Fed is From Pluto, BoJ is from Mars and Santa is from Singapore
So it is a fact.
That we are all subjects of central banking experiments so the central bankers can all leave at the end of their term to write textbooks and their memoirs.
Academics have acknowledged that central banks are caught in a high stake game with results yet known because this is outside the textbook.
The story has taken a turn with new characters in it. Characters, previously the bystanders, have now taken centrestage, starting with Japan and the BOJ.
The New Plot
Fed : Monetary Policy to target unemployment rate of 6.5%.
BOJ : Monetary policy to target inflation rate 2%.
ECB : Austerity.
PBOC : Reform.
I am missing something here. They are all going off tangent and going the Me-First route.
Central banks and governments doing their quick fixes to keep the populace happy and holding off the bad numbers. Only 1 common theme amongst them all. Spend and spend. Print and print. One for all and all for one.
And that is why I am proud of good old Singapore ! Same government, same policies, same people over the years, sharing our wealth with the world.
Buy SGD today and we promise a guaranteed return of at least 2% against the NEER basket of other currencies (USD, EUR, MYR, IDR, JPY, HKD, THB, TWD, KRW, CNY, AUD, INR, PHP, GBP, CHF), currency to strengthen against all odds ESPECIALLY IF OUR INFLATION IS HIGH. At the same time, our interest rates will GO LOWER with the HIGHER INFLATION which is NOT A LAME BRAIN concept especially if you consider we do not have monetary policy. When SGD strengthens, the authorities have to step in to buy USD against SGD and neutralise it by injecting the SGD back into the system which lowers short end rates to a minimal or negative.
Doesn’t low rates fuel more inflation ? Considering that all the global central banks are printing and the hot money will pour onshore ? Interest rates go lower and lower but the foreigner does not care. Even if you pay him 0% on his bonds/property/stocks, he will still earn 2-3% on the SGD that the country promises for appreciation when he converts his money back.
It has been going on for too long and now locals have ended up with an uncompetitive export economy, highly reliant on cheap foreign workers, unaffordable housing and low birth rates. Foreign investors love it ! More please because the more ineffective they are against inflation, the more their investments will appreciate as the SGD dollar strengthens.
We are in a currency war here. Singapore has set itself up as a sitting duck. But do not worry. Australia is in worse shape. Article coming soon !!
Meanwhile, harken the Singapore Siren’s call, cometh on board, free lunch for all !
Thank you for the article. Please pardon my ignorance but I was wondering where the firm and committed 2 percent guaranteed appreciation figure came from? Also the appreciating sgd is something that had been trending nicely for a while to take advantage of in trading. I fear things may be changing and appreciation is not given!
Hi Daniel
2% is the NEER band which is the last guest-imate from the last MPS (monetary policy statement of unchanged). Actually it should be closer to 2.5% but it is not a hard and fast rule. NEER band means the appreciation slope of SGD vs the basket.
Currently we are running at +1.1% of the mid NEER band which is a fair estimate for a half yearly run rate.
Yes. It is slightly complicated but you will get the hang of it when you follow it for long enough.
Today’s CPI number should be good to keep it there.
Appreciation is a Given ! That is a painful lesson that I have personally learnt to be able to tell you that it is a pretty given outcome. Unless someone calls the bluff which is unlikely in the near term.
Best Regards.
As the saying goes, you can’t fight the Fed.
Because America can never be bankrupt. So what is the use of credit ratings ?