Money printing (/borrowing) by Singapore government- how much is too much?

[cherry6]

Money printing (/borrowing) by Singapore government- how much is too much?

Briefly, M1= printed SGD in circulation + some more, M3= quasi money= everything including government bonds (treasuries) etc (people will pay U money for these at whatever is market rate(much is sold to CPF so Temasek & GIC can invest the CPF monies etc) but too big to use at super-mart).

• Will so much printed money worsen the rate of inflation (even if it isn't captured by the CPI) in Singapore? ('Why CPI might fail to capture the true rate of Inflation in Singapore.'[HWZ, 11Jan2013])
• Will so much money 'printing' worsen the wealth divide?
• Will the supply inflation of the SGD ($ printing) also inflate the housing price in Singapore?
• Are CPI measurements in Singapore consistent over the years just as the luxuries enjoyed by the average Singaporean (who has been forced to become more and more 'productive') have alongside increased- is this 'productivity' readily translatable into quality of life improvements?
• What is the effect of Singapore's increase in GDP upon the environment- Singapore has already refused entry to boat people arriving as political refugees 'Singapore cannot accept Rohingya refugees' [CNA, 24Mar2009], will Singapore do the same for environmental refugees as sea levels across the world rise?

According to the chart on SG govt money printed, 1989-2011, M3, the broadest measure of Money created by the central bank has increased from
dollar notes created/ printed have increased from SGD71.0 billion (1989) to SGD 451.7 billion (2011)
Using compound interest(inflation) calculator [ink] with the input values as:
Input principle: $71,007.8 B
Input years= 22yrs.
Input total= $451,675.2 B
Result: Effective Annual Rate of increase = 8.7736% P.a.

The same calculation for years 2010 to 2011 period= Effective Annual Rate of increase= 10.135%

Thus if Singapore's GDP didn't increase by 10.135%, why is the government of Singapore issuing so many treasuries/ printing so much $$$???

In short, the government of Singapore should perhaps encourage its citizens to buy gold rather than pouring their $$$ into housing to avoid a large housing bubble and then the political instability following either such a bubble bursting or else the ravages of high inflation rates upon society that few governments can effectively control albeit postpone (which is what Paul Volcker, I think, did)

[pict source: https://secure.mas.gov.sg/msb-xml/Re...=I&tableID=I.1 ]

Caption: Currency to exchange for gold please- takers, anyone?[Image source]

 

[rebeccasu4]

hi, such an interesting post. hope a solid discussion comes out of this

just out of curiosity, are you well read in the fields of economics and finance?

 

[rebeccasu4]

i'm no expert in this field but i do think that supply side inflation would become an issue only if M1 spirals out of control. when theres a dramatic increase in amount of money in circulation this could mean supply >>> demand. but if you think about it graphically, a rightward shift in supply curve would lower the gpl (ie inflation rate falls). but if increase in supply is met with a greater increase in demand for money (or increase supply is DUE TO increase in dd) then this is where inflation could worsen. hope you get what im proposing. do correct me if im wrong

 

[rebeccasu4]

"In short, the government of Singapore should perhaps encourage its citizens to buy gold rather than pouring their $$$ into housing to avoid a large housing bubble and then the political instability following either such a bubble bursting or else the ravages of high inflation rates upon society that few governments can effectively control albeit postpone (which is what Paul Volcker, I think, did)"

True, the government should definitely try and steer direction of investments away from housing cause housing prices are already worsening domestic inflation rates. Housing bubbles can also be very disastrous to the entire economy. But do you think the government isn't trying to do so? There is also the concurrent problem of housing shortages especially for low-mid income groups. Hmm.

