Questions: Jobs update, a dollar crisis, gold banking in Singapore, sustainable community

February 19, 2010
Bangkok, Thailand

I really need to start out today’s letter by expressing how truly humbled I am to be part of such a fantastic community.

Matt and I have spent much of the last few days combing through resumes (200+ so far) for the job openings that I posted on Monday, and the caliber of talent and energy is really impressive.

Applicants vary in age from 17 to 70. They come from all stations of life– corporate executive, successful entrepreneur, student, homemaker; and they  hail from at least 18 different countries, from Guyana to China to the Netherlands to South Africa.

I’ve read every email with great interest and have made difficult choices to narrow down the pool of candidates. If you submitted an email, you might just be hearing from me in the next week or two.

Now… on to this week’s questions.

Karl asks: “Simon, we own a condo in Pattaya, Thailand and a home in Boquete, Panama so your comments have real meaning for us.  I am having trouble trying to decide how the decline in the US dollar will affect Panama which uses the US dollar for everyday commerce.  Can you comment on this?”

This is a great question. There are a couple of important factors that you should understand about the US dollar–

First, it’s like what Churchill said about democracy: the dollar is the worst of all major fiat currencies… except for all the others. Only three currencies can handle the massive capital flows of the global financial system without a major impact, and the other two (euro, yen) are in even worse shape.

Second, in the event of a critical dollar collapse, the currency of a country will be less relevant than its net exposure to the United States.

Panama has independent means of supporting itself thanks to the Canal, a robust financial system, global tourism, etc. So in the event of a dollar collapse, asset prices in Panama will definitely rise relative to the decline of the US dollar.

Sure, you might be paying $20 for a loaf of bread in nominal prices, but the inflation-adjusted standard of living should remain fairly stable because the Panamanian economy will still have independent income to support itself.

This is a similar fate as a country like Saudi Arabia whose ‘riyal’ currency is pegged to the dollar. Like Panama, Saudi has an independent source of income. If the dollar collapses, oil prices will spike, and the long-term inflation-adjusted effect for Saudi will not be too severe.

Contrast this with El Salvador which has no independent means of income and relies heavily on the United States for both remittance income and roughly half of its exports… Thus, El Salvador is much more vulnerable to fluctuations in the dollar.

The last thing you need to understand about a dollar collapse is that no country will be totally immune. The greenback defines the global financial system right now, and its collapse will cause panic and shockwaves around the world, at least in the short-term.

While yes, it would be preferable for Panama to have its own independent currency backed by gold, I would not let Panama’s dollarized economy scare you away.

Roger asks: “Simon, you’ve provided useful information on which countries are the safest to store gold.  Unless I missed it, however, I did not see any suggestions on places to buy gold coins in Singapore or Austria.”

In both countries, you can buy gold at nearly every bank you walk into. Austrian banks sell coins called the ‘Philharmonic’, which is the Austrian equivalent of the Eagle and Maple Leaf. Singapore banks have a wide inventory.

In Singapore, though, precious metals purchases are subject to the GST tax at 7%… which is a bummer. So one of the best things you can do there is open a precious metals bank account (try United Overseas Bank) where the value is denominated in grams instead of dollars.

You can withdraw gold in this way and the transactions are not subject to the tax.

Maria asks: “Dear Simon, It’s easy to forget sometimes that you put valuable information out every day for free on your own dime… so, thank you for all that you do. I’m wondering if you could shed some light on your sustainable community idea in Panama?”

Thanks, that’s a really nice thing to say.

Matt and I are leaning towards doing the sustainable development in Panama. I will circulate an initial concept paper in the next few weeks and put together a special list of prospective residents.

Based on my back-of-the-envelope calculations, I’m thinking that we could offer reasonably sized lots in the range of $25,000 to $50,000 in a secluded community that has its own satellite internet, clean water system, a bit of renewable energy, and a lot of low-maintenance agriculture.

Each lot would have a share of the crop yields, which I envision selling on the open market to generate a dividend for residents in the first few years, at least unless/until things really start to go south.

Also, for the planning and development, I would like to put together a steering committee comprised of experts in areas like security, construction management, organic agriculture, energy independence, etc. to help make it the best community possible.

More to follow on this in the future. Have a fantastic weekend, and get ready for second citizenship and residency discussions next week.

Tagged as: Austria, bad governments, foreign real estate, Gold and Silver, gold banking, panama, Singapore