Why singapore's currency higher than RM?

[Gula2tingtong]

aloha!

have u ever wonder why singapore economy is more stable and better than Malaysia?
any idea? :lol:

[gohweihan]

aloha!

have u ever wonder why singapore economy is more stable and better than Malaysia?
any idea? :lol:

Well, it'll take a whole book to explain the mechanisms that made the Singaporean economy more stable than the Malaysian economy.

[youngyew]

It takes the whole book, but mind telling us the summary? 8)

Anyway, I see some assumption here. The thread subject asks why is singapore's currency higher, while in the post itself, the question is why is singapore's economy more stable.

They are not equivalent, are they? If so, is it true that UK economy is the most stable in the world, since the sterling is the highest value currency?

[Randomphantom]

Study macroecons, lots of answers there!

When I see our NTU (Singapore) economists boasting about how sleek the Singapore economic mechanism is, I do agree with them, that their way of running things isn't half-assed, that there's some smart brains in there. Their economy essentially mirrors Hong Kong's free market style, with the added benefit (crutch?) of a high rate of government intervention. Basically, the government controls the economy.

So how did SG keep its currency stable during the Asian financial crisis of 1998?

SG has HUGE amounts of foreign reserves overseas, and the actual sum remains undisclosed to the public. Using this foreign reserves alone helps them to keep their currency afloat. Their exchange rate isn't fixed like Malaysia's, rather it is floated between a band range.

Also, since SG's government controls every aspect of the singaporean's life, they are able to easily pull out every economic tool in their vast arsenal, such as cutting CPF rates (similar to the EPF we have here) to halt the rise in unemployment and correct the depression.

Malaysia on the other hand was hit quite badly because of a number of factors: lots of white elephant projects, cronyism, low amount of foreign reserves, etc. Still, we fare quite well, at least better than poor Indonesia.

Its not without its faults though. SG's economy is really well managed by their government, and some people say, TOO well. Its this high degree of government intervention that invites a lot of dissent from the SG populace. But from the way I see it, the "socialist-style" gov is doing a good job indeed. Their policy follows the wise words of a chinese saying, wei4 yu3 chou2 mou2, "preparing the umbrella before the rain".

[__earth]

One of the reasons SG is strong than RM - more capital flowing into SGd than RM. At the same time, Singapore is a financial center along with Hong Kong, Zurich etc. As such, a lot of ppl believe it is a stronghold whenever something happens nearby.

During the financial crisis, a lot of capital flight occured. RM was 2.5 to a USD. Singapore suffered the same time. I believe they were SGD 1.2 to a USD. Now, SGD is 1.7 to a dollar.

The the reason why the degree of drop of SGD is lower to RM is probably attributed to weihan's foreign reserve explanation.

[gohweihan]

It takes the whole book, but mind telling us the summary? 8)

Randomphantom already beat me to that. Basically it's a convergence of a few factors he described, in addition to those basic things like geographical size (smaller means easier to govern), their preparedness to counteract forces within the global economy, and their drive to improve themselves through encouraging competition.

[gohweihan]

The the reason why the degree of drop of SGD is lower to RM is probably attributed to weihan's foreign reserve explanation.

It's Randomphantom who did the explanation, not me.

[__earth]

The the reason why the degree of drop of SGD is lower to RM is probably attributed to weihan's foreign reserve explanation.

It's Randomphantom who did the explanation, not me.

ah, Now I see. Apologize for that.

[__earth]

It takes the whole book, but mind telling us the summary? 8)

Anyway, I see some assumption here. The thread subject asks why is singapore's currency higher, while in the post itself, the question is why is singapore's economy more stable.

They are not equivalent, are they? If so, is it true that UK economy is the most stable in the world, since the sterling is the highest value currency?

You're right. The two issues are different however related it is.