June is too soon for an RBA rate rise

Name:         CHAN, Sin Fong
Subject:      June is too soon for an RBA rate rise
Visit Time:  11/05/2011 6:04 PM

Remark:
Predictions by Glenn Stevens and his team at RBA are far from satisfactory. Either the economic models used or the way the results produced by the models have been interpreted need to undergo vigorous challenge.

The trilogy of negative demand, as I called it, is a signal for heading towards a recession. This may sound farfetched, naïve and ill-founded, but a rationalist will see the wisdom of this doomsday prediction. The trilogy of negative demands is real properties, cars and household goods including fashions. These three categories of items are in descending sequence in terms of average value. In recent months, we witness the trilogy of negative demands are taking place.

I have written in many blogs and newspaper comments about my predictions, a lot more accurate than what RBA has been predicting. Using dollar value as the key element in prediction is inadequate. The total quantity demand must be taken into consideration for normalisation.

CPI increase, unfortunately, always targets at increase in price which can be due to real reason and artificial manipulation. If quantity demand is increased, causing shortage of supply and thus pushing up the price, then there is room to call for increase in interest rate to dampen the demand. However, it is irrational to increase interest rate because electricity charges, water rates, local petrol prices have gone up, and that the quantity demand of these utilities or items is in fact unchanged or decreased. In short, the total dollar increases bear no relation to the demand curves.

Read more: http://sinfongchaneconomy.blogspot.com/2011/05/why-june-is-too-soon-for-rba-rate-rise.html

Real estate reality check

Name:        CHAN, Sin Fong

Subject:     Real estate reality check

Visit Time: 29/09/2010 11:31 PM

Remark:

The Age quoted "an estimated 60 per cent of Australian banks’ loan books is secured by residential property, ...". With the reversing of foreign investment policy, the demand of residential properties has definitely softened, and the resale values of the over-valued properties will face reality check. There is a good chance the real estate bubble will burst sooner than many expected, not dissimilar to what had happened in the USA.

In total, all small / medium businesses provide over 50% of employment, and many of them at present are not doing well. This can only translate to shaky employment future for many, and uncertain mortgage repayment. If these people were to default, the final selling price may not cover the original loan.

For the past 4-5 years, many people borrowed well beyond their repayment ability in order to secure their dream homes. Unfortunately, further upward movement in interest rates will turn their dreams into nightmares.

RBA and interest rate increase

Name:        CHAN, Sin Fong

Subject:     RBA and Interest Rate Increase

Visit Time: 29/05/2008 12:41 AM

Remark:

One of the key determining parameter used by the Reserved Bank of Australia (RBA) to increase interest rate is the inflation rate, which is derived from the consumer price index (CPI). The CPI is calculated based on a "basket of goods". The rising price of petrol has a flow-on effect on other items such as utility, transport, foods, wages, etc. These items, plus petrol are all included in the basket of goods. Using prices to determine inflation rate is rather illogical and nonsensical.

The higher prices, through no fault of the consumers, should not be considered as inflation. Redefinition of the word inflation based on increase in quantity consumed instead of money expended seems to be fairer and equitable.

The action taken by the RBA Board to increase interest rates for the past few months may help to dampen demand in many sectors, but the longer term impact may lead to business closure, loss of employment, rise in marriage / family breakup, mental and psychological suffering, theft and burglary. In addition to its main responsibility in determining monetary policy, and maintaining financial system stability, the RBA should also take on board social consciousness.

The methodology employed by the Reserved Bank of Australia’s (RBA) to increase interest rate can aptly be described by the acronym GIGO – garbage-in-garbage-out.

Banks - triple dipped

Name:        CHAN, Sin Fong

Subject:     Banks - Triple Dipped

Visit Time: 16/01/2008 2:28 AM

Remark:

What a load of rubbish that due to the subprime crisis, banks have to pay more to raise or repay overseas borrowing? On the contrary, the interest rate in US has been dropping, and our currency versus the US increasing.

To illustrate this with a simplified example, if our currency has risen from 80 cents to 88 cents per US dollar, the increased percentage is (88-80)/80*100% = 10%. If the interest rate were to increase, not decrease in this instance, from 5% to 8% in US due to the subprime crisis, the increase is just only 3%. By repaying the loan in US dollars, the banks netted a gain of 7%. The banks are crying poor, but in fact they are making more money now than they claimed to have outlaid.

By charging more from the least afforded, the banks are evil and morally corrupted