Singapore hyperinflation warning signs #2 : Cooking oil price up 75%

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Monday May 05, 2008

Singapore hyperinflation warning signs #2 : Cooking oil price up 75%

This article belongs to the Singapore inflation watch story arc.

The Knife brand cooking oil is a popular brand over here in Singapore. It is a blend of palm oil and vegetable oil. The photo shows a jumbo 5kg + 1kg packaged bundle. It was sometime last year when I last bought a package like this one. The price then was SGD $11.80. But now, over at Prime Supermarket, the price has gone up to $20.65. That's a whopping 75% price increase!

This is what I did : I scouted around and found that both the Prime outlets near my home and my office were selling this at the same sticker-shock price of $20.65. I went to the NTUC supermarket outlet near the office and found that there were 3 bundles left over still going for $16.90. So I got one of them and that's the one you see in the photo above. The next day, I went back to the NTUC outlet and voila, they had new stock. That shelf was fully packed - see, no shortage here. But the new price? $20.60. Just 5 cents off from the Prime price. So perhaps we could take this as hyperinflation early warning sign #2. The first one has been described here.

You see, once inflation takes off, it tends to take on a life of its own. It tends to go exponential and hyperinflation starts to set in unless and until something comes along and stops it completely in its tracks. What could that something be? In the 1980's, it was high interest rates. Gee, I wonder what happens to non-fixed-rate home loans and the Singapore housing market if we were to have say, 20% interest rates? All-out property market crash, most likely. So I don't think that could be a solution here, seeing how the economy and the markets are already dizzy from the ongoing credit crisis - adding a 20% interest rate shock could very well collapse the system. And yup, that's the other thing that could stop hyperinflation in its tracks - complete and total systemic collapse. Cool. Not!

Meanwhile, we have our government telling us things like "inflation is expected to cool to 4% in the second half of 2008". Oh, really. And we have a certain famous elder statesman who told us that oil wasn't likely to rise above $110. Uh, wait a minute. We've already passed the $110 level. What a dilemma. Whom to believe? I think about these "official statements", and I look at that cooking oil in front of me. Hmm. I think I will believe in the reality of the receipt that I have in my hand, and the reality of the price tags in the Prime supermart, downstairs, at my office, at the NTUC outlets. I think I will believe in the reality of the price tags that are going up everywhere that I go. Sure, they can talk the talk. But that talk very much pales next to the reality of ever-increasing street prices hitting the citizens in the face each and every passing day.

But to be fair to the government, it *is* true that this is a global phenomenon. There is literally nowhere left to hide, and I do mean nowhere, because all the currencies in the world are based on fiat, and all of them are inflating away at the same time. The problem is global in scope, and the problem is systemic in nature. One could hardly expect the government of the "little red dot" to be able to do anything meaningful to halt the worldwide hyperinflationary tidal wave. They have already adjusted the currency trading range by another notch and that's about all they can do without demolishing the exporting companies overnight by, say, taking USD/SGD to parity. Talk about a rock and a hard place. Leave the forex exchange rates alone, and the citizens continue to suffer. Let the currency strengthen and the exporting companies suffer, close down or move out, leading to job losses, and then again the citizens suffer. We are so screwed.

The way I see it, there are exactly 2 ways out : one way is that the global economic body comes to its senses, returns to a stable currency, and lets the markets work out meaningful solutions to the various crises facing the world today. The other way out is, like I said, a complete and total system collapse, let the system reboot and restart from scratch. Somehow I don't think we'll like the latter one very much.