Forbes Article - Why Singapore's Economy Is Heading For An Iceland-Style Meltdown

[lilvestor]

Then MAS should just let go the interbank rate control? Its a inflating cycle using unconventional economic policy - ultra-low deposit rate when inflation is 4-5%? How long more depositor will suffer at the expense of those who borrowed excessively to help create the inflation feel good effect, manifest most acutely in property cycle - record cycle since 2000 till now even in the face of global crisis.

Very soon the unraveling is going to create panic? I m sure the contractor will be the first to bale out. The chinese contractor bid so low and yet willing to loss money. How many more contractor will suffer?

There is no reason for saving rate to reflect inflation. Just old saying says, no risk, no return. To counter inflation risk, the investment has to take certain risk. No way that riskless saving can fight inflation. And like everything else, saving has its price, that's saving interest rate. If the interest rate is any higher, at least the demand for saving from the financial institutions has to be higher. That's not the case in Singapore for very long. The loan interest rate or the return from the saving collected by the banks is not high enough to stimulate more demand for saving. On the other hand, saving supply is high. There is a lot of foreign money coming into Singapore.

Totally wrong. Lots of countries have positive interest rates, in fact that used to be the norm before the financial crisis, central banks only turned to negative rates because there was/is record unemployment and govt debt was skyrocketing, financial repression was the only way out.

We have negative rates in Singapore mostly because the MAS doesn't have control over interest rates (due to the impossible trinity), they'd have to be crazy to want to have negative rates when our economy rebounded so strongly back in 2010.

[freedom]

There is no reason for saving rate to reflect inflation. Just old saying says, no risk, no return. To counter inflation risk, the investment has to take certain risk. No way that riskless saving can fight inflation. And like everything else, saving has its price, that's saving interest rate. If the interest rate is any higher, at least the demand for saving from the financial institutions has to be higher. That's not the case in Singapore for very long. The loan interest rate or the return from the saving collected by the banks is not high enough to stimulate more demand for saving. On the other hand, saving supply is high. There is a lot of foreign money coming into Singapore.

Totally wrong. Lots of countries have positive interest rates, in fact that used to be the norm before the financial crisis, central banks only turned to negative rates because there was/is record unemployment and govt debt was skyrocketing, financial repression was the only way out.

We have negative rates in Singapore mostly because the MAS doesn't have control over interest rates (due to the impossible trinity), they'd have to be crazy to want to have negative rates when our economy rebounded so strongly back in 2010.

give me an example of positive interest rate. At least all major economies have negative interest rate. US, EU, JP, CN. Before financial crisis, Singapore saving(not time deposit) interest rate has not been above 1% for several years already.

If we are talking about time deposit, duration is important. 30-year fix deposit is possibly higher than temporary inflation only. But the money is locked for 30 years. And banks don't like long time deposit as interest rate always goes lower in the long term if it is too high. The days that Singapore saving interest rate is high are gone as the creditability of Singaporean and Singapore companies improve a lot compared to long ago. The same will happen eventually for emerging countries such as China, Indonesia, etc.

[csl123]

give me an example of positive interest rate. At least all major economies have negative interest rate. US, EU, JP, CN. Before financial crisis, Singapore saving(not time deposit) interest rate has not been above 1% for several years already.

[/quote]

Interest rate is not only the measure of financial conditions. There are other factors such as

-Interest rates
-Stock price
-Commodities
-Real asset price (e.g. properties)
-Exchange rate

that measures the financial conditions. One notable index is the Goldman Sachs Financial Condition Index. In US and other major economies, the conditions are not necessary "loose", even though real i/r are low.

(I am assuming you are referring to real i/r as nominal i/r is unlikely to be negative)

[pianist]

in the Islamic world, there is no such thing as interest rate?

[ValueBeliever]

There are clear signs that the excess of pass is catching up:-

1) Santosa condo and properties are tossed
2) BLVD which at its peak is priced and sold betw 3.5k to 4+k/sqft, now only 2.8
3) Recent fire at Marine bay suit fire exposed fire sales - just imagine only 10% of the buyer are staying there? These specuvestor will head for the door is things go right
4) Case of Marina Sail is pending on failure of the building design. Serious flaw, hope this is not due land movement issue. How come a water pipe burst can affect lift? Windows falling off.

Lady in the interview was obviously upset and likely foreigner, and my guess is those early bird buyers had bale out long time back when price hit 2700 in secondary sale. Now with losses mounting and secondary market showing sign of weakness, looks like those caught will pay for the excesses.

[DP28]

There's no written rule that says Bull market cannot be present when interest rate is 2, 3 or 4%.. Key is market trades on expectation at this very point. Much has been debated and I feel the article has already achieve its point - to ruffle some Asian feathers (like here). To be honest, I am a little pessimistic but I don't see how we are coming close to Icelandic ice age.

[jamestaylo]

Icelandic financial crisis was a major economic and political event in Iceland that involved the collapse of all casual farm staff thanks