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Thread: What is the impact on country if $ is remitted out?

  1. #21
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    Default Re: What is the impact on country if $ is remitted out?

    Quote Originally Posted by frankchn View Post
    Some percentage point drops in the exchange rate resulting in a weaker Singapore dollar against other currencies. Otherwise I don't see a problem.
    Are you sure 60bil only causes some % points drop? How much money are in circulation?

  2. #22

    Default Re: What is the impact on country if $ is remitted out?

    Considering that >50 billion SGD a day worth of FX is traded with Singapore Dollars as one side of the currency pair, yes. In any case, we haven't seen any effect of remittance causing any problems for Singapore's economy.

    Also, by some % points drop I mean probably 2% than if there were no remittance at all.
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  3. #23
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    Default Re: What is the impact on country if $ is remitted out?

    Quote Originally Posted by ManWearPants View Post
    If you look at the kind of investments that we have made overseas. Most have not made any actual returns. They are mostly forecasted returns, projections. So far I only know of losses or potential losses. But then again we are not talking directly about foreign workers/talents.

    I just want to understand if for example 5 billion is remitted, brought out from Singapore every month, what does it mean for the country affected. Consider this is a one way scenario, whereby there is no influx of cashflow. What if these money are all brought back to foreign countries and held by foreign banks? Will the country collaspe due to a lack of local currency in circulation? Can the MAS print more money to make up for the shortfall of money in circulation? Who and what determines how much money is in circulation?
    oversea investment is different story...

    but if u talk about money only moving 1 way which i think is highly unlikey... then there is a super hugh deficit, dun think there is any country willing to bail you out... the currency probably is worthless...

    anyway i dun think its possible to have 80% of the money going out... that is way too much a deficit...

    like i say, i think we have more money coming in then going out... we are mainly exports, tourism, banking... all money in...
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  4. #24
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    Default Re: What is the impact on country if $ is remitted out?

    In forex, it is paper value being traded. Does it means that actual 50bil are being traded. It could also mean 10bil is traded 5x on the same day.

  5. #25

    Default Re: What is the impact on country if $ is remitted out?

    Quote Originally Posted by ManWearPants View Post
    Are you sure 60bil only causes some % points drop? How much money are in circulation?
    How much money is in the economy is irrelevant. For example, if I were a Indian worker in Singapore and I had 1,000 SGD to remit to India, I would convert the money to ~34,000 Indian rupees with someone who has 34,000 Indian rupees but want 1,000 SGD. Thus, the money is not destroyed. If there is a supply imbalance (too many people holding SGD and want to convert to other currencies) then the exchange rate will change to accomodate the imbalance.

    If you really want to know, Singapore M3 money supply in April 2010 is 387.4806 billion SGD.
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  6. #26
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    Default Re: What is the impact on country if $ is remitted out?

    ok. Let me digest and read up a bit more before probing further. Thanks for the info up till now.

  7. #27
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    Default Re: What is the impact on country if $ is remitted out?

    from my colleagues and friends who are FT, about 10-20% of salary is usually remitted home .... the rest is spent on rent, food, transport , entertainment and shopping

    these effects are usually more than offset by offshore demand for S$

    actually local Singaporeans going overseas for holidays have the same effect too (sell S$ to buy foreign currency ) no ?

    so look at it from BOTH directions.......... as much as there are people selling Singapore Dollars to buy foreign currency..... there are others who sell their foreign currencies to buy Singapore Dollars too...... its the NET effect that is important

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    Last edited by ed9119; 13th July 2010 at 09:39 AM.
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  8. #28

    Default Re: What is the impact on country if $ is remitted out?

    Quote Originally Posted by ManWearPants View Post
    In forex, it is paper value being traded. Does it means that actual 50bil are being traded. It could also mean 10bil is traded 5x on the same day.
    I think this is irrelevant as well. You could stay the same thing about the volume of stocks being traded on NYSE. The fact is that such a large volume (relative to Singapore's GDP and M3) means pretty liquid market which should take any shocks (say 1,000,000 foreign workers converting 1,000SGD each on same day) well. As to long term systemic effects, I would still say it would mean a slightly weaker SGD than otherwise, ceteris paribus.
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  9. #29
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    Default Re: What is the impact on country if $ is remitted out?

    Quote Originally Posted by ManWearPants View Post
    What is the impact on country if $ is remitted out?
    The impact would be minimal - relative to the economic benefit of the output of these workers.

    An employer pays a foreign worker in exchange for his effort (eg. making something, building something, or for services etc). A monetary value can be determined on the output of this effort - can call it economic output of the worker. Unless the employer wants to run a money losing business, the combined economic output of all it's employees would far outweigh the salaries being paid to the employees.

    eg. a very simplified case of an employer exporting manufactured goods. The economic output (the value of the sold manufactured goods) would have more than paid for the costs to run this business (the investment in building the factory, buying all the raw materials, buying other services to run the business (eg. logistics to ship out goods etc) paying employee salaries, paying for government taxes and permits). Employee salaries would be a small part - and as others have mentioned, not all the foreign worker's salaries would be remitted, as generally savings would be around 10-20%.

    I don't have exact figures, but say for example an exporting employer generates export revenues of $100 million a year, this employer is entirely dependent on foreign workers - you've got $100 million coming into the country from foreign exports and maybe 2 million going out as remitted salaries (I'd be surprised if it was even that much)

  10. #30
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    Default Re: What is the impact on country if $ is remitted out?

    it's unrealistic to presume money flows only in 1 direction and in large amount. Singapore is not printing "strong" value currency. It takes a lot of "factors" to make strong currency.

    Your assumption (very large amount flowing out, and dump by foreign countries, ppl)) could only be seen when a country is in war and usually its their rich or upper class level citizen converting their currency, valueables for safer countries' currency that make its own country currency dive to the south.

  11. #31

    Default Re: What is the impact on country if $ is remitted out?

    It actually depends on the amount being remitted and whether the host country, where the worker is employed, does export goods to the worker's home country.

    Assuming that the amount is substantial, it has an effect in benefitting the worker's home country as what used to be unaffordable becomes now affordable, and in other words, the worker's home economy grows and benefits from the money earned. It also indirectly benefits other countries who export goods into the worker's economy due to increase in demand.

    As for the host country, it should be exporting enough goods into the worker's country to benefit from the increasing demand, resulting from employment benefits. For the net incentives and disincentives in the remittance scenario, we need to include the net value output from the foreign workers as well as opportunities forgone from the local workers while computing the remittance effect.
    Last edited by eyes; 13th July 2010 at 07:15 PM.
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