Thursday, January 3, 2008

Wealth Protection

Inflation in 2007 was high in China. Having experienced such inflation back in 1980s, people in China are very aware of wealth protection by buying real assets, to hedge against the fall of the otherwise useless money.

All real assets, especially those non-renewable assets, such as jade, precious & semi-precious stones are in high demand. The hard currency - gold, is in high demands, too. Swiss gold bars are hot stuff in China. They sell like hot cakes.

In contrast, people in Singapore tend to complain a lot of the recent high inflation, but few seem to have anything to hedge against inflation, other than their investments, which are stocks, bonds and other financial instruments. Of course, they have CPF too. However, the question I have is, if there is ever a high inflation caused by unstable political scenarios, or imminence of war, do Singaporeans have any real assets to protect their wealth?

People here like to buy consumables, such as electronics. The latest handphones, latest computers. We all know electronics will only depreciate, rather than appreciate, over time. In time of war, how much would your compute fetch? Would anyone be willing to exchange some food or water with you for your computer? or your memory card? or your handphone? Indians and Malays may still do well. The gold chains, bracelets will help them get through, for a while at least.

Many think they have lots of money, in the banks. But hey, those money nowadays is nothing more than a couple of numbers formed by some pixels on that LCD screen. If there is a war, the numbers die together with the LCD screen.

1 comment:

  1. not quite. you can very well hedge your assets in a case of war. for one, the assets are not lost just because you can't access them. there are sufficient systems in place to make sure the status-quo of your bank draft is maintained and stored. second, you can hedge using multiple currencies, government bonds of different countries, etc.
    but it is true that your wealth, which you need not lose, will not buy you any bread or water. you'll have to wait until trouble is over to be able to access your wealth again, which might have gone in any direction in the meantime.