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John Browne

John Browne

John Browne is the Senior Economic Consultant for Euro Pacific Capital, Inc. Mr. Brown is a distinguished former member of Britain's Parliament who served on…

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Singapore A Wise Owl Among Currency Snakes

As China enters the "Year of the Snake," Singapore stands as a beacon of sound currency in a world gone mad. China's renminbi remains pegged to the US dollar, while even steadfast Switzerland has followed the US, UK, EU, and Japan into an impoverishing strategy of currency debasement. Singapore, alone, has been able to sustain genuine economic growth in the context of a strong national currency.

The Currency Snakes

In most major economies, a corrective recession has become politically unacceptable. In order to conceal negative real economic growth, politicians and their central bankers have resorted to the irresponsible policy of excessive government spending. This is financed by unsustainable borrowing,excessive taxation, and/or currency debasement. The result is the progressive impoverishment of citizens and increasing government intrusions, dressed as 'help' for the needy. This places government in an ever-more dominant position over its citizens, reducing them to subjects.

The Fed's massive QE programs, now virtually unlimited, have been imitated by the stewards of the world's other reserve currencies - and the result has been stagflation.

The EU, the world's largest economy, saw its combined economy shrink by 0.3 percent last year, and it is forecast to fall an additional .3 percent this year. Unemployment is estimated to reach 12.2 percent in 2013. With youth unemployment in Greece at 62 percent and the mighty German economy shrinking by 0.6 percent in Q4 of 2012, Europe is primed for deep recession,possibly even depression.

The UK saw contraction for 3 of 4 quarters of 2012. Though it saw an uptick in Q3, economists are bracing for a "triple dip" recession.

Japan remains stagnant, with 3 quarters of no growth. While growth is forecast to pick up in 2013, this may simply be economists' rosy excitement over the massive stimulus announced by Prime Minister Shinzo Abe. [Read Peter Schiff's analysis of Japan's stimulus shock & awe plan and what it means for the US dollar.]

USA: The King Cobra

Among the major developed economies, only the US shows positive economic growth. But official US inflation figures have been massaged covertly to the downside. Even after deflating GDP growth with the official CPI inflation rate of 1.6 percent, the US economy grew at only 2.2% in 2012.

However, Shadow Government Statistics (SGS), which calculates government figures on a basis consistent with pre-Clinton methodology, shows US inflation running between 5 and 7 percent. Averaging this to an assumed 6 percent, the US economy is shrinking by approximately 3.8 percent. [See more on the true inflation rate from Peter Schiff here.]

The Fed's economic recovery is in fact non-existent!

Meanwhile, SGS estimates US unemployment at 22.9 percent, or some 33 percent higher than the official U-6 figure of 14.7 percent. The number of Americans on food stamps, the politically correct version of soup kitchens, stands now at 47.7 million.

Some role model...

The Wise Owl

Unlike most other developed nations, Singapore pays high salaries to its political leaders - but expects results. In 2011, when Singapore's economy shrank, the salaries of its President and Prime Minister were cut correspondingly, by 51 and 36 percent respectively.I believe this encourages leaders to act in the national interest and eschew graft. For Singaporean politicians, it is 'no gain, no pay.'

The result? Singapore's economy is outperforming. GDP grew by 1.3 percent in 2012, while the Singapore dollar was up 6.5% against the US dollar for the year. Unemployment has actually remained down since the start of the financial crisis, pushing below 2 percent in 2012. This figure would be a pipe dream in the West.

What's more, Singapore remains a creditor nation, with a current account balance that has remained on an uptrend for over two decades.

Clearly, currency devaluation is not a winning strategy, especially for a country with a strong balance sheet.

Bucking The Trend

The monetary doves want all nations to join the currency war. That way, they will share the same disastrous fallout without the risk of comparison. By bucking the trend, Singapore is showing the world that Keynesian stimulus and devaluation is not the true route to economic salvation.

I have no doubt that Singapore's neighbors in the Orient are taking note. If more of them lay down their printing presses and quit the currency war, the US and EU will become increasingly isolated. Neither Western bloc can afford to tighten monetary policy without an outright sovereign debt default.

As recent events unfold at increasing speed and volume, the question of financial catastrophe may not be if, but when.


John Browne is a Senior Economic Consultant to Euro Pacific Capital. Opinions expressed are those of the writer, and may or may not reflect those held by Euro Pacific Capital, or its CEO, Peter Schiff.

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