Hope to hear more views on this

 

[sunzoner]

"In short, the government of Singapore should perhaps encourage its citizens to buy gold rather than pouring their $$$ into housing to avoid a large housing bubble and then the political instability following either such a bubble bursting or else the ravages of high inflation rates upon society that few governments can effectively control albeit postpone (which is what Paul Volcker, I think, did)"

True, the government should definitely try and steer direction of investments away from housing cause housing prices are already worsening domestic inflation rates. Housing bubbles can also be very disastrous to the entire economy. But do you think the government isn't trying to do so? There is also the concurrent problem of housing shortages especially for low-mid income groups. Hmm.

Hope to hear more views on this

The government should try to profit less on Housing and return to its root. Public housing is for the lower income and should not be used by the government for speculation.

Having said that, we must acknowledge the bubble is at a stage where bursting it hurts too many lower income. The government will commit political suicide if they deflate or burst it...

 

[Inix]

TS has ignored the fact that from 1989 till 2012, our population has increased significantly. We almost doubled from 2.9M till today's 5.4M. If you put that into perspective, the M3 supply didn't increase that much.

And TS, AFAIK, SG has never accepted refugees. We are not a caring nation (in the sense of the government) and its not going to hurt the government politically by refusing them access to the country, so no point in bringing them up.

Its like the death penalty thing. All a bloody waste of time.

 

[Haagen Diaz]

TS, where do you get the knowledge on this? Just from MAS website? I'm damn interested to know more. Thanks. I prefer to read a book in order to get the whole picture.

 

[Mancunian2]

Greed is insatiable

 

[Unhomer]

The USA has been on a money-printing spree for the past 4 years, the only reason why their dollars is not regarded as toilet paper is that the entire world has been engaging in the printing press to maintain their export viability.

We should start worrying when the Treasury stops propping up their own bond markets. What happens next would be uncharted waters. Financial gridlock again? A decade of stagnation like Japan?

Or will the USA ultimately become a Banana Republic and implode when bondholders realize it's worth and try to cash out en mass?

MAS is just a small grain of sand in the tidings of the world economy. Actions taken will always be reactions.

 

[sunzoner]

...

And TS, AFAIK, SG has never accepted refugees. ...

IIRC, we had vietnamese boat people.

A Forgotten Past – Vietnamese Boat People in Singapore | Remember Singapore

 

[Haagen Diaz]

The USA has been on a money-printing spree for the past 4 years, the only reason why their dollars is not regarded as toilet paper is that the entire world has been engaging in the printing press to maintain their export viability.

We should start worrying when the Treasury stops propping up their own bond markets. What happens next would be uncharted waters. Financial gridlock again? A decade of stagnation like Japan?

Or will the USA ultimately become a Banana Republic and implode when bondholders realize it's worth and try to cash out en mass?

MAS is just a small grain of sand in the tidings of the world economy. Actions taken will always be reactions.

Huh?? Money printing spree for 4 years only? The hard truth is, they have been printing $$ for many years.

 

[PainRack]

As Inix pointed out, an increase in money supply leads to inflation only if
demand and supply don't match up. If there is increased need due to increased population, or even just people more richer buying more stuff, increasing money supply doesn't lead to inflationary pressures

 

[koxinga]

IIRC, we had vietnamese boat people.

A Forgotten Past – Vietnamese Boat People in Singapore | Remember Singapore

No, we did not. They were never allowed to be citizens. Every single one was sent away. The policy for refugees was and still is pretty hardcore.

 

[rebeccasu4]

agree with unhoner, singapore mas would usually carry out policies in response to the global economy. it's the best way we can manage our financial system without sinking as the global economy keeps fluctuating. so good or bad that's the way it is.

having said that i also agree with sunzoner. public housing (hdb flats) used to be for the 80 odd % of singaporeans back when majority of singaporeans were in the lower income group- decades ago. now that more people are climbing the ranks and moving to mid income groups, that's where speculation and increased demand becomes a worrying problem

 

[sunzoner]

No, we did not. They were never allowed to be citizens. Every single one was sent away. The policy for refugees was and still is pretty hardcore.

They were allowed in, got jobs...

