Sunday March 02, 2008

Hyper-inflation : early warning signs

This article belongs to the Singapore inflation watch story arc.

Earlier in the day, I went to a shop in Hougang to buy a light bulb. One of the lights in the kitchen was flickering and due to be replaced. I already had one in the inventory at home, bought about half a year ago, and the next one is supposed to go into storage to await its turn.

It's an ordinary thing, this fluorescent light - it's a circular tube type, white daylight, power rated at 32W, and it is made by Panasonic. I usually go back to the same shop since a. they usually have lower prices than other shops, and b. I pass by this place now and then to run errands.

Ordinary light bulb, ordinary day. Here they are, the two of them :

Exact same shop. Exact same item, down to the brand and model number - I've checked : Panasonic FCL32EX-D/30 (it's this Japanese penchant for detailed model numbers on everything). The prices though, are another thing altogether. Are you sitting down yet? Right, good. Because what I'm going to put up next is a close-up of the price tags :

Yep, you saw right. The fluorescent light on top, bought about half a year ago, was going for $5.50. And the one I bought today had gone up to $8.00. That's a 45% rate of inflation. 45% !!!!! Heck, not even the government ministers' salaries are going up by 45% (just up to 33% only).

I am shocked. I am stunned. I am flabbergasted.

Not at the difference of two dollars and fifty cents, but at the rate of change this implies. I think this is one of the early warning signs of what may turn out to be something much more ominous : hyper-inflation.

As I have said before and definitely more than once, inflation in Singapore, and not just in Singapore, but practically everywhere else too, is taking off and going exponential.

I have been monitoring this inflation situation for quite some time now. There were signs that it was getting worse and worse with each passing year, every passing month, and now it seems, every passing day. Just take a look at the prices of oil and gold, the classic indicators of price inflation. They are setting new records practically every day nowadays. Price inflation as indicated by the official CPI figures released for every month, is setting new multi-decade highs : from 3.6% in Oct 2007 to 4.2% in Nov 2007, to 4.4% in Dec 2007, and now it is at 6.6% in Jan 2008.

I have spent a lot of time talking to people about this inflation problem, and how it was going to get worse. Friends, family, colleagues. Few listened, fewer understood. And to a person, nobody that I knew took any action whatsoever.

But I did. I wrote blogs. I read up whatever I could on money supply (all the M's : M1, M2, M3), on inflation, on history's sordid tales of hyper-inflationary episodes, from France, to Germany, to Argentina, and, more recently, Zimbabwe. I continued to talk to anyone who would listen. I started to put my money into investments that would serve as a hedge against inflation.

I will continue to put up blogs on this site tracking the progress of inflation in Singapore and elsewhere. This time, it's war. We are going to have to wage our own personal war on inflation. This time, it's global. Whether you live in Singapore, Malaysia, US, Europe, or elsewhere in Asia. And this time, if things continue to roll down the slippery slope like they are, it's going to be exponential.

This past week has been a watershed on the inflationary front. Things seem to be happening faster than before. I have been observing the markets, and what the markets seem to be saying, is this : certain lines of resistance which have not been broken before, have broken down. The price of crude oil is now well over $100 a barrel. Oil at $100, instead of being a line of resistance, has become a support level. Oil is on its way to $120 and then $150, and then $200. Matt Simmons, investment bank CEO and energy advisor to George Bush, has been quoted as saying oil could go to $300. Gold has broken through resistance at $950 and is now at $974, on its way to $1000 and beyond. Platinum has breached $2000 and it keeps going. Wheat, the stuff used to make flour, and noodles, and bread, is setting records beyond $12 a bushel, (it was $3 to $4 a couple of years ago) and on certain exchanges has gone well beyond $20. The forex exchange rate of the Euro to the US Dollar (EUR/USD) has broken through 1.50. The US M3 money supply growth rate has hit 18.6%, and USDX, the weighted US Dollar Index, has broken down below 74.

And then there was this light bulb.

If there is any time for your personal light bulb to go off in your head, this is the time. I hope I am wrong, and this is one of the things that one really wishes one is wrong about, but if I am right, and that the early warning signs of an impending hyperinflation are here, it's going to be get rough. Be prepared.

See also :

1. Singapore : Inflation rate could push past 6% in Q1 2008
2. Singapore CPI inflation hits 6.6% in Jan 2008 - a new 25-year record high
3. Singapore economy stuck in mud : inflation rising, M3 falling, GDP crashing - the stagflation formula
4. Crude oil reaches $103.05 record high on dollar drop, UK gas terminal fire
5. US dollar sinks to new lows, gold price hits $955.70 all-time record, crude oil hits $101.43 record high

(2008-03-02 02:07:58 SGT) [Biz] Permalink Comments [6]

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