Read more at https://www.channelnewsasia.com/news/singapore/singapore-dollar-mas-monetary-policy-10133554
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Ricky Lim ·
Allowing Singdollar to rise slightly - will not necessary impact trade greatly or discourage business.
Singapore is a big net importer of goods.
When Singapore Economy is doing well and growing strongly, demand for goods and services will rise - and import will increase alot more. This will cause outflow of money and will drive up inflation - which are bad for the Economy.
By allowing Singdollar to rise slightly, it will make import cheaper - due to our stronger Singdollar.
And having stronger Singdollar will also keep imported inflation in check.
On the production, the supply side, strong Economy means there are higher internal demand and more export demand. As Singapore has no natural resources, Singapore will need to import more raw materials, intermediate goods and even finished goods to supply to the manufacturers, traders, exporters.
With stronger Singdollar, it will make export cheaper because we are importing raw materials, intermediate goods and finished goods at a lower price due to the strong Singdollar - and the cost of production become lower.
As paying for imports for goods are mainly in US dollars or other denominations, stronger Singdollar can exchange for more US dollars or other denominations - and this will prevent more outflow of Singdollar - and thus make our supply of money stronger.
Being a trade intensive and extensive Economy, smart and wise adjustment by tightening and losening of monetary policy is a Wise way of ensuring our good healthy Economy.
MAS and MOF has a proven track record in managing Singapore Monetary Policy wisely due toe experience gained in managing the Economy and keep our Economy going healthily.
Singapore is a big net importer of goods.
When Singapore Economy is doing well and growing strongly, demand for goods and services will rise - and import will increase alot more. This will cause outflow of money and will drive up inflation - which are bad for the Economy.
By allowing Singdollar to rise slightly, it will make import cheaper - due to our stronger Singdollar.
And having stronger Singdollar will also keep imported inflation in check.
On the production, the supply side, strong Economy means there are higher internal demand and more export demand. As Singapore has no natural resources, Singapore will need to import more raw materials, intermediate goods and even finished goods to supply to the manufacturers, traders, exporters.
With stronger Singdollar, it will make export cheaper because we are importing raw materials, intermediate goods and finished goods at a lower price due to the strong Singdollar - and the cost of production become lower.
As paying for imports for goods are mainly in US dollars or other denominations, stronger Singdollar can exchange for more US dollars or other denominations - and this will prevent more outflow of Singdollar - and thus make our supply of money stronger.
Being a trade intensive and extensive Economy, smart and wise adjustment by tightening and losening of monetary policy is a Wise way of ensuring our good healthy Economy.
MAS and MOF has a proven track record in managing Singapore Monetary Policy wisely due toe experience gained in managing the Economy and keep our Economy going healthily.
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Ricky Lim ·
So getting the Economic fundamental right.
Getting the Financial (monetary policy) fundamental right.
Getting the Fiscal Policy (tax policy) fundamental right.
Getting the Foreign Affairs policy fundamental right (Friends with All, Adversity with None).
Singapore Economy will continue to prosper and progress very well.
--- Compare that with Golden crown - where economic (trade) fundamental is wrong by waging trade war, foreign affairs fundamental is wrong, low tax but excessive debt --- how to prosper and progress?
Getting the Financial (monetary policy) fundamental right.
Getting the Fiscal Policy (tax policy) fundamental right.
Getting the Foreign Affairs policy fundamental right (Friends with All, Adversity with None).
Singapore Economy will continue to prosper and progress very well.
--- Compare that with Golden crown - where economic (trade) fundamental is wrong by waging trade war, foreign affairs fundamental is wrong, low tax but excessive debt --- how to prosper and progress?
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Ricky Lim ·
Singapore Monetary Policy unlike most Countries in the World - does not adjust Interest Rate.
Most Countries like Fed and so many other Countries adjust interest rate up or down - to boost their Economic Growth but Singapore does not.
For eg. when an Economy is not growing, Central Bank will usually lower the interest rate so that :-
(1) Business can borrow from banks at a lower interest rate - to fund business operation or investment.
(2) People will borrow money to buy goods, services, houses, cars etc
(3) People have less incentive to save by putting into saving account - and will usually spend or invest in instruments that have higher return.
All these activities will boost Economic activities and spur Economic growth - based on the Economic Model of Growth - known as multiplier effect of the Circular Flow of Income.
When our Economy is getting strong, Central Bank can increase interest rate so that :-
(1) Business will borrow less from the banks due to high interest rate to service - and thus contribute to high business cost.
(2) People will save more and spend less due to the higher interest rate.
All these activities will lower Economic activities to prevent overheating of the Economy - due too much money chasing fewer scarce resources - driving up prices and lead to high inflation.
All these activities will lower Economic activities to prevent overheating of the Economy - due too much money chasing fewer scarce resources - driving up prices and lead to high inflation.
This will prevent "Economic bubble from forming and growing and cause it to burst".
When economic bubble burst, it means business will be unable to repay bank loan and interest and go bankrupt. People cannot repay bank loan and go bankrupt. Banks have many bad debts and may trigger run-on banks causing the whole financial systems to collapse.
Based on the Economic Model of Growth - this is known as de-multiplier effect of the Circular Flow of Income.
But why Singapore don't adjust interest rate to boost Economic growth like other Countries neh?
Because Singapore internal economy is very small - only about 5.6 million people economy.
Using interest rate as instrument for Monetary Policy - has very small impact.
Comparatively Singapore external economy and trade that spur our Economic Growth is very large - because of the huge 6 billion people in the World out there.
Thus using Exchange rate as instrument for our Monetary Policy have very big impact.
In other words, Singapore Monetary Policy is very unique to Singapore - Singapore homegrown self-invented one.
Most Countries like Fed and so many other Countries adjust interest rate up or down - to boost their Economic Growth but Singapore does not.
For eg. when an Economy is not growing, Central Bank will usually lower the interest rate so that :-
(1) Business can borrow from banks at a lower interest rate - to fund business operation or investment.
(2) People will borrow money to buy goods, services, houses, cars etc
(3) People have less incentive to save by putting into saving account - and will usually spend or invest in instruments that have higher return.
All these activities will boost Economic activities and spur Economic growth - based on the Economic Model of Growth - known as multiplier effect of the Circular Flow of Income.
When our Economy is getting strong, Central Bank can increase interest rate so that :-
(1) Business will borrow less from the banks due to high interest rate to service - and thus contribute to high business cost.
(2) People will save more and spend less due to the higher interest rate.
All these activities will lower Economic activities to prevent overheating of the Economy - due too much money chasing fewer scarce resources - driving up prices and lead to high inflation.
All these activities will lower Economic activities to prevent overheating of the Economy - due too much money chasing fewer scarce resources - driving up prices and lead to high inflation.
This will prevent "Economic bubble from forming and growing and cause it to burst".
When economic bubble burst, it means business will be unable to repay bank loan and interest and go bankrupt. People cannot repay bank loan and go bankrupt. Banks have many bad debts and may trigger run-on banks causing the whole financial systems to collapse.
Based on the Economic Model of Growth - this is known as de-multiplier effect of the Circular Flow of Income.
But why Singapore don't adjust interest rate to boost Economic growth like other Countries neh?
Because Singapore internal economy is very small - only about 5.6 million people economy.
Using interest rate as instrument for Monetary Policy - has very small impact.
Comparatively Singapore external economy and trade that spur our Economic Growth is very large - because of the huge 6 billion people in the World out there.
Thus using Exchange rate as instrument for our Monetary Policy have very big impact.
In other words, Singapore Monetary Policy is very unique to Singapore - Singapore homegrown self-invented one.
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