Forex and Politics

Before I start this piece, I would like to mention that in no way does this blog have any political ideas, all things included in this post are just my opinions. Hope I don't lose any readers because of this.

On the Financial Times yesterday, there was an article about the upcoming elections in Britain (Britain is arguing about the past, by Philip Stephens). This article got me thinking about how politics and economy of a country is intertwined.

When Gordon Brown announced that elections were going to take place on May 6th, this is what happened between the GBP/AUD is shown below.

What is interesting here to note is that the GBP had a 200point dip against the AUD in a little over 4 hours. The large drop was due to the worries that neither party would be able to able to secure a majority in the upcoming elections. Although it has since recovered, to 1.6521, and admittedly forex is extremely sensitive to political instability, questions popped up in my head about governments and how political instability, flawed monetary policies, or just plain mismanagement can affect a country's finances and economy.

The best example would be Zimbabwe. Any country with inflation rates that high ought to be listed in the Guinness Book of Records. Other examples that come to mind would be as recent as the PIGS incident, where spending sprees by government has come back to haunt them. Likewise, low interest rates in US helped fuel the housing boom which resulted in the subprime crisis that we have all come to know.

Somewhere in the middle of the article, Stephens writes:

"Colleagues of Mr Cameron say he is confident about being the next prime minister: the nation, they judge, cannot contemplate the prospect five more years of Mr Brown. This tells us little about the Tory alternative"

I thought this was quite apt in describing the political situation in Singapore. With house prices increasing, without our salary matching it, and with COE prices increasing probably due to the change in number of COEs provided, it makes me wonder what happens when I graduate and start a family.

It makes me wonder whether a change in the number of opposition in government would be a good solution that would change policies that we have right now. However, from what I read from several websites, Temasek Review being one of them, it cast a lot of doubt on the quality of the opposition because simply, there isn't enough news on them and the positive things they have done. Instead it is more like an anti-PAP session than a positive opposition session. It seems that the idea is either NBP (nothing but PAP) or ABP (anything but PAP).

Looking at how several bad policies as mentioned earlier would have an adverse impact on the economy, my vote rests with the party that is able to prove that they are able to do a better job, instead of competing for which is the lousier of the 2 parties. If PAP's policies are working for Singapore's economy, I really don't see a need to change because I don't see much benefits.

Once again, I would like to reiterate that this is my personal opinion, and the only inducement is to provide a point of view for everyone.