Masterful Distortion of the Trilemma Theory: PART -1: A concealed monetary construct of Advanced economies

Masterful Distortion of the Trilemma Theory: PART -1: A concealed monetary construct of Advanced economies

The main aim of this series research paper is to establish that ‘The Trilemma Theory’ is not completely infallible, and that successful decades-old distortions of the theory do exist. This research paper is published in two parts. In the first publication, which is this one, I establish the case of distortion of the theory by Singapore and in the second publication, I establish the case of distortion of the theory by USA, European Union and China. Monetary Authority of Singapore (MAS) has always openly claimed to be dutifully following side -1 of the Trilemma Triangle since it moved to a managed exchange-rate policy, in 1981. However, I beg to differ with their statements; MAS has been flouting the principles of the ‘Trilemma Theory’ in a concealed manner and successfully implementing a masterful distortion of the ‘Theory of the Impossible Trinity,’ in all these 43 -long years!! In this research paper, I establish how MAS has been using its Overnight borrowing rate - Standing Facility Borrowing rate (SF Borrowing rate) as a proxy policy-rate tool to steer the domestic inflation of Singapore, in conjunction with its primary monetary policy tool, S$NEER Index, which is the primary market-guidance tool for management of SGD’s exchange-rates. I establish this decades-old, concealed construct of MAS, by performing a series of analytical tasks, which are described in CHAPTER -II. A basic understanding of how the analytical tasks are structured is a must to understand the unravelling process of the entire monetary structure that has been intricately constructed by MAS, over decades of experienced implementation. And, this unravelling process is structured under CHAPTER -III, which is basically the heart of the document. I start this series with an extended Prologue that summarizes the Trilemma Theory, its importance in formulation and implementation of international monetary policies, by discussing the Asian Financial crisis, its original postulation context and the divergent distortions that have been brooded by various Nations over the decades hence. I then proceed to the actual chapters; In CHAPTER -I, I provide a basic low-down on the dual distortion committed by MAS - distortion of exchange-rate, which is openly admitted by MAS and distortion of interest-rates which is not admitted by MAS, and then proceed towards Chapters II and III in a chronological order.