Saturday, July 30, 2011 @ 9:55 AM
What a year! The USA - and the rest of the world - is still reeling from what is said to be the biggest economic downturn since the Great Depression. In the meantime, the US’ debt ceiling has also been brought into the spotlight. In the past decade alone, the debt ceiling has been raised more than 10 times, and currently stands at more than $14 trillion. With Congress still undecided on what actions to undertake, the issue of raising the debt ceiling looms.
What is the debt ceiling?In the United States, the federal government can pay for expenditures only if Congress has approved the expenditure. If the total expenditure exceeds the revenues collected there is a budget deficit, and the only way that the shortfall can be paid for is for the government, through the Department of the Treasury, to borrow the shortfall amount by the issue of debt instruments. Under federal law, the amount that the government can borrow is limited by the debt ceiling, which can only be increased with a vote by Congress. (Taken from Wikipedia: http://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis )
Why this is important
Raising the debt ceiling due to the large United States federal budget deficits and the increasing federal debt is worrying, as budget deficits and long-term debt is detrimental to the economy and will also bring into question the Balance of Trade Payments as well as foreign exchange. According to the Congressional Budget Office (CBO): "At the end of 2008, that debt equaled 40 percent of the nation's annual economic output (a little above the 40-year average of 37 percent). Since then, the figure has shot upward: By the end of fiscal year 2011, the Congressional Budget Office (CBO) projects federal debt will reach roughly 70 percent of gross domestic product (GDP) — the highest percentage since shortly after World War II." The sharp rise in debt after 2008 stems largely from lower tax revenues and higher federal spending related to the severe recession and persistently high unemployment in 2008–11. The US' ability to pay for its expenses is brought into question, and the outcome of this debate will affect the actions that the MAS will undertake with regards to the exchange rate policy with the US.
Meanwhile, the Singapore dollar has continued to grow and become stronger against the US dollar, as current exchange rates stand at:
While a stronger SGD is not a bad thing, the USA is still an important player in the global economy and its actions will definitely affect everyone, including Singapore. Congress is expected to come to a decision regarding raising the US debt ceiling soon, so keep your eyes peeled for more information.
What is the debt ceiling?In the United States, the federal government can pay for expenditures only if Congress has approved the expenditure. If the total expenditure exceeds the revenues collected there is a budget deficit, and the only way that the shortfall can be paid for is for the government, through the Department of the Treasury, to borrow the shortfall amount by the issue of debt instruments. Under federal law, the amount that the government can borrow is limited by the debt ceiling, which can only be increased with a vote by Congress. (Taken from Wikipedia: http://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis )
Why this is important
Raising the debt ceiling due to the large United States federal budget deficits and the increasing federal debt is worrying, as budget deficits and long-term debt is detrimental to the economy and will also bring into question the Balance of Trade Payments as well as foreign exchange. According to the Congressional Budget Office (CBO): "At the end of 2008, that debt equaled 40 percent of the nation's annual economic output (a little above the 40-year average of 37 percent). Since then, the figure has shot upward: By the end of fiscal year 2011, the Congressional Budget Office (CBO) projects federal debt will reach roughly 70 percent of gross domestic product (GDP) — the highest percentage since shortly after World War II." The sharp rise in debt after 2008 stems largely from lower tax revenues and higher federal spending related to the severe recession and persistently high unemployment in 2008–11. The US' ability to pay for its expenses is brought into question, and the outcome of this debate will affect the actions that the MAS will undertake with regards to the exchange rate policy with the US.
Meanwhile, the Singapore dollar has continued to grow and become stronger against the US dollar, as current exchange rates stand at:
1 USD = 1.2019 SGD
1 SGD = 0.83202 USD
While a stronger SGD is not a bad thing, the USA is still an important player in the global economy and its actions will definitely affect everyone, including Singapore. Congress is expected to come to a decision regarding raising the US debt ceiling soon, so keep your eyes peeled for more information.
Saturday, October 30, 2010 @ 10:05 AM
Hello! We thought that perhaps a post about some key economic terms might be in order. We will also post a summarized version of the explanations for these terms in the section titled “terms”, so do look out for that new feature.
Circular income-flow
This is the basis for Keynes’ income-expenditure model, explained later below, that came to play a big part in the study of economics. It is taken to be that as long as there are available resources, firms will keep producing while consumers will continue to spend on these products. As long as this continues, the economy is said to be in equilibrium. However, there are two other important types of flow of income: 1) Injections, and 2) Leakages. Injections keep the income in the circular flow while leakages withdraw this income, or purchasing power, from the system.
