{"id":37651,"date":"2013-04-17T22:37:18","date_gmt":"2013-04-18T02:37:18","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=37651"},"modified":"2013-04-17T22:37:18","modified_gmt":"2013-04-18T02:37:18","slug":"is-the-australian-economy-the-new-switzerland","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/04\/17\/is-the-australian-economy-the-new-switzerland\/","title":{"rendered":"Is The Australian Economy The New Switzerland?"},"content":{"rendered":"

By MoneyMorning.com.au<\/u><\/a> <\/p>\n

Switzerland is the place that has traditionally stood above all the rest in its reputation for financial stability.<\/p>\n

Why? Because the currency was well-managed, the banking system was sound, and the country had a long tradition of treating capital well.<\/p>\n

Over the last few years, however, these advantages have collapsed.<\/p>\n

Switzerland has voluntarily surrendered banking privacy, and the many Swiss banks are now haemorrhaging cash.<\/p>\n

Even worse, the Swiss government destroyed its reputation for respecting capital when they pegged the Swiss franc to the euro<\/a> in 2011 to arrest the franc\u2019s rapid rise.<\/p>\n

The country\u2019s top central banker at the time, Philipp Hildebrand, claimed that he would buy foreign currencies in \u2018unlimited quantities\u2019 to defend the peg.<\/p>\n

This is not something a responsible steward of currency should ever say. The currency peg was nothing more than a form of capital controls…and it effectively screwed anyone that had trusted the Swiss system with their savings.<\/p>\n

Since then, the market\u2019s need to find a financial safe haven has only become more desperate. One only needs to look at Cyprus <\/a>to see why.<\/p>\n

Yet just a small handful of countries inspire confidence in the marketplace. And the most popular seems to be Australia.
\n<\/a><\/p>\n

How Australia Shapes Up<\/h2>\n<\/p>\n

From a macro perspective, Australia is in much better shape than the rest of the bankrupt western hierarchy.<\/p>\n

Though the national budget deficit has been rising over the last few years, Australia\u2019s public debt as a percentage of GDP (less than 30%) is a tiny fraction of the US, France, Italy, etc.<\/p>\n

Moreover, as the Australian economy<\/strong> is heavily dependent on resource exports, it\u2019s a \u2018commodity currency\u2019, much like Canada. But unlike Canada which is wed to the US, Australia\u2019s economy<\/a> is much more closely tied to Asia\u2019s growing dominance.<\/p>\n

Perhaps most importantly, though, Australia is not printing money with wanton abandon like the rest of the world.<\/p>\n

In fact, the RBA\u2019s (Australia\u2019s central bank)<\/a> balance sheet has actually been -decreasing-, dropping from A$131 billion to just A$81 billion in 2012.<\/p>\n

This constitutes a 38% decline in central bank assets in five years. By comparison, US Federal Reserve <\/a>credit has grown 367% over the same period. This is an astonishing difference.<\/p>\n

Plus, Australian interest rates<\/a> here are typically much higher than in the US, Europe, or Canada. Just holding cash in an Australian bank account<\/strong> can yield over 4% in annual interest. It\u2019s sad to say, but this is quite a bit these days…<\/p>\n

Now, there\u2019s really no such thing as a \u2018good\u2019 fiat currency. But given such fundamentals, it\u2019s easy to see why Australia is replacing Switzerland<\/strong> as a global safe haven.<\/p>\n

I\u2019ve spent the last few days with some banker friends of mine, and they\u2019ve been telling me about the surge of foreign capital coming into Australia from Europe, the US, and China.<\/p>\n

But one thing to keep in mind, they reminded me, is that the Australian dollar<\/a> has a loose correlation with the price of gold. After all, gold is Australia\u2019s third biggest export.<\/p>\n

Consequently, we\u2019ll likely see a decline in the Australian dollar if the gold correction <\/a>continues to play out. This may prove to be a good entry point for individuals to get their money out of the US dollar<\/a>.<\/p>\n

Simon Black<\/b><\/p>\n

<\/b>Contributing Writer, Money Morning<\/i><\/b><\/p>\n

Publisher\u2019s Note: <\/i>This article originally appeared in <\/i>Sovereign Man: Notes from the Field<\/a><\/i><\/p>\n

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Join Money Morning on Google+<\/u><\/a><\/strong><\/p>\n

From the Archives\u2026<\/i><\/b><\/p>\n

Australia: The Home of World Beating Dividend Stocks<\/a><\/p>\n

12-04-2013 \u2013 Kris Sayce<\/p>\n

Investors: Ignore Japan\u2019s Yen Devaluation Game<\/a><\/p>\n

11-04-2013 \u2013 Murray Dawes<\/p>\n

What Japan\u2019s Economic Disaster Means for Australia<\/a><\/p>\n

10-04-2013 \u2013 Dr. Alex Cowie<\/p>\n

Gold Bulls About to Win the War<\/a><\/p>\n

9-04-2013 \u2013 Dr. Alex Cowie<\/p>\n

A Better Inflation Bet Than Gold\u2026Stock Market Investing<\/a><\/p>\n

8-04-2013 \u2013 Kris Sayce<\/p>\n<\/div>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au Switzerland is the place that has traditionally stood above all the rest in its reputation for financial stability. Why? Because the currency was well-managed, the banking system was sound, and the country had a long tradition of treating capital well. Over the last few years, however, these advantages have collapsed. Switzerland has voluntarily … <\/p>\n

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