There is something investors need to see and be informed on why they ought to be worried about their good savings
in the bank today. To prove a point, let us look at things in perspective and
slowly digest on the topic.
Over the years, It is very
apparent the purchasing power of every individual had dropped very
significantly. Just consider how much one has to pay for a unit condominium now
compared to 10 years ago. While economic always points us to an inflationary
environment we live in, higher raw material costs, payrolls and future demand
or supply of goods etc, there is a missing puzzle that has been put away so
often. That missing puzzle is what I want to talk about - Our cold, hard, cash deposited in the
bank.
Economic taught us that value
is created in products, goods or services based on market demand. For example,
because the scientist had discovered crude oil can be used in powering car or
machines, the explosion of demand had made crude oil the most valuable resource
in the world. Otherwise, crude oil is just an element found on earth with no
value. Like shares or stocks in the
exchange, share price or value goes up because of high demand from market
participants. Same theory, In the current financial models, paper money value
derive from its ability to perform transactions. Everyone believes in money,
works for money, and demand more money to perform transactions such as buy
services, food, car, and condominium etc. This value in money is fully
supported/protected by our government in order to create liquidity within the
whole financial system and carry out country's agendas.
So, I now want you to
know/believe that your money has lost its value for the last 10 years. The loss
in money value is not so much associated with Inflationary pressure because
inflation had been weak and compensated with the little rise in our wages. So
what had happened to our money value? Please see the reasons below:
1. Over supply of paper money
in the financial system ( The US carry out quantitative easing on monetary
policy since 2008)
2. Demand for paper money in
financial system had dropped. (Overseas Banks do not want to accept deposits.
European, Japanese banks actually have negative interest on savings, they
charge customers who deposit money in the bank. Other banks give a very low-interest
rate for savings. Banks do not want to carry money asset that could potentially
lose more value)
3. Drop in oil price had
affected money value.
4. Money flows out of the
financial system to seek safe haven in Gold, Crypto currency other hard assets.
5. Lost confident with
governments / Country debts
6. Society going cashless.
(New mode of money transactions)
7. Others
Yes, our money had lost its
value, many people just do not see this. The high Condominium price was
associated with the rise in demand and the drop in the value of money or
savings in the bank. So is the raw materials, items, goods or everything else.
Things will just get more expensive with the loss in money value.
This had happened 10 years
ago, will this continue? The answer is
quite obvious. You good SGD savings in the bank today will probably worth much
lower 5 to 10 years down the road. The market interest returns of 3 - 4% per annum
is insufficient to compensate the loss in money value. The risk of your money
losing value is even higher now as Crypto currency demand is in the rising
trend. Technology advancement had proven a point that there is value in
associated with Crypto currency concept. Using Blockchain technology, Crypto
currency transaction improves the efficiency of fund flows and help in cost
savings on individual/corporate or even countries. Crypto currency was deemed
as worthless, something created out of thin air. But because it is a decentralized
space or medium created to allow transactions to happen, a value was created by
the demand and is rising fast.
The next things we ask
ourselves is will Crypto currency be one day become mainstream currency in a cashless
environment? I have no answer for this. What I know for sure is, our money
value will continue to drop and Crypto currency or cashless environment is
going fasten the pace. Vicious cycle, super rich will get richer because they would
have invested in crypto currencies years ahead, the poor only concern is food
and shelter, middle-income folks will be the hardest hit.
So what is the solution? The
answer is capital preservation. You can try few things but I do not know if
that is enough.
1. If you do not own a house,
do get one soon.
2. If you do not have hard
assets? Go get some golds or silvers to keep
3. If you are getting 4%
interest returns per annum, looks further.
4. If you do not have insurance,
please go get one.
5. Buy a farm and grow
vegetable. Self-reliance.
6. Buy into crypto currencies
7. Buy into a business which
is modern and has potential to scale up.
8. Others
In summary, we are living in an
era of change. There is a choice given to you, to lead the market or let the market
leads you.
