Tan Kin Lian's Blog: Insuring the risk of high inflation

Thursday, June 12, 2008

Insuring the risk of high inflation

Can people buy insurance against the risk of high inflation?

My answer is "yes". But it cannot be done by commercial insurance companies. It requires a new way of thinking on the role of governments and the free market system.

I shall give my views on this matter within the next few weeks, either in this blog or in www.theonlinecitizen.com

9 comments:

Raymond T said...: Interesting concept - buy insurance against high inflation!

Like buying insurance against the banker opening 21! :D; June 12, 2008 11:24 PM
Weng Mao Fa said...: Mr Tan, your personal Blog is always positive, consturctive and focus. It enhance our IQ & EQ. Thanks.

"theonlinecitizen.com" ?!?!; June 13, 2008 6:17 PM
Raymond T said...: Yeah, isn't that kind of an opposition kind of website? Very critical of the ruling party.; June 13, 2008 10:26 PM
Raymond T said...: Another way to hedge against inflation is to be vested in property.

Suppose you have already purchased a 2 bedroom condo a couple of years ago at $670psf in the central area. Nowdays, selling prices are in the region of $850psf to $1000psf due to higher construction costs and land costs or enbloc proceeds paid out by the developer.

Even if folks were to baulk at paying current higher prices of around $1000psf…. would they still consider your property if you market it lower then $1000psf? Remember you started from a much lower base

Those without property will have to fork out a larger amount of money to buy a similar piece of property nowadays. They are also willing to do so due to the higher rentals now being paid. Anything in the region of 5% upwards is acceptable in keeping in line with inflation.

As an example, say you receive a monthly rental of $3,500 to $3,800 a month for a property purchased at $850k thereabouts. The gross ROI is about 5%

Why put money in the banking earning 0.25% when you can get rentals at 5% to keep up with inflation? So if you put money in the bank, you are actually losing money instead!

The point is that property owners do not lose out in inflationary times.; June 14, 2008 7:22 AM
Weng Mao Fa said...: $2 Laksa at coffee Shop behind Fu Chung Community Club.

S$1.05 Cold Water (tap water) at the Indian Restaurant behind Fu Chung Community Club !!

S$9 consultation fee at Woodlands Polyclinic. (previously was $8).
An increase of 12.5%

Price change of most cook foods/hot drinks is 14% onwards in Marsling Neibourhood. This is DOUBLE DIGIT inflation rate !!! Policymaker, are you aware???

For inflation survival guide in USA context, please read:
http://money.cnn.com/2008/06/12/pf/inflation_questions.moneymag/
index.htm; June 14, 2008 11:43 AM
Weng Mao Fa said...: Last year, Indonesia stop supply of sands suddenly. Now, malaysia stop petrol subsidy. We are feeling the inflation heat! Tomorrow, where is the next cyclone/earthquake? Let's be prepared ahead. Mr Tan will give you an advice - "insuring the risk of high inflation".

QUESTION: How is it possible according to last 28 years (1980-2007) inflation history:

World Average Inflation Rate=13.28%
Developing Nation=33.87%

Reference:
http://caifu.dahe.cn/finance/zixun/200806/00008674.html; June 15, 2008 10:46 PM
hongjun said...: Mr Tan is one of the writers for theonlinecitizen.com

http://theonlinecitizen.com/theonlinecitizen-team/; June 16, 2008 12:13 AM
siewkhim said...: Hi Kin Lian,
I disagree with you that it cannot be done by commercial insurers. Lloyds of London insures everything from beatiful legs, voice and even virginity. Governments who are kiasu, who don't believe in social welfare, who always want to gain are not competent to carry out such a daring project.

What can some govenments do? Impose stupid rules and neglect the suffering of the poor by small short term handouts and tell the whole world "look you can depend on me as your Government". Even some life and medical insurance schemes which were once the ownership of the Government are now push to the commercial insurers to shoulder the risks!

Yuk!; June 19, 2008 5:41 PM
Falcon said...: We really have to be very careful about outsourcing. Outsourcing intelligently after considering all pros and cons can be beneficial. But given the quality of our civil service who practiced outsourcing in a parrot fashion, it may very well bring us closer to exploitation by the likes of sharks and barracudas flooding this small pond by the equator. Then it is our poor who will suffer and the laws of the land will be lagging the intelligent design of the products and services after taking into account the state of the law of this land.; June 23, 2008 2:09 AM