Excuse me for being stupid but I think there is a free flow QE3 party coming to Singapore.
We have this fancy article in Business Times today QE May Add Twist To Inflation-Growth Balance, with highly intellectual reasons for “slightly steeper” appreciation and “calibrated easing” or “macroprudential action” ???!!!#@@**?? because of capital inflows and imported inflation.
Wow. I bet Singapore designed this foreign exchange policy to prevent the public from understanding it !!
This is how my dumb brain works.
QE3 = bad liquidity = short term hot money liquidity = not good for Singapore because it will go away once you stop feeding it.
|QE3 raises need for Korea to smooth capital inflows: BOK head|
Singapore feeds QE3 her with exchange rate policy, because to fight inflation, Singapore will always let the SGD appreciate vs a basket of currencies (NEER – USD, EUR, MYR, IDR, JPY, HKD, THB, TWD, KRW, CNY, AUD, INR, PHP, GBP, CHF). So Singapore is the only country in the world where you can have lower interest rates when inflation is going up.
So what does the bad ass fund manager in America do when he gets his hands on QE3 ?
It would be pretty brain dead not to put it in Singapore. Why not ?
AAA country with guaranteed foreign exchange appreciation. It does not matter if interest rates were zero, because the capital would automatically appreciate as long as MAS is commited to fighting inflation.
I do not want to even suggest where all this inflation they are fighting is coming from. Because they keep saying its IMPORTED from overseas.
Maybe I am a bimbo to ask this, but if our currency is APPRECIATING, then how come INFLATION IS NOT LOWER ? We have the second highest inflation in SE Asia, after Vietnam. I mean, are we trying to compete for number 1 in inflation too ?
And if our inflation is domestically generated (eg. Teachers wages going up), what good would it do to appreciate the SGD any further ? To give ourselves cheaper holidays abroad ?
How Does MAS manage to let the SGD continue to appreciate ?
By telling people they will let it do so. So the market will buy SGD because MAS will not let it weaken.
Who is affected ?
In a Bad Way
1. People whose businesses are involved in exports ?
2. People whose jobs are affected by the businesses involved in exports ?
In a Good Way
1. People who repatriate their SGD earnings and wages from Singapore to their home countries ?
2. Overseas investors in SGD dollar assets such as houses and bonds who will make a capital gain when they sell up and convert back to their own currencies ?
What happens when one day MAS wants the SGD to appreciate and the market stops buying. MAS will have to buy SGD then.
Do we all believe that what goes in will never come back out ?
Have we asked what is the driver of growth in the past 3 years ?
How about just THE CASINOS ?
My Worry ?
That when my son grows up, people will start taking their money out of Singapore because there is no more inflation and so the SGD will not appreciate anymore and they rather invest in Brazil.
What will we do then ?
BUILD ANOTHER CASINO OF COURSE !!
PS: Next Monetary Policy Statement expected 12th of 19th Oct.
PSS : Have been writing about the Exchange Rate Policy for the longest time…..
List of articles
|9-Apr-12||SINGAPORE MPS AND THE FREE LUNCH MACHINE|
|13-Apr-12||USING NEGATIVE RATES TO FIGHT INFLATION ! SINGAPORE STYLE|
|3-May-12||SINGAPORE AND SWITZERLAND – NEVER THE TWAIN SHALL MEET ? (MONETARY POLICY)|
|22-Jul-12||AND WE’LL HUFF AND WE’LL PUFF, TO BLOW YOUR YIELDS DOWN !|