuing to sublet.

As of April 1, new stallholders will not be allowed to do full-day sub-letting and assignment. This will reduce speculation - a practice that has led to higher rentals, said Ms Fu. Existing stallholders will have a three-year grace period to adjust to these new conditions.

I will assume that the current stallholder will have to run the stall or return the stall to NEA after three years.
So, after three years, there will be no subletting anymore.

http://www.reach.gov.sg/YourSay/Discussi...d=[[6301]]

It is a good move but unfortunately, some low income stallholders that depend on the stalls for income will be hit.
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#5
yeokiwi Wrote:Existing stallholders will have a three-year grace period to adjust to these new conditions.

Ack. Caught out again! OK time to read more and type less...
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I do not give stock tips. So please do not ask, because you shall not receive.
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#6
"One of them has the responsibility of steering the economy through treacherous waters and the other has the luxury of sitting in his office and sending articles to the New York Times" - Anthony Karydakis, an adjunct professor of economics at New York University's Leonard N Stern School of Business and former chief US economist at JPMorgan Asset Management. He was commenting on the debate going on between Fed chairman Ben Bernake and Nobel laureate Paul Krugman.
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