Australia: The 'New' Switzerland?

Tyler Durden's picture

Submitted by Simon Black of Sovereign Man blog,

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 surrendered banking privacy, and the many Swiss banks are now hemorrhaging cash.

Even worse, the Swiss government destroyed its reputation for respecting capital when they pegged the Swiss franc to the euro in 2011 to arrest the franc’s rapid rise.

The country’s top central banker at the time, Philipp Hildebrand, claimed that he would buy foreign currencies in ‘unlimited quantities’ to defend the peg.

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.

Since then, the market’s need to find a financial safe haven has only become more desperate. One only needs to look at Cyprus to see why.

Yet just a small handful of countries inspire confidence in the marketplace. And the most popular seems to be Australia.

From a macro perspective, Australia is in much better shape than the rest of the bankrupt western hierarchy.

Though the national budget deficit has been rising over the last few years, Australia’s public debt as a percentage of GDP (less than 30%) is a tiny fraction of the US, France, Italy, etc.

Moreover, as the Australian economy is heavily dependent on resource exports, it’s a ‘commodity currency’, much like Canada. But unlike Canada which is wed to the US, Australia’s economy is much more closely tied to Asia’s growing dominance.

Perhaps most importantly, though, Australia is not printing money with wanton abandon like the rest of the world.

In fact, the RBA’s (Australia’s central bank) balance sheet has actually been -decreasing-, dropping from A$131 billion to just A$81 billion in 2012.

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

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

(Attendees at our Offshore Tactics Workshop were able to open such accounts on the spot with an Australian bank representative; we’ll soon send out information about how you can do this as well…)

Now, there’s really no such thing as a “good” fiat currency. But given such fundamentals, it’s easy to see why Australia is replacing Switzerland as a global safe haven.

I’ve spent the last few days with some banker friends of mine, and they’ve been telling me about the surge of foreign capital coming into Australia from Europe, the US, and China.

But one thing to keep in mind, they reminded me, is that the Australian dollar has a loose correlation with the price of gold. After all, gold is Australia’s third biggest export.

Consequently, we’ll likely see a decline in the Aussie dollar if the gold correction continues to play out. This may prove to be a good entry point for individuals to get their money out of the US dollar.

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AlphaDawg's picture

tyler dudes, why do you not use Mish's analyisis? I see from you homepage that you guys follow his shit, and he has been on the money over the last few years. esp wit the treasury long call.even tho hes a bear

Popo's picture

Too funny. I read the summary on the first page and thought, "That's a very clueless assessment. It's got to be that Simon Black douche"

And sure enough... It was.

This guy has the economic analysis skills of a junior varsity cheerleader.

AlphaDawg's picture

yeah, whats with the retard analysis?

thought ZH could do better than this jive talkin bullshit. long AUD? right? wtf?!?!?!?!?!?

AlphaDawg's picture

just short the fucking yen against a basket of currencies without too much leverage.


And dont get fucking greedy! read the art of war pdf from google and position yourself with some decent stops and monitor that bitch 24hrs a day 5 days a week


then bang ur missus and fuck off

Popo's picture

I was with you right up to the marriage part.

AlphaDawg's picture

good point

well she is foxy! and asian gold bugg...

and every dawggg needs some poontang.


but she is still a good point!


gmrpeabody's picture

And the girls are pretty..., which doesn't hurt.

gmrpeabody's picture

"thought ZH could do better than this jive talkin bullshit"

Speaking of jive talking BS...

Alpha indeed..., ROFLMAO

AlphaDawg's picture

sorry man, didnt realise you are some bend over faggot who cant think for himself

go fuck off you sheep shit

AssFire's picture

I really need to limit my posts....retracted

UnpatrioticHoarder's picture

Simon is right this time. A fair assessment of why Australia is a safe haven has been a long time coming. Low debt, good regulation, capital friendly...

AlphaDawg's picture

only reason is cause they sell commodities to china who use that to build shitty crap and sell it to the USA.


