Saturday, August 02, 2008

On the road again

Labour Chief and Cabinet Minister Lim Swee Say has reportedly admonished workers "to work together to cope with a global economy which may be heading towards a state of stagflation — one sparked off by low growth and high inflation." The last time that this stagflation word was used widely was in the 1970s and early 1980s. Soaring oil price was a problem then and OPEC was all powerful. It has returned to haunt use again, and to demonstrate to a new generation of people that things can change so fast. One moment, you think your world is perfect - low inflation, low interest rate (well, the feeling is mixed here) coupled with high growth. Growth appears to be slowing (i.e. stagnating), prices are rising (inflation) through the roof though interest rate remains artificially low (which, no doubt, fuels spending).

So I was not surprised to be told that the current NATAS travel fare was bursting with visitors yesterday - a work day in Singapore. I was told that there was a queue stretching right up to the concourse leading to the MRT station for people to GET INTO the exhibition hall. Clearly many have taken leave from work to attend the travel fare. And I don't think they are there to gawk at pretty sceneries, or whatever else they think they may see. They must have come to buy. Which leaves me wondering. Are people suspending reality? Aren't times getting difficult? Sure there are still jobs to be found, but really, how long will they last? Annual affairs such as the F1 race coming up in September can only sustain so much of the economy and for only a few months in a year. Manufacturing isn't doing that well due to the weakening US economy. The Singapore government, with all their competent (though not infallible) economists and policy planners, are already saying that times will get tougher.

So why are Singaporeans spending on things that are really not essential? One would go away thinking that the good times are still rolling on and on. Isn't it time to tighten the belt? Well, there is a certain wisdom in the crowds. In this case, they are beating the Paradox of Thrift and thereby sustaining the economy, though don't ask me where they are getting the money from to splash on these vacations. Air travel has become much more costly with the high oil prices, so no matter what good deals a person may pick up at the fare, it's still going to cost, no matter that one is 'locking-in' the prices of oil and inflation. 'Locking-in' prices will only be good if oil price and inflation will continue to rise - which is a bleak prospect. So why are people still spending like there is no tomorrow?

If NATAS was that crowded yesterday, wait till you see the herd today - a weekend - at Singapore Expo...Still planning to go?

Image source: Author: Dani Simmonds

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