Keynes’ income-expenditure model
JM Keynes is a legendary British economist, who is largely remembered for his theory on the circular flow of money in an economy, still widely in use today. He provided many insights into the workings of the macroeconomy, such as injections and withdrawals, the multiplier, the role of expectations in influencing consumption and investment decisions as well as the role of the government in initiating fiscal pump-priming.
Keynesian analysis of the income-expenditure model is built around the central concept of Aggregate Expenditure (AE). National income is equal to aggregate expenditure, which is comprised of consumption, investment, government expenditure, and net export (taking away import).
This also led to many other economic terms commonly used today, such as his famous "animal spirits".
Consumer Price Index
This records the changes in the price level of consumer goods and services purchased by households, recorded in index numbers. It is a useful tool in determining whether exchange rates are weak or strong in relation to each other.
Purchasing Power Parity
Currencies differ in economies all over the world. Currencies can also buy different things in each economy. Purchasing Power Parity or PPP shows how much the same amount of money (in different currencies) can buy.
Circular income-flow
This is the basis for Keynes’ income-expenditure model, explained later below, that came to play a big part in the study of economics. It is taken to be that as long as there are available resources, firms will keep producing while consumers will continue to spend on these products. As long as this continues, the economy is said to be in equilibrium. However, there are two other important types of flow of income: 1) Injections, and 2) Leakages. Injections keep the income in the circular flow while leakages withdraw this income, or purchasing power, from the system.
Keynes’ income-expenditure model
JM Keynes is a legendary British economist, who is largely remembered for his theory on the circular flow of money in an economy, still widely in use today. He provided many insights into the workings of the macroeconomy, such as injections and withdrawals, the multiplier, the role of expectations in influencing consumption and investment decisions as well as the role of the government in initiating fiscal pump-priming.
Keynesian analysis of the income-expenditure model is built around the central concept of Aggregate Expenditure (AE). National income is equal to aggregate expenditure, which is comprised of consumption, investment, government expenditure, and net export (taking away import).
NY = AE = C + I + G + X - M.
This also led to many other economic terms commonly used today, such as his famous "animal spirits".
Consumer Price Index
This records the changes in the price level of consumer goods and services purchased by households, recorded in index numbers. It is a useful tool in determining whether exchange rates are weak or strong in relation to each other.
Purchasing Power Parity
Currencies differ in economies all over the world. Currencies can also buy different things in each economy. Purchasing Power Parity or PPP shows how much the same amount of money (in different currencies) can buy.
Friday, January 23, 2009 @ 10:29 AM
1 USD = 1.4343 SGD
1 SGD = 0.69720 USD
It’s been slightly more than 4 months since the collapse of the Lehman Brothers and the recession going full-scale; how has everyone been?
Much has happened within the past few months; the massive drop in oil prices, the decrease in demand for airline flights which led to the drop in ticket prices, retrenchment, and many more.
And Singapore has yet again recorded an appreciation in exchange rate against that of the US Dollar.
If you intend to travel to the USA...
To be frank, this is a good opportunity to travel to the USA. The fact that the USD has depreciated against the SGD shows that a similar good in USA will be more affordable as compared to buying it in Singapore. Also, the decrease in demand for airline flights due to consumers’ pessimism has taken a toll on the airlines’ businesses, causing them to impose a drop on the ticket prices to match the decreasing demand with the same supply. With the advantageous exchange rate of SGD to USD, as well as the relatively cheaper airline ticket prices, why not? :)
Friday, October 10, 2008 @ 8:23 AM
1 USD = 1.4830 SGD
1 SGD = 0.67431 USD
All over the headlines is news about the Global Financial Crisis currently being experienced by economic markets all over the world, which began with the credit crunch in late 2007, causing a loss of confidence in US investors, who backed out from their investments. This in turn caused the US federal bank to pump in large investment capital into financial markets, giving rise to the plummeting consumer confidence as stock markets all around the world crashed.
The collapse of the Lehman Brothers just a month ago on September 14, 2008 marked a new phase of the crisis, where many financial institutions faced strings of serious liquidity issues, and Singapore was not spared.
As such, investors have lost confidence in financial markets, pulling out of their investments and taking the safe route lest the worst - the crashing of the market - happens.
Relative to the USD, the SGD has appreciated, though there is still an overall drop in the exchange rates on both sides.
If you intend to travel to the USA...
Airline ticket prices are expected to plunge further as less people prefer to travel during difficult times of recession. In the meantime, we would suggest that you wait should you wish to exchange the SGD for USD, as the SGD value is expected to appreciate further relative to the USD.
