On 23 May 2016, Singapore smashed the record for the longest streak of negative inflation, recording a stunning 18 consecutive months of declining Consumer Price Index CPI (all items). On a year-on-year basis, CPI (all items) for February 2016 was -0.8%. Is this a good development for Singapore and should wealth builders pop the champagne because things are going to be cheaper? This is certainly not the case because the data is disturbing and reveals dark sides of the economy that every Singaporean should take note.
The statistics on consumer price development track three data, namely CPI (all items), CPI-OOA which excludes rental from owner-occupied accommodation and MAS Core Inflation, which excludes the cost of accommodation and private transport costs. The top reasons for the negative CPI (all items) are due to declining housing prices, weaker Certificate of Entitlement (COE) premiums and slump in global oil prices. Together, these three factors drove CPI (all items) to 18 months of downward trend. The negative trend is expected to continue as Monetary Authority of Singapore (MAS) forecasted that CPI (all items) is projected to average -1.0 to 0.0% for the whole year.
On the other hand, MAS Core Inflation rose to 0.5% in February due to higher food inflation. Hence, due to this consumer price trend, Singaporeans are paying more for food while things like petrol prices, recreation products, rental, COE and housing become cheaper. Given that Singapore is a price-taker in terms of food imports, the inflation in food prices is inevitable because of poor climate conditions. In my view, being a small country with no resources, there is nothing much that Singapore can do to tackle this problem because this is a global phenomenon.
However, the continuing decline in CPI (all items) warrants much concern because it covers comprehensive prices for consumer goods and services. As a major financial hub and regional leading exporter of electronic equipment, the decline in demand is an indicator of trouble for our economy because it reflects a decrease in consumer spending. If policy-makers do not intervene appropriately, such trend may lead to shrinking incomes or even retrenchments within Singapore. Just imagine if majority Singaporeans tightened their belts and refused to spend. How would our economy pick up?
While it is still early days to claim that deflation is coming to Singapore, such a possibility cannot be ruled out. What we are experiencing now is probably disinflation, a short period of negative inflation. However, if left unmitigated for a long period, we may face the prospect of deflation, which is a much more frightening scenario when compared to either inflation or disinflation. Deflation occurs when there is severe decline in consumer, government and investment demand in the country. The side effect of deflation is widespread unemployment, leading to severe economic depression.
Japan is a prime example of a country facing deflation for the past 20 years, a period well-known as the “Lost Decades”. Once the Number 2 global economic power-house, Japan has even slipped behind China in recent times, a result of the devastating effect of the “deflationary spiral”. In a desperate bid to tackle deflation, the Japanese policy-makers announced Negative Interest Rates Policy (NIRP) earlier this year to encourage investment and consumer spending. Under NIRP environment, central banks actually charge banks for deposits because they want to encourage consumers to spend and hence spur domestic demand.
As a wealth builder, in the face of inflation, disinflation or deflation, the best strategy is to buy bullion to preserve your wealth. Long seen as a safe haven during market turmoil and economic uncertainties, physical gold is regarded as the best hedge by investors. Start taking actions to protect your money and don’t procrastinate anymore. The bank interest rates for saving deposits are currently very low and the best rates you can find are probably between 2% to 3% per annum. However, comparatively, gold has risen by at least 17% in value since the start of this year and the upward trend is expected to continue for the rest of this year.
In Singapore, you can choose to buy physical gold from BullionStar, one of the largest online bullion dealers with a store-front shop at 45 New Bridge Road. With BullionStar, you can choose to buy gold or silver bullion online and have them delivered to your home or put them into ‘My Vault’ storage in BullionStar’s secure vault storage facility. Alternatively, you can choose to walk in and buy gold and other precious metals at BullionStar shop and showroom premises.
Setting up an online account is pretty simple and you can choose to pay in different currencies, including Singapore dollar and Bitcoins. In addition, the price is very transparency as BullionStar’s website displays the price premium and spread for each bullion. This allows buyers to make price comparisons online before making the purchase.
BullionStar also offers customers their own minted gold and silver bars with zero spread. They have commissioned world-renowned LBMA-approved Swiss gold refiner Argor-Heraeus to produce these stylish and unique minted 100 gram 99.99 % purity gold bars.
Below are some gold bullion offered by BullionStar that are worth buying:
Singaporeans who still think that they can win the stock market should wise up. The matter of fact is that the odds are stacked firmly against retail investors and those who did not diversify their portfolios are taking on big risks. Just one market correction and their wealth would be gone. Instead of risking your hard-earned money on speculative shares, start buying real physical gold from a trustworthy bullion dealer.
Join me in my investment journey and read my financial adventures for free! Through the sharing, my vision is to improve and change people’s lives. In school, we don’t learn how to budget, manage our finances, build wealth and invest our money. Instead, we are taught useless subjects which we would never put to use most of the times during our working lives.
Yet, managing our money is an important life skill that is critical to our survival in the society. Many people start to realize how it is importance of managing money only when they face the prospect of financial ruins, by then which would be too late for remedies. Thus, I started this blog to share articles on finances which I aspire to make a positive impact in others’ lives.
You can opt to subscribe email updates on my articles for free by entering your email address below.
Subscribe to Blog via Email
SG Wealth Builder