Between inflation and deflation, governments would rather have the former. However, if inflation remains elevated over a prolonged period, then, we will have problems aplenty.
I am not an economist and this is not going to be an economic essay. This blog post is inspired by a report by Bloomberg which says how elevated inflation in Singapore is persistent and unlikely to go away. The repercussions are real and grim.
As the negative effects of inflation would affect middle to lower income earners more than the rich, it is even more urgent that we do something to at least protect our wealth.
Sections from Bloomberg's report:
Singapore is grappling with the elevated inflation that comes with years of economic growth and population expansion on an island smaller than New York City, with rising demand fueling record property and car prices.
Singapore has the highest inflation rate among 27 economies with GDP of at least $100 billion and classified by the International Monetary Fund as advanced. The island’s inflation has exceeded 4% every month but one since November 2010, more than double the 1.9% average in the past two decades.
Singapore, which uses the exchange rate to manage inflation, unexpectedly refrained from slowing the pace of its currency’s appreciation in its October policy review even after the economy contracted last quarter. The Singapore dollar’s 6.4% gain this year has done little to damp inflation stemming from domestic price pressures.
Higher car and property prices and the measures to tighten rules on hiring overseas workers are driving up the “overall cost structure” of the economy, spurring inflationary pressures that are a result of “self-imposed” policies, according to DBS Group Holdings.
I have shared my thoughts on wealth creation here on a regular basis. We want to grow our wealth but for many, taking the step to at least protect their wealth from being eroded by inflation would be significant and, in certain cases, it would be quite an achievement. All of us have different circumstances, after all.
It is more important now than ever before that we make sacrifices and put in place plans to secure our financial future in a world that is increasingly uncertain. People who still think Singapore will continue to do well simply because we are in Asia, the future global growth engine, should hedge their positions. Things could get worse.
Read Bloomberg's report: here.
Related posts:
Go to the right side bar and look for the box with the label "Wealth Creation: Beating inflation" for my earlier blog posts on the topic.