S’pore: The trouble with AAA-status

In Economy, Political economy on 10/08/2011 at 6:59 am

Singapore is one of the few remaining AAA sovereign borrowers, especially one without any fiscal issues.

So money will pour in, interest rates will drop, and property prices will fly.

The banking system may soon have more cash deposits than it knows what to do with. In the 1970s in  Switzerland, banks were paid to accept deposits i.e. negative interest rates.

This is a tough problem to solve. If our central allows the exchange rate appreciate  in order to slow the inflow, a more expensive Singapore dollar will hurt exports and tourism. If it doesn’t act, then Singapore will face significant inflationary pressures. House prices will fly even higher, SBS, SMRT and the electricity suppliers will fleece us even more, and CPF rates will drop to 0.1%, if not negative. We will pay the government interest on our forced savings. OK I exaggerate on the likihood of this.

Even the late Dr Goh Keng Swee might not have been able to solve this problem.

  1. Even Friedman or Stigliz won’t be able to tackle the issues!

  2. (Quote) “CPF rates will drop to 0.1%” (UnQuote)

    You’re too kind. Real CPF rates already at -2.5% considering the over 5% inflation rate.

    No worries. Singapore will always open floodgates for the Burmese, Indos, Chinese and other rich and infamous to come in and buy bungalows and penthouses, and setup trust funds and holding companies. When inflation shoots to the stars, and the peasants look to be doing a Libya on the elites, they will do a Syria on the peasants, and flip the bird to the UN.

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