The only different now is that the ships carrying them wasnt allowed to come into singapore for food and water. Isnt it interesting how as the incumbent ask singaporean to be more caring, grasious, and chariable, while turning away refugees carrying ship and denying them food and water?

 

[cherry6]

Live Documentary: Fiscal Abyss of the 21st century, thanks to unfettered welfare liberal democracy.

Live Documentary: Fiscal Abyss of the 21st century, thanks to unfettered welfare liberal democracy.

Thread topic: Money printing (/borrowing) by Singapore government- how much is too much?
TS, where do you get the knowledge on this? Just from MAS website? I'm damn interested to know more. Thanks. I prefer to read a book in order to get the whole picture.

Appreciate your expression of interest on this topic.

Suggest watching:
Inside Job (2010): https://vimeo.com/54817244

Inside Job (2010)
from THELIGHT
DOCUMENTARY : 'Inside Job' provides a comprehensive analysis of the global financial crisis of 2008, which at a cost over $20 trillion, caused millions of people to lose their jobs and homes in the worst recession since the Great Depression, and nearly resulted in a global financial collapse. Through exhaustive research and extensive interviews with key financial insiders, politicians, journalists, and academics, the film traces the rise of a rogue industry which has corrupted politics, regulation, and academia. It was made on location in the United States, Iceland, England, France, Singapore, and China.

And perhaps:

Money, Power and Wall Street
Time : 10:30 PM
Duration : 29 mins
Desc : Since 2008, Wall Street and Washington have fought against the tide of the fiercest crisis since the Great Depression. What have they wrought? This special series finds out the inside story of the struggles to rescue and repair a shattered economy.
Buy: FRONTLINE: Money, Power and Wall Street DVD - shopPBS.org

- the latter is still showing on CNA, 1030pm; think the 2 same concern.

In short, US bankers had succeeded in making congress, prior to 2008, permit them to buy, with various savings account monies transferred into their investment arms, CDO (collective debt obligations) which we all know, circa 2008, were renamed toxic debt whose opaque value was tagged to the burst property bubble in the USA.

Acknowledging their responsibility for the past lack of regulation over the now too big to fail (and too big to jail) banks, congress had thus no choice but to agree with Sec of Treasury Pall Hanson to BAIL OUT THE BANKS at the cost of (AFAIK: USD5T++) or else face public mayhem with a total collapse of the financial system with a run on practically every main bank.

So US congress did the necessary and patched the holes in the banking dam, using cash raised from the higher dam (US Treasury viz selling of treasuries).

And that's why China is now warning of a massive US collapse- turning a fiscal cliff into a fiscal abyss... ['China on ‘fiscal cliff’ deal: US kicking can towards ‘fiscal abyss’'(FPeconomy, 03Jan2013)]

Liberty found its way then lost it again... if U asked me, I'd say that the best way froward is religion without specifying as yet which (anyhow, I believe that the founding fathers of the USA were all deeply religious(Christian etc)).

Then again, all U asked about is the fiscal cliff/ abyss, and Nouriel Roubini writes well too.

Just my 2c,
All the best,
C6.

 

[Inix]

And TS is again shifting the goalposts. The highly polarised idiotic politics of the Americans has allowed the rich to dominate all the headlines, and to set policy expectations.

This is fortunately, not happened in Singapore. Our financial policy has always been safe, and our banking rules are stricter than even the so call "strict" global banking rules that the banks are so desperately trying to repel. That is proper financial governance. It protects everyone. The banks from themselves, us from the banks, and the banks from everyone including the government.

No matter how much I dislike the PAP, I fail to acknowledge nor understand how people continue to claim that they placed us into a huge debt hole when this little red dot has no real debt, has a stable monetary policy, and has a humongous foreign reserve that some people estimate to be ranging from US$500B to US$1T.

Granted, it does not benefit us materially most of the time, but without these in place, our lives wouldn't really be much easier. There is a reason why SG's passport is the 3rd most convenient in the world and also why our interest rate is so low. No one send their money here if we were not safe enough.