The USA is going down the shit bag so the whole chain is going to collapse.

just short the fucking yen

tooktheredpill's picture

No, so China can keep building ghost cities - now that's a good idea that will go on forever

RaceToTheBottom's picture

The Ghost cities can have Ghost sports stadiums with the teams called the Ghosts......

Popo's picture

Australia's economy will be in free fall THIS YEAR. I'm not even going to make long term predictions. They're fucked right now. China's consumption of Australia's resources is collapsing in real time.

Simon is clueless.

AlphaDawg's picture

cant believe some faggot downgraded spoke the truth

Dr Benway's picture

Low debt? You mean low public debt. And you might have noticed how private debt has a tendency to become public as soon as things turn bad.

JOYFUL's picture

FFF'nn A!

Ever notice that back in the day that kid's cartoons featured non-stop violence, guns, ethnic slurs and racial caricatures of the worst description...

we all got along much better and life was like, totally better than now...

with the endless tide of political correctness, affirmative actions, and mindless bullshit gender wars?

QuikDraw...DeputyDawg, Heckle&Jeckel, Felix....

freedom fighters of a lost era(when cereal boxes still stood tall n full weighted!)

edit: downvoted by Master Cylinder!

Schmuck Raker's picture

That may change when things get serious.


BTW: "...some banker friends of mine..." is a tell.

warezdog's picture

It's easier to get rid of AIDS than it is to get off his email list

CH1's picture

I know Aussies who were massively screwed by the OzGuv.

TwoShortPlanks's picture

Two Words: Carbon. Tax.

Poor Grogman's picture

Julia Gillard no carbon tax promise - YouTube

We also have another Goldman alumni waiting in the wings to "save the banks" when they inevitably collapse.

Australia is just the last one to be screwed that's all, don't get too excited...

Dr Benway's picture

As usual Simon Black, secret agent, doesn't know jackshit about what he's talking about.

A third of the Australian share market is composed of banks, which are completely dependent on the property market, which is one of the biggest bubbles worldwide. When the property bubble starts popping, the RBA will move rates to zero to try and "provide a soft landing", ie provide a cash out opportunity for old cronies.

Large swathes of the leadership of both business and gov are criminals, as evidenced by recent corruption hearings outlining gov cronies involved in halfbillion dollar mining bribes. And then of course we have the manipulating investment companies with huge crossholdings:

Popo's picture

Agreed. Australia's bubble is already collapsing.

Dr Benway's picture

Yeah the current desperation of the slimy real estate shills is palpable.

And the resources sector is in much worse shape even than people realize, because a large section is made up of supershitty juniors and explorers, companies that have never made cash and never will, but instead raise endless capital in malinvestment.

akak's picture

Another downside of Australia is that they do not speak English.

Midas's picture

Michelle Jenneke makes up for all that.

Some Bloke's picture

No one in Australia drinks Fosters, you cant even buy it here, and who'd want to, it's a load of crap.

One advertisement, and one film, and you clueless Americans are believers.

PhilofOz's picture

I thought only poms drank Fosters.... I have not seen it in a regular sized bottle shop in 10 years here. Yuk!!! 

spdrdr's picture

As a resident of Oz, I agree.  I haven't seen Fosters actively marketed and available to purchase here for maybe 20 years.

Not that one would willingly throw down a Fosters - it was simply horrible...

The property bubble is still bubbling away nicely, we have sort of got to the "Oh, shit!!!" peak moment circa July '08 USA, and the entire property/financial edifice is tottering on the (so far - minor) downturn of the peak.

We have an openly Communist Federal Govt, who will legislate the country into penury as a "payback" for their ultimate trouncing in the next Federal eelction, in September 2013.

Australia will be OK for investment next year.  At the moment, it is a basket-case.




Bearwagon's picture

You can easily swap Foster's for a german Holsten :

same stuff ....

