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Deutsche Bank: “Zero for growth, yield, velocity and confidence”

PUBLICATIONS / Newsletters / 2012 / Newsletter November
Deutsche Bank: “Zero for growth, yield, velocity and confidence”
Germany’s largest bank has published an amazingly frank rapport on the prospects of global markets and the future of gold. Although reading it might make you pessimistic, we can’t help the fact that some experts working for major financial institutions are finally waking up and smelling the coffee. Quote:
“Certainly extremes in leverage in the Western economies and questions regarding growth in China present investors with a worrying post-2012 future.
However, in our view there are nearly zero real choices available to global policy makers. The world needs growth and it is willing to go to extraordinary lengths to get it. This is creating distortions where old rules don’t seem to apply and where investors face a disturbing paradox:
  • Those who are right are likely to be wrong
  • Those who lose, often win
  • Those who are imprudent can be rewarded
  • Dumb money can win
In the first instance, we believe investors are right to worry; the imbalances in the global economy are extreme and need to be urgently addressed, proactively. This is unlikely however, making a necessary future adjustment likely to be involuntary and therefore unexpected. Those who are right are likely to be wrong for a considerable period of time.
In the second instance, as has been witnessed over the past several years; those who risk and lose, often don’t in fact lose. Loss-makers are compensated by a system that is unable to tolerate the consequences of failure. Moral hazard continues to be encouraged.
In the third and fourth instance we point out that those that have borrowed too much, those who have been negligent in managing their own personal finances are not likely to suffer the bitter consequences of such folly. The financial system in fact remains oriented to encourage further leverage and risk-taking. It is better to be a debtor than a creditor.
It seems that the ‘smart’ money needs to adjust for the irrational or emotional characteristics (and therefore poor predictability) of the current economic environment. This makes investment simpler in the sense that one only needs look to what is ‘easiest’ rather than what is ‘right’.”
The study goes on to confirm gold as money and supports the idea of having a gold standard. Furthermore these commodity-strategists expect the price of gold to exceed $2000 an ounce in the first half of 2013. A very interesting read (PDF).

Singapore top expat destination
Countries that resist trends of increasing taxation and regulation are flooded with investors and well-to-do immigrants. One of the top destination in the world is Singapore, which not only attracts ambitious and successful Asians, but also has a huge western expat community. Most amazingly of all, 17,1%, more than 1 in 6 of Singapore households has an income over one million US dollars. This figure excludes real estate, business assets and luxury good. Considering the value of property in Singapore, the real number of millionaires could be much higher. These millionaires also enjoy higher purchasing power compared to other rich folks living in countries like the US, UK or Switzerland.
The number of foreign workers steadily increased with an average of 6.7% per year over the past five years, now totalling 1.2 million. Shortages remain in many sectors, even today. Companies are lining op to make use of Singapore’s attractive fiscal climate, small and virtually corruption free government and modern infrastructure.
Singapore’s immigration laws are especially attractive for entrepreneurs. Simply starting a business in the city-state automatically entitles you for a so called Entrepass working visa. (Minority) shareholders who want to become actively involved are eligible too.
There are few requirements to apply for the Entrepass program:
  • Applications should be made before incorporating your business
  • A 10 page business plan needs to be submitted
  • Some simple businesses such coffee shops, kiosks, karaoke bars and so on are excluded from the program.
Applications are usually approved within 2-3 weeks and provide residence for dependants too. They are valid for a period of two years and can be extended indefinitely as long as the business is operational.

Lessons from Greece
Dr. Gono, governor of the Reserve Bank of Zimbabwe said in 2008:
“We have been humbled and have taken heart in the realization that some leading Central Banks, including those in the USA and the UK, are now not just talking of, but also actually implementing flexible and pragmatic central bank support programmes where these are deemed necessary in their National interests. That is precisely the path that we began over 4 years ago…”
And what happened to Zimbabwe we all know. That is not to say we can expect dramatic hyperinflation but more likely a steady decline in standards of living. To look at what the future holds for us we only have to look at Greece. It will be useful to study then, what solutions impoverished Greeks have developed to deal with necessities of everyday live such as food, shelter and so on.
Alternative local currencies have sprung up all over Greece. So called ‘social currencies’ are basically a system of computerized barter where a server and a virtual currency is used to assist exchange and keep track of transactions and balances. While it is unsuitable as a means of exchange for more complicated products or services, it does provide many impoverished Greeks with a means of obtaining groceries and making a living.
Many websites have been created that attempt to reduce the number of links between consumers and producers. Although it might take a little more time to buy directly from a farmer instead of the supermarket, it certainly makes a difference on a tight budget.

Another way to save costs is to cook together in so-called ‘unemployed kitchens’. Which is also much more fun when you can’t afford cable TV anyway.
Interesting of note in this context is the Bitcoin system on which we wrote earlier. While not yet widely in use in Greece, it is gaining popularity worldwide at a steady pace. So much so that the European Central Bank considers it enough of a thread to undertake a study (PDF).
Overall the crisis has many positive aspects  too: it brings families, friend and neighbours together, many people discover they can live happy lives with much less and it stimulates creativity and self-reliance.

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