Stagflation - Would you still buy a new car?

[Daveneo]

OK, firstly, define stagflation: Stagflation is an economic illness wherein inflation combined with stagnation locks a society into slow-to-negative economic growth and rising unemployment, invariably including recession.

 

A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, or inflation.

 

Stagflation occurs when the economy isn't growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries. For these countries, including the U.S., stagnation increased the inflationary effects.

 

This looks like what we are going to be experiencing soon... given this situation, will you still buy a new car? This is unlike the financial crisis we face previously where prices are cut until so low that people can still afford to buy... prices of everything are increasing nowadays if you do the grocery or eat out..

 

A report in Boston USA said to START SAVING NOW, Stagflation is around the corner... Starbucks is going to wind up some of their branches in USA and thousands are going to be out of jobs. Big companies around the world are facing problems and are cutting jobs to save costs. Countries in Asia are also experiencing the high costs and you can see them going on the roads asking the govt for help. This is something very real.

 

My 2 cents: Unless it is a necessity, do not spend unnecessarily. If the movie is not a must-see, well save the money. East Coast Park or any parks are just as good for an outing. For family, spending time together doing housework or simple projects (making a cake, cook up a dish) can be just as entertaining, there is no real need to spend money outside. Buying a car is a long term investment (liability), do you really NEED a car (Must Have) or is it consider a luxury (Good to Have)? Dun forget if you can't pay off the instalments, the bank will definitely go by the book... so please save up and wait till the storm blows over...

 

Thank you

 

Dave

[Speedsun]

Spend within one's means will be the key words. A coin always has 2 sides. if everyone is to spend too cautiously, economic growth will be much worse. Do not spend all one has earned for the month. Set an amount that needs to be saved, then spend the rest on necessities before spending on enjoyment matters.

[Daveneo]

I saw a news report on Singapore's stagflation as well.

 

Clarissa Oon

Sun, Jun 22, 2008

The Straits Times

 

 

IF INFLATION is bad, consider a 'worst-case scenario' of Singapore sliding into stagflation, said labour chief Lim Swee Say on Monday.

 

It is inflation coupled with slow or negative economic growth - a situation Mr Lim said the Government must guard against by ensuring that the economy keeps growing.

 

Otherwise, jobs will be lost and wages will stagnate.

 

One way to avoid stagflation is to maintain a foreign worker policy that is 'very responsive' to business needs, he told some 200 residents of Sengkang West at a dialogue that wrapped up his visit to the constituency.

 

Mr Lim, secretary-general of the National Trades Union Congress (NTUC), illustrated his point by comparing Singapore to Denmark. Both countries have near full employment, but Singapore's economy grew by 7.5 per cent last year, while Denmark's was only 1.3 per cent.

 

Denmark's slower growth rate was because it was running out of workers but still placed a cap on foreign workers because of integration issues, Mr Lim was told on a research trip there last week.

 

Singapore takes a different approach.

 

'If we're short of construction workers, we allow (foreigners) to come as construction workers. It helps us to keep growing our economy,' he said, urging Singaporeans not to view foreign workers 'as a threat'.

 

The message is quite simple. Singaporeans must continue to add value to their jobs in order to keep their jobs. If you do not do it, we have other people who can do the job.

 

Thank you.

 

Dave

[Ultramega]

If everybody save save save, the problem will only get worse. Spending money improves economy. Please don't go around telling people to save money if you want to see the situation improve. Thanks.

[Daveneo]

My message is to spend only when necessary. If I cannot afford a car, why would I want to take up a loan and then have headaches thinking of ways to pay the instalment? If I cannot afford that LCD TV, why would I want to sign on my credit card and get myself into debts. Spend when necessary and within your means.

 

Saving for rainy days is always a good practice cos you never know in the next moment, when you will be needing that sum of money.

 

Thank you.

 

Dave

Edited July 6, 2008 by Daveneo

[Silver_blade]

TS has a point. He is not asking people don't spend...but asking people to save whenever they can for rainy days.

 

Boosting the economy is one thing, but if someone is to lose their job or get a big pay-cut and don't have much savings in their bank....putting food on the table would be one of their biggest priority...not boosting the economy. but if they have been saving for rainy days, they may still be able to spend a bit on the 'extras' (to boost the economy a little) in the same scenario.

 

I think most lower-middle income household will be the most affected if they don't starting saving (however little) now should they get a huge pay cut or lose their jobs.

Edited July 6, 2008 by Silver_blade

[Silver_blade]

I may still buy a new car if the situation don't get worse than what I'm expecting (with buffer). But I will be more careful with the choice of car and the loan amount. I have been saving (sort of) and investing a little for years, so I think I should be ok to afford a car. In fact, I may save some $$ if I buy during difficult times like I did when I bought my house in the midst of the last crisis (tho this one looks worse).

[Ultramega]

I understand your message. What i meant was, don't remind people of that. This may sound selfish but it's the only way to go. Last thing we want is everybody reminding everybody to save. Like that economy sure die. Economy die, the money saved will be useless.

 

Cheers.

[Daveneo]

Yes, if it is within your means, definitely you can. But do some research first, I know some banks are already increasing their loan interest... just be careful..

 

Thank you.

 

Dave

[Ultramega]

Yes, i understand.

 

Haha, i think this is a chicken and egg story. Spend or don't spend... which one??

[Drive_carcar]

For me a car is a luxury disguised as a necessity

 

That said, one of the biggest fellacies about money management is "start saving now" when faced with looming bad times. In fact, with mounting inflation, it's quite pointless to save money, as the value of money keeps falling every month.

 

What I'll rather be doing is using the cash reserves I have, to start up some businesses or invest in something. One area that I'm looking at now is to provide seed money and be a sleeping partner while holding down a full time job at the same time.

