Government Studying Ways To Screw Savers More Subtly

It has been years since savers in Singapore have been receiving an indecently LOW rate of interest for their savings deposits. Ostensibly, this is due to banks being 'flushed with cash' and 'helping businesses' in a bad economy by reducing their borrowing costs. Yet somehow, banks still manage to retain if not increase their interest margins and their CEOs have managed to retain their multi-million dollar salaries and bonuses. Indeed, their healthy salaries are often touted as a sign that the economy is doing well!

Now, the government is suddenly 'mindful of the problems' faced by savers and depositors. And their solution? Government issued inflation linked bonds! There are two very serious problems with this 'solution'.

1. These are government issued bonds. This means that the interest that are payed out comes from the government. Where does the government get the money to pay the interest? From YOUR taxes. Ie: you are basically paying yourself interest from your own money. I do not see the benefit in that. Do you?

2. What is inflation? Who decides it? It comes from the CPI. Who computes and publishes the CPI? The government! This is a figure that the government can manipulate it to almost any value it so decides.

Now if the government is TRULY interested in helping savers and depositors, the simplest way is to make the banks pay a higher interest rate for savings and deposits. We have all tightened our belts, citizens and businesses, it is WAYYY past time for the banks to do their bit.

If the government still feels inflation linked bonds are the way to go. Then consider making the banks issue such bonds with the government setting the CPI and inflation rates used to determine the interest payouts. This separation will ensure less hanky pankying and it will be more obvious to citizen savers and depositors WHO to blame if the CPI and inflation rates are being set at a level that is out of touch with reality on the ground and is too favourable for the banks.

The banks shouldn't be too worried about getting a raw deal. Despite the system being apparently flush with money, there doesn't seem enough to go around. I understand that Spanish borrowing rates are north of 7% now and Greek borrowing rates are unbelievably high (if they can even borrow). By issuing cheapo bonds to Singaporeans, the banks will be able to use the money to loan to Spain, Greece and soon Italy and France and really make out like the bandits that they really are.

Hmmm.... wonder WHY the geniuses at the MAS and Ministry of Finance didn't think of this? Anyone?