Having received feedback from my previous blog regarding M1 money supply, I decided to delve deeper into the topic. I need to apologize as my previous blog is kind of extreme.
Put it simply, Singapore dollar is created when Joe goes to MAS trading his foreign currency for SGD. MAS simply creates the money and give it to Joe.
This is the reason our government claims SGD is backed more than 100% by FX. The real money creation mechanism is of course much more complicated and our government makes it clear that SGD is peg to the exchange rate of a basket of currencies.
The US Fed starts to print money since 2008, MAS prints in tandem when hot monies flows to Singapore. This is the reason of hike in M1. In other words, US action has forced MAS to debauch our currency as well so as not to erode our competitiveness.
Our elite is well aware that the increase in M1 spell inflation for Singaporean, which is the main reason of property bubble. They are not responsible to the sin of US Fed but are guilty of--
- Allowing property bubble to develop even further. (a few regulations here and there will simply mitigate the bubble)
- Failed to provide proper hedging for CPF, for example they can give us an option to convert CPF monies to 100% physical gold. The elite should be well aware that Fed QE can be fully hedge by gold.