In my personal opinion, one of the main culprit for the surge in property prices in Singapore is due to the money supply released via the CPF ordinary account.
It is unclear to me whether the measurement of money supply namely the M1, M2 and M3 calculated by MAS takes into account of the money supply coming from the CPF. It is obvious that CPF has some influence over the money supply but the question is how much. MAS’ calculation of the money supply has not been always consistent. Take for example, POSB’s current account deposits were taken into consideration only when it was merged with DBS. How could this be since POSB was also a bank all along fulfilling the role of a banking institute? If CPF monies were not taken into account of the money supply, it would be a big mistake. However, we must understand that CPF monies cannot be treated similarly as a banking deposit and neither could we treat CPF monies as even a quasi-money. Unlike a banking deposit, CPF money cannot be used except for housing, payment of insurances, children’s education and retirement. For retirement, the withdrawal of the CPF monies now via CPF Life is a slow process over a very long period. Since the largest purchase allowed by CPF is the house, it is only natural that more money supply is available for purchase of the house as compared to say purchase of a car.
While most people do not buy a HDB flat using the entire CPF in lump sum (because they don’t have that amount yet), they would take up a loan from HDB. Neither CPF board nor HDB board provide proper banking functions but their combined characteristics have features of a traditional bank namely in the ability to hold deposits and provide loans. My question is this: Is CPF part of the M1,2 and 3 calculation?
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