Monetary Policy Cannot Fix Our Problems In The Game of Dare

It seems my friends and I have wine problems here.

I am indignant as my favourite for the past 9 months, Fat Bird, a NZ Malborough Sav Blanc which I consume at a copious rate, has risen by 30% overnight and I missed their final promotion at Cold Storage the other day. (Price at NTUC, Giant, Cold Storage now all at $23.5 vs price for past 9 months $18+ and promo price 17+).

There goes. Have to find a new wine again because when Fat Bird goes on promotion next month, you can bet it will be at $21 max. Yet I am used to it because it happened for the past few wines too – Matua Valley, Oyster Bay etc. I just have to find the next cheap and good one.

But for the connoisseurs like my friends who have to have that Margaux, like the one in this picture, the outrage is amplified because they have no substitute.

Since when did wine (yes, WINE) ever retail cheaper in Hong Kong than in Singapore ? We know they removed all taxes on wine in 2008 whereas Singapore’s wine taxes remained almost status quo albeit a minor revision back in 08 as well. So how did this Margaux come to cost 30% less in Hong Kong (in SGD terms) ? What happened to Purchasing Power Parity ?


The SGD has strengthened 20% against the USD and the HKD in the past 5 years but onshore prices have risen. Yet is is cheaper if we bought the wine from Hong Kong today. It does not make sense.

Ben Bernanke believes that monetary policy can fix all problems – inflation, unemployment and make the world a better place.

“It’s often assumed from that that monetary policy can necessarily
solve the problem alone, but that depends upon the ability — as you
well know, depends upon the ability of pure monetary policy to achieve
any desired inflation. There’s no question that if you — to use
Milton Friedman’s famous line, which you contributed to the
popularization of, if you drop enough dollars bills from enough
helicopters …. there’s no question that you can get as
much inflation as you want, but in the classic economics lexicon, that
is of course an expansionary fiscal policy because you’re making a
transfer.” Larry Summers at the IMF, in rebuttal to Bernanke last Friday

“”Why are so many product prices in Singapore and Hong Kong more expensive than in the U.S.? It’s because when you have asset inflation and high property prices, shops have to pay higher rents, so they charge more for their products. So asset inflation can flow into consumer inflation..” Marc Faber on CNBC

After USD 1.9 trillion in bond purchases, the US has managed to get unemployment down a high of 9.93% to 7.3%. If you distributed that money to the unemployed population of 11.3 million or so, that would be about USD 168,000 per person which is over 3 years of median HOUSEHOLD (not individual) income.

Even if the Taper starts, the 1.9 trillion will have done its work for the markets – easy credit, EM bubbles, historic highs in stocks. Does anyone want to think of what lies ahead ? Because I am so tired of headlines that go Stocks Rally Because of Earnings, Stocks Rally Because of Economic Numbers, Stocks Rally Because of Potential Stimulus (Because of Poor Economic Numbers) …

And what happens the day when stocks stop rallying and companies cannot profit from stock buy backs ? They cut headcount which means the FED would have to start the print press again.

And why, despite of Singapore and Hong Kong’s economic success in unimaginably good times, do we have all these articles screaming poverty ?

It is a game of Dare and I cannot make a call for stock markets because it is a lottery ticket these days, depending on whether Janet has a bad hair day. And since when did we ever learn that just by tweaking interest rates, we can get someone a job ? And since when can we expect that just because we have a strong SGD policy, that our wine prices will be at least the same as Hong Kong’s ?

But, like Marc Faber says, the ending would be ugly.