Monday, May 16, 2011

M1 of Singapore

A look at M1 money supply of Singapore from MAS website. The PAP government does not publish M0,  so we can only make a rough estimation of MAS printing press base on M1. Our M1 increases by almost 8 times in 20 years.

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Update :  Refer to [link] for more balanced view.


Fox said...

I think you do not understand Singapore's monetary policy. By law, every Singapore dollar has to be exchangeable with a trade-weighted basket of currency. So, when investors pour hot money (in USD, Yen, RMB, etc), MAS exchanges the hot money for Singapore dollars, resulting in an increase in the base money supply. If you plot a normalized version of Singapore foreign reserves, you'll see the same trend, with a sharp increase starting in mid 2007.


Hayek said...

Re Fox:

I agreed with what you has mentioned. MAS acts more like a currency board, as it need to have certain amount of FX before Sing dollar is created.

But the thing is, if MAS choose to increase the supply of Sing dollar on par with gold production which is 2% increase a year -- regardless of consequence; then we would see price stability under gold standard for Singaporean.

I do not doubt that FED is the number one culprit to be blamed. But one cannot deny MAS money printing hugely impact the life of Singaporean.

Inflation is a monetary phenonmon, and nothing else.

Fox said...

Erm, the total supply of money is determined by credit creation/destruction, not by base money stock. Also, money supply increased sharply from 2007 onwards, before any quantitative easing started.

What we are witnessing is mostly the inflow of hot money and MAS's inability to sterilize them due to the open nature of Singapore's economy.

Hayek said...

I should be less extreme in my words. Thanks for your correction anyway. I will make my due changes.

I change my stance on the ground that MAS looks more like a currency board to me, than central bank.

The FED QE has been devastating to us on one hand. On the other hand, PAP should be honest that our CPF is short-changed and the government is preventing us from finding a hedge against inflation.