 

So instead of whining about how tough times are, I'll advocate work on building up multiple sources of income.

[Drive_carcar]

The message is quite simple. Singaporeans must continue to add value to their jobs in order to keep their jobs. If you do not do it, we have other people who can do the job.

 

Thank you.

 

Dave

 

You are so right on this. We must continue to add value, and enhance our professional standing, expand our skillset.

[Daveneo]

Hi, I am using one post to share my view on the comments by fellow forumers. I am not trying to prove a point here... but wanna share my thoughts on the current financial situation... if you feel that my thoughts coincide with yours, then i would say thank you... but if it does not, I would say thank you as well... there is no right or wrong... it is up to every individual to live his own life...

 

The S$ is actually stronger now, just that prices of commodities are getting higher and pay is stagnant so that results in the same amt of money that can buy u X number of food previously can only get u (less than X) number of food now..

 

In times of needs, liquidity is always the best. That means having cash on hand. For example, if you need money urgently, u cannot sell off your property or bonds easily to have cash easily.

 

While it is right to help boost the economy, but if the economy gets bad (even though after you have keep spending) and you do not have any savings, what to do? Borrow from banks? Put every purchase on credit? I would tell you NO. Cut down on things you do not need. To start with, if the weather is cool, then there is no need to turn on the aircon at night (especially with the recent increase in electricity).. If your colleagues stay near you, have a car pool plan, this will REALLY save money...

 

I dun meant to scare anyone here... but take a look at the figures from IPTO... if you do not know what the IPTO stands for... will be good to take a look at the website...

 

http://app.ipto.gov.sg/QuickAccess.asp?pg=3E2E303C1B0E1B1C

 

Or you can check out a legal loophole, discovered by The New Paper:-

 

http://tnp.sg/printfriendly/0,4139,131118,00.html

 

To help boost the economy, I feel there are other ingenious ways to do it. Think of Out of the Box products and set up a company to sell it... employ people to help reduce the out of job rate... for those in service area, reflect on yourself and serve the customers with a service attitude... that would definitely make people buy stuff becos of good service... for tourist area, same same lah... good service and good image would make the tourists wanna come back again... Think of ways to help your company save money or increase sales, that would allow the company to employ more people and reduce the out of job... There are thousands of ways.. just need to put in an effort to add value...

 

Check out the news today. Definitely a tell-tale sign.

 

http://sg.news.yahoo.com/afp/20080706/tts-oil-energy-price-opec-algeria-c1b2fc3.html

 

OPEC president warns no end to oil price rises

 

ALGIERS (AFP) - - OPEC president Chakib Khelil warned Sunday that oil prices will continue to rise because of the falling dollar, in an interview in the Algeria-News.

 

"The price of oil will rise again in the coming weeks. We have to follow the evolution of the dollar, because a one percent fall in the dollar means four dollars more on the price of oil," Khelil, who is Algeria's minister of energy and mines, told the independent daily.

 

"As producer countries we think that the current supply is sufficient, that this balance in supply is in everybody's interests and that it shouldn't be disturbed, because the current rise in oil prices is in nobody's interest," the head of the Organisation of Petroleum Exporting Countries stressed.

 

He also commented on the geopolitical effects on the price of oil, notably the crisis between Iran and the West over its nuclear programme and rejected the theory that oil cartel members were against boosting production to put a downward pressure on prices.

 

"I believe that 60 percent of the rise is due to the fall in the exchange rate of the dollar and to geopolitical problems, and 40 percent to the intrusion of bioethanol on the market," he said.

 

"I can affirm that all the (OPEC) countries are in favour of new explorations (of oil reserves), but the fact is that the embargo imposed by Libya has prevented any increase of investment in that country, just as the current embargo on Iran is stopping anyone investing there," Khelil said.

 

"The United States is threatening severe economic sanctions against any group which dares invest in Iran. Similarly, the war in Iraq is why investment there is weak. No OPEC country can invest in embargoed countries."

 

Thank you

 

Dave

[Qpik]

i will be lucky if i can drive my car till end of it's life.

 

as for spendg, will do it on a need to basis.

[Drive_carcar]

Dave, as in all economic views, there's no right or wrong. One man's view is as good as the other's. I guess the same applies to politics.

 

My concerns about some of your views - which although valid, if accepted by majority, then we WILL surely slide into worldwide depression.

 

Prudence is always good no matter what the economic climate brings. However, do bear in mind, in stagnation, it's just as bad to hoard money as well as to spend unnecessary. What I do believe is spend what is needed, manage your cashflow carefully.

 

It is also important in uncertain economic climate, we stay positive as a whole, think ahead, and encourage more entrepreneurship.

 

My personal strategy is - I'm going on an agressive debt reduction program - and by year end, I'm on target to being debt free. I also accumulating liquid funds through a property sale that I have just concluded. And the liquid funds I'll probably use it to start some F&B business - nothing big, but as a secondary source of income. I'll still keep my job, and continue to work on getting better professionally. And I even continue to look out for better paying jobs in the industry and will jump ship if the offer is right.

 

I have survived the Asian Currency crisis, where my family business folded, and I had to come out to look for a job, and start at the very bottom. And now I'm doing okay. So I believe I can weather any situations that come.

[Simply_lex]

yes, minimise spending.

 

And not buy only necessities, but also electronic stuff, toys, stationery, etc.

let the higher income satisfy the niche models, while the rest settle with the

mid or lower types.

 

Unemployment and retrenchment will direct being hit. it's everyone's business

in such economic crisis.

[Curahee]

aSK the rich to spend more as they can afford, the poor no choice have to save if not they will jia lat.

[Ev0lutionz]

Why some families have more than one car? Should limit one to a family.