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 …

When the Bank of Japan (BoJ) announced the shock move to implement Negative Interest Rate Policy (NIRP) in January 2016, it took the market by storm. The aggressive step reflected the extent of Japan’s economy difficulties and the scary prospect of deflation. Just what is NIRP all about and why should Singaporeans take note of this development? Will Singaporeans pay the banks to deposit their savings?

NIRP is used by countries to devalue their currencies so that their exports can be cheaper and thus spurring economic growth. Previously, during the era of the Great Financial Crisis in 2008, major economies like USA, Europe, Japan and China all resorted to Quantitative Easing (QE) to encourage spending in the hope of achieving growth in the long-term. However, after a long period of sluggish global growth, policy makers started to panic because they have run out of idea to stimulate growth. In Europe, countries like Denmark, Sweden and Switzerland had already embarked on NIRP. Japan followed suit early this year.

Together, Europe and Japan produce 20% of the global GDP. Thus, they are major players in terms of global trade. By adopting NIRP, they are essentially triggering a global currency war and issuing a subtle challenge to United States. After all, the greenback is still the de-facto global reserve currency. So with negative interest rates in Europe and Japan, surely traders will flee Euro and Yen and flood the US Dollar. And a rising US Dollar will have serious implications not just for USA, but also developing countries.

Many people have speculated that USA will increase interest rates at least two times this year and have dismissed the prospect of the Federal Reserves implementing NIRP. However, it remains to be seen whether this is true because things may worsen to the point that …

In the aftermath of Great Financial Crisis in 2008, policy makers had resorted to financial engineering to restore global economy. Some notable policies were Zero Interest Rates and Quantitative Easing (QE) which aimed to encouraging spending and lending. However, after so many years, these policies were deemed ineffective and so several European countries and Japan had devised the Negative Interest Rate Policy (NIRP) in a bid to revive their ailing economies. What does this mean to you as a wealth builder and how can you protect your wealth against negative interest rates?

Very simply put, for those who live in countries with NIRP, the banks will charge depositors for putting their monies in the bank. Yes, that’s right. Instead of receiving money on your saving deposits, you have to pay the bank money. This may sound strange but the intent of this policy is to prevent wealth builders from hoarding money and also to encourage banks to lend money. The objective of central banks implementing this policy is basically to prevent deflation from eroding the demand side of the market.

It is still early days of NIRP and the long-term effects are unclear. Nevertheless, by resorting to negative interest rates, policy makers had inadvertently revealed that they have run out of ideas to salvage the affected economies. Thus, it is only a matter of time that the fiat currencies collapse. Look, we are talking about major economies like Japan, Sweden, and Switzerland which have all implemented NIRP. Will United States follow suit and reverse its course of monetary policy? There is a possibility because of “peer pressure”. After all, no countries like to lose the currency war.

According to World Gold Council (WGC), bond holders “can expect little return, or even negative return, from their sovereign bonds” due to the …

Gold is often denominated and traded in US dollars, so a weak dollar will cause gold to be less expensive to buy. In addition, when US dollars devalue, investors will seek an alternative safe haven, such as gold, to store value. Loosely speaking, gold’s value is often correlated to the strength of the dollar. However, with the introduction of quantitative easing by the US government since 2008, I have always been puzzled that global inflation has not shot through the roof and purchasing power of the US dollar has not been diminished a single bit. In BullionStar’s website, I found my answer.

BullionStar explained that 80% of the global trade is still conducted in US dollars as businessmen still trust the stability of US government. In my opinion, a lot of credit must go to President Obama, who took over from his predecessor, George Bush, during the Great Financial Recession in 2009. Under Obama’s leadership, he helped to steer United States out of economic recession and in 2015, his hard work finally paid off. United States’ economy is finally showing sign of recovery and unemployment rate decreases substantially since last year. As a result. the value of US dollar rise for the past few months.

Bullionstar also pointed out that most commodities, such as oil and gold, are priced in US dollars. Thus, the recent drop in oil prices helped to boost US dollar value because of the increased purchasing power of dollar to buy oil. Inadvertently, because of the strengthening of the dollar, gold price is forced to retreat.

The last important point raised by BullionStar is that the US dollar has been long regarded as the world defacto reserve currency and many central banks hold US dollar as their foreign reserve holdings. US dollar’s supremacy has been challenged …