Dugald's picture

Stone the fucking crows and starve the flamin lizards whit the fuck is this coot on about, we does so spik bluddy gud engrish, wel, all us whyte fellas from Italy and Greece does fer cripes sake. It them imports whats buggerin up the place, that fella capn Cook was the bluddy start of it all, strike a light its all true....I swear as true as me mothers a blackfella.

tooktheredpill's picture

Quite a few houses on the market for 500k + in a nearby suburb have been on for over a year. Who wants to buy a property that you can't sell?

monkeyboy's picture

Tell Simon Black he's bloody dreamin'!!! He's a shill.

I wish I was this optimistic about my country's financial well being, but there are way too many domino's poised to fall(and are falling/have fallen).

We are some of the most indebted consumers on this planet.

Our government is a dysfunctional basket case. Fools, idiots and theives, the lot of them. The ultimate in self-serving bureacrats a nation could wish for. Policy's are a debacle - mismanagement and unmitigated waste of resources - pink batts, building school halls revolution, carbon tax, set top boxes farce, NBN blowout, "new" tax on super...the list goes on.

We are one of the most over-governed and regulated countries.

Our property bubble is of epic proportions. The government, RE industry and banks are doing their best to keep this bubble inflated as they know when this thing pops there will be fuckedness of 'epic proportions' for the consumer, RE, banks & government. And our manufacturing and retail sectors are currently in the toilet. Might also be worth checking how well our automotive industry is doing.

Our isolation is a double edge sword - we were late to party in arriving and soon to be leaving.

Here's a couple of headlines from today's Oz paper's -

after dropping a $40B LNG project just last week.


Australia is not immune from the stupidity of the few. The ugly has already started. Lets revisit in 12 months and see how we're looking then.





Dugald's picture

The stupidity of the few you say......what utter rubbish it took a very large number of lame brains to elect the current idiots, the average oz does not long as the beer is cold the footy or cricket or the beach is in front of them....who cares about politics


Dugald's picture

The stupidity of the few you say......what utter rubbish it took a very large number of lame brains to elect the current idiots, the average oz does not long as the beer is cold the footy or cricket or the beach is in front of them....who cares about politics


awakening's picture

Your ignorance is showing.

At the last Federal Election the result was a deadlock that ultimately left the whole kaboodle in the hands of 3 stooges (independents) to decide upon the formation of Federal Parliament for the entire country. Certainly didn't take "a very large number of lame brains to elect the current idiots" in parliament, unless you consider 3 to be a large number.

' long as the beer is cold the footy or cricket or the beach is in front of them....who cares about politics'.

Don't do any of those, but then again I'm not the average Australian (but will settle for the 'average oz' (Troy Ounce specifically) of Au as compensation for responding to this rant of yours).

FWIW; I voted neither of them, and the only reason I fronted a polling booth at all was due to the legal requirements of Australia with regards to mandatory voting (so you can toss aside the 'you voted at all' argument because it carries no weight down here; unless you intend to send a few oz's of Ag as well to cover the fines for failing to vote at the upcoming election).

tip e. canoe's picture

Simon Black : International Man of Mys-direction

warezdog's picture

the last place I want to leave the US for is a country he says is the place to go, seriously it's easier to get rid of a german cockroach infestation than it is to get off his email list, guy is a total douchebag

Dr.'s picture




   !! Tylers !!


Please indicate in the subject line (aka on main page too)  "Simon Black:" from now on for his spam "articles".


I understand you get your $$$s from him for the adds "artices" but I'm sure you would do experienced ZH's a great service by just indicating "no need to open this link".

Merci mes amis!

Dr Benway's picture

Good doctor,

This has been requested many many times, but if implemented would kill the pageviews for Simon Blacks fluffy crap.

Schmuck Raker's picture

I think Simon makes the cut with Tylers because it hopefully gets 'Blue Pill'-ers to start thinking about options.

I dislike Simon as much as the Romans, already....a LOT, but that's my best guess, anyhow.

toys for tits's picture

FWIW, I'll look at any page if it helps the Tylers to support this site.  I click ads every now and then as well, especially for the Ukrainian dating sites.

I'm just extremely grateful for this awesome site