Fed Ends Zero-Rate Era as Yellen Signals Gradual Tightening
By Christopher Condon and Craig Torres | Bloomberg – 16 hours agoL
Lee Sian Loon • Report Abuse
UK, New Zealand, Australia, European countries set interest rates without reference to the USA fed. They decide what is good for their countries, not what is good for the USA. USA economy is going up, SG economy is going down. No reason for MAS to allow banks to raise interest rates, except to profit bankers.Reply
- ricky l • Remove
I believe Singapore is a financial hub.
If US increase interest rate, it will attract an outflow of money in Singapore financial hub into US and we will face cash crunch if Singapore don't increase interest rate to keep money stay in Singapore.
HongKong Central Bank immediately announce an interbank rate increase of 0.25% the moment FED announce a 0.25% increase in FED rate.
I guess Singapore MAS will have to do the same - to remain an attractive financial hub.ricky l • Remove
Let us test this economic theory.
Assume Singapore does not increase interest rate for S$.
So people sell S$ and convert to US$ and place it in US banks - because many people will buy more US$ and US$ increase. In addition, US$ attract higher interest.
So this will cause a big outflow of money to US as people begin to sell S$ and buy US$ and deposit into US banks at higher interest rate.
Singapore as a financial hub - will need US$ to trade and finance business - but US$ left Singapore because of low interest rate - then how to trade? Also it will cause S$ value against US$ will go down rapidly. Though this is good for export to US due to cheaper price but it will not be good for import from US because it will be too expensive.
Also as a financial hub that loan US$ to business, not enough US$ will be deposited in Singapore due to outflow of US$ into US - as Singapore interest rate is low.
So if Singapore increase interest rate, currency exchange rate between S$ and US$ will be maintained. Deposit will also be maintained because of the higher interest rate.
This economic theory make sense?
ricky l • Remove
Let us test another economic theory :-
If interest rate is keep to zero, it means more business will borrow to finance their business and people will borrow or go on credit to buy goods and services.
When easy credit are make available and when interest is low - more people will borrow to spend and buy goods - that will eventually lead to higher inflaton - as there are too much money chasing after too few goods and services.
More people will be in debt and especially if people borrow to buy big ticket items such as properties, house and cars - it will be a high risk to the banks.
When there is economic downturn, banks will be at risk when people or business default. Even with mortgage - no one will pay a good price for the auction - in economic downturn - and there will be alot of bad debts.
Thus to recalibrate the economy - to balance economic activity with financial prudenece, vis-a-vis inflation and financial debt --- there is a need to increase interest rate - through the manipulation of monetary policies - to regulate money supply - in conjunction with economic data (that may signal overheating in the economy and increase in debt).
Does this economic theory make sense?ricky l • Remove
See the late news published just now support the theory above :-
Mortgagee listings set to hit 7-year high: Colliers International
A total of 241 repossessed properties were put up for auction this year, up by nearly 52 per cent per cent from a year ago, says the property services firm.
⦁ Posted 17 Dec 2015 20:48
⦁ Updated 17 Dec 2015 23:19
⦁ SINGAPORE: Mortgagee listings in Singapore look set to hit a seven-year high by the end of 2015. According to property services firm Colliers International, 241 repossessed properties were put up for auction this year, up by almost 52 per cent from 159 in 2014. This is the highest since 2008.
⦁ In a media release on Thursday (Dec 17), Colliers International said there were 555 owner listings in the property auction market, bringing the total auction listings for 2015 to a six-year high of 796. In 2014, there were 529 auction listings.
Colliers said the increase was because borrowers in default faced difficulties in selling their properties. Residential properties formed the bulk of listings at 79.6 per cent.
In terms of segments, mortgagee listings for landed homes more than doubled from 19 in 2014 to 50 this year. For non-landed properties, the number rose from 104 to 142 units year-or-year.Mortgagee listings set to hit 7-year high: Colliers International
A total of 241 repossessed properties were put up for auction this year, up by nearly 52 per cent per cent from a year ago, says the property services firm.
- Posted 17 Dec 2015 20:48
- Updated 17 Dec 2015 23:19
SINGAPORE: Mortgagee listings in Singapore look set to hit a seven-year high by the end of 2015. According to property services firm Colliers International, 241 repossessed properties were put up for auction this year, up by almost 52 per cent from 159 in 2014. This is the highest since 2008.
In a media release on Thursday (Dec 17), Colliers International said there were 555 owner listings in the property auction market, bringing the total auction listings for 2015 to a six-year high of 796. In 2014, there were 529 auction listings.
Colliers said the increase was because borrowers in default faced difficulties in selling their properties. Residential properties formed the bulk of listings at 79.6 per cent.
In terms of segments, mortgagee listings for landed homes more than doubled from 19 in 2014 to 50 this year. For non-landed properties, the number rose from 104 to 142 units year-or-year.
A
Augustine • Report Abuse
simple economics, if you create wealth during zero interest era and didnt cash out,
how do you think you can cash out during rate hike era where there are more econo problems
J
John Lim • Report Abuse
BANK INTEREST MUST INCREASE LAH ! Where got so low one. Don't increase later SG DOLLARS DROP LEH !
ricky l • Remove
This zero interest rate scenario for the last 7 years is exception rather than the rule. After the financial crisis - lehman bros collapse and the subprime crisis (real assets bubble burst) - it is first time the US is facing a crisis that almost mirror the Great Depression of 1930s.
To instill confidence in the business, to simulate the business environment - to do a Hercules lifting of business environment and create jobs ---- zero interest rate is implemented to encourage business borrowing to pump prime the economy and create jobs. This period is consider the Great Recession (the little brother of Great Depression).
Now the US Economy is lifting, slow moving back to the norm and away from the exception - is expected.
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