 

[GamerSg]

Wow TS, u actually started a topic on Money Printing.
After my previous posts on the Money Mind forum, i realised that the vast majority of ppl on HWZ are Keynesian clowns.

So far this subforum seems to have more knowledgeable ppl.

"In short, the government of Singapore should perhaps encourage its citizens to buy gold rather than pouring their $$$ into housing to avoid a large housing bubble and then the political instability following either such a bubble bursting or else the ravages of high inflation rates upon society that few governments can effectively control albeit postpone (which is what Paul Volcker, I think, did)"

This is the importance of sound money which most of the world has not had access to at fair prices for awhile. Sound money can be any item which is a reliable store of value/liquid/portable/fungible. This allows excess capital to be saved when investment terms are not attractive(low interest rates or lack of low risk investments). Gold has historically been most ideal for this purpose because it has low intrinsic value(no significant industrial use), which means capital saved in gold does not needlessly drive up prices of scarce necessities like housing, oil, commodities. However since most countries discourage investments in gold(due to Capital Gains tax, GST, poor liquidity, storage costs) and the ridiculous liquidity and size of the derivatives market($615 trillion in 2009) enabled by high leverage and infinite rehypothecation, gold appeared less attractive until 2008 when counter-party risk and chain-defaults were demonstrated on a global scale.

Since the SGD is an abysmal failure as a store of value, it is no surprise that everyone is putting money into property. Buying begets more buying and this incites speculation. It's should be noted that property is usually a leveraged investment, meaning large gains in short periods of time but also large losses when the bubble bursts.
It is important to note that the whole housing bubble has been engineered/enabled by MAS whether it be intentional or not. The rampant money printing as evident in the M1 supply causes excess liquidity in the banking system and thus drives down interest rates. The larger supply of SGD also causes price inflation and drives savers to look for higher yields to protect against inflation. Due to the lack of good investments which can beat the higher inflation, money tends to flow into property during low interest rate periods.

Having said that, we must acknowledge the bubble is at a stage where bursting it hurts too many lower income. The government will commit political suicide if they deflate or burst it...

It is not within the power of any government to stop the bursting of any bubble. At best they can debase the currency aggressively to make the bursting appear less extreme as the US/Japan have done.

As Inix pointed out, an increase in money supply leads to inflation only if
demand and supply don't match up. If there is increased need due to increased population, or even just people more richer buying more stuff, increasing money supply doesn't lead to inflationary pressures

An increase in money supply & population may not lead to increased wages but will always lead to price inflation of finite goods and raw materials. Your increased population cannot conjure raw materials/oil/silver/gold from thin air like money can be. Cost of products and services which have a high labour component cost may remain stable in nominal terms but will be depressed in real terms whilst cost of finite commodities and raw materials goes up.
This is why the wages of working class ppl cannot keep up with inflation.

The USA has been on a money-printing spree for the past 4 years, the only reason why their dollars is not regarded as toilet paper is that the entire world has been engaging in the printing press to maintain their export viability.

They have been printing since 1913. Discreetly until 1971 when they defaulted, without limit after that.

There are 2 reasons it is not toilet paper yet.
1) Petro-Dollar status
The US goes to great lengths(read: gun to head) to ensure that oil is traded solely in US dollars. Considering that oil is the most traded commodity, it forces countries to buy dollars to buy oil. Since most countries are dependant on oil, it also makes sense for them to accumulate reserves in USD.

Sadam and Ghadaffi were killed only when they attempted to break away from selling oil in US dollars(Sadam wanted to trade oil for Euros, Ghadaffi wanted to trade for Gold Dinar).

2) China
China has been accumulating tons of US dollars/treasuries for multiple reasons.
i - As the largest foreign holder of US debt, they get political influence on US policies.
ii - Financial Weapon
They could bring down the US without firing a single shot by dumping their US assets. China knows that they cannot fight US in a conventional war, dumping US assets would trigger the dumping of US assets by all central banks around the world guaranteeing hyperinflation and collapse of the US dollar, civil unrest.
iii-Industrial/Technology transfer
By debasing their own currency(RMB) to prop up the USD, they impoverish their own ppl and force them to work harder for less. This makes China extremely attractive for corporations to setup labour intensive jobs in China, allowing knowledge transfer to occur.

The US knows what China is doing and has been fighting back by debasing the USD by record amounts as the largest loser is China which holds record amounts of USD and allows the debts of the US to be inflated away.

China has realised this and is now accumulating record amounts of gold to protect its reserves from further debasement.

This is fortunately, not happened in Singapore. Our financial policy has always been safe, and our banking rules are stricter than even the so call "strict" global banking rules that the banks are so desperately trying to repel. That is proper financial governance. It protects everyone. The banks from themselves, us from the banks, and the banks from everyone including the government.

If you know how the financial system works, you will realise that banks have an elevated legal status which allows them to create money which no other legal entity can. If you print money at home, you will be jailed. Banks profit from the same activity.

And i would not say that our banking system is safe. >50% of assets in the local banks are in the form of mortgages, should the housing bubble burst either due to rising interest rates/recession/war in region, every local bank will have to declare bankruptcy if the default rate hits ~10%.
However i also have no doubt that the MAS will print to bail them out causing more inflation and a wider wealth gap leading to more political unhappiness.

I would advise anyone with an interest in this topic to watch the following videos which i posted on another thread.

https://www.youtube.com/watch?v=65SH35IMzlI

https://www.youtube.com/watch?v=vowbrq_g5NM

"What About Money Causes Economic Crises?" with Peter Schiff - Ron Paul Money Lecture Series, Pt 3/3 - YouTube

Perhaps it will help prepare you for the day when SHTF.

 

[PainRack]

This is the importance of sound money which most of the world has not had access to at fair prices for awhile. Sound money can be any item which is a reliable store of value/liquid/portable/fungible. This allows excess capital to be saved when investment terms are not attractive(low interest rates or lack of low risk investments). Gold has historically been most ideal for this purpose because it has low intrinsic value(no significant industrial use), which means capital saved in gold does not needlessly drive up prices of scarce necessities like housing, oil, commodities.

Ignoring gold use in jewelry, there is actually a substantial use of gold in hand phones, laptops and other small electronic devices due to its high conductivity.

Indeed, the recent gold bubble drove up costs for electronics manufacturers due to this.Your statement is only true until the late 1990s, when gold had insignificant non industrial use outside of aircraft.

gold appeared less attractive until 2008 when counter-party risk and chain-defaults were demonstrated on a global scale.

So you would of course point out that since Gold is now in a bubble, speculating in gold now is actually stupid and adds to the froth................

Since the SGD is an abysmal failure as a store of value, it is no surprise that everyone is putting money into property. Buying begets more buying and this incites speculation. It's should be noted that property is usually a leveraged investment, meaning large gains in short periods of time but also large losses when the bubble bursts.

....... The word leveraged investment........ I don't think it means what you think it means.

It is not within the power of any government to stop the bursting of any bubble. At best they can debase the currency aggressively to make the bursting appear less extreme as the US/Japan have done.

........... Raise interest rates aggressively, raise needs for capital held in reserve...............

 

[Haagen Diaz]

Ignoring gold use in jewelry, there is actually a substantial use of gold in hand phones, laptops and other small electronic devices due to its high conductivity.

Indeed, the recent gold bubble drove up costs for electronics manufacturers due to this.Your statement is only true until the late 1990s, when gold had insignificant non industrial use outside of aircraft.


So you would of course point out that since Gold is now in a bubble, speculating in gold now is actually stupid and adds to the froth................


....... The word leveraged investment........ I don't think it means what you think it means.


........... Raise interest rates aggressively, raise needs for capital held in reserve...............

Huh? Gold? Silver is used in handphones, laptops and other small electronic devices. I never heard of gold being used in such devices like handphones...etc.