(23-04-2012, 10:56 PM)Jacmar Wrote:(23-04-2012, 10:44 PM)freedom Wrote: let's assume that it is international 'hot' money causes Singapore asset inflation. then what is MAS doing? appreciating SGD, which will only cause more 'hot' money coming in? Do you think 'hot' money will go to weak currencies?
Well besides the appreciating SGD(can be done to a certain extent only), they fired off with the ABSD on foreign property ownership.that's why now you see locals are the ones that are flocking to the launches and the high end property mkt has grined to a halt. so next move is to deflate the mass mkt property slowly via lots of supply.once a correction is achieved then asset inflation will come down and the strong SGD will take care of the food commodities.however if US puts in QE3 then all bets are off and you should join the gold bugs.
maybe we are going to go through another round of over-built, property deflation, under-built, property inflation?
the point is that government should try their best to prevent run-away asset inflation, rather than try to deflate when inflation is out of control....
the life of ordinary people will be much easier that way.
(23-04-2012, 11:00 PM)dzwm87 Wrote: Again, i think that is the incorrect way of seeing it. You are probably viewing it from the perspective that higher currency appreciation will drive more hot money - animal spirit. It is analogous to buying share price when it goes higher and hoping you can sell it off higher.
Unfortunately, though that is logical, it is not the only and perhaps is a small factor towards 'hot money inflow'.
Perhaps, you may view it this way - the effect of interest rates hike and currency appreciation. The former, like you said, can curb inflationary pressures through the means which you had stated. But moreover, interest rate hike also spur on a higher demand for SGD - leading to an appreciation in its currency (more returns on each dollar saved in SGD, assuming the rest constant). This then goes through the contractionary effect on net exports (as I had mentioned earlier).
Currency appreciation is one of the results of interest rate hike - hence, that is why people say FX & interest rates are the different side of the same coin. Since Singapore cannot influence the interest rates, they will have to resort to currency appreciation/depreciation.
Hope this paints the picture better.
please don't tell me that you think it is foreign money that created sub-prime in US rather than persistently low interest rate.
maybe Singapore can't influence FED's decision on USD interest rates, but at least MAS can control domestic SGD money supply through effective SGD interest rate control