Here we’ll talk about economic issues which affects both investors and the average person on the street.
The loss of S$7.4 billion announced by the Monetary Authority of Singapore (MAS) seems to have gotten a lot of Singaporeans excited. How did that happen, and why is it a necessary trade-off to fight inflation?Macroeconomics is a super complicated subject. The politicians may have been factually correct in what they say, but I feel they haven’t done a good job at explaining it to the public.In this article, I will try to simplify everything, with layman examples, so that it can be understood by the layman.
In my previous post “Using Interest Rates to fight Inflation”, I said that the SGD has depreciated 4% against the USD. And as the US Federal Reserve (the “Fed”) hikes interest rates further, the depreciation will worsen, and the Monetary Authority of Singapore (“MAS”) will eventually be forced to either raise interest rates or sell our foreign reserves to defend the SGD. I stand corrected, I’m sorry.
The Monetary Authority of Singapore (MAS) uses exchange rate, rather than interest rate, as its chief weapon to fight inflation. However, after 3 rounds of tightening efforts between Oct 2021 and Apr 2022, the SGD has actually weakened about 4% against the USD, from 1.35 to 1.40. Is there more that can be done?
Asset prices in a free market, like all other prices, is determined by demand and supply. Thus, understanding both the demand drivers and supply factors of a particular asset is important if you want to figure out if the price is going up or down in the time frame you are looking at.
Inflation and Recession. These are the two buzz words all over the market right now. Sentiment is broadly pessimistic. But is there still an upside? I believe there is.
In traditional economics talk, money has … 6 characteristics …: Durability, Portability, Divisibility, Uniformity, Limited Supply and Acceptability … However, the … fact that crypto currencies like Bitcoin … are still not widely used for commerce has led me to believe the current economic model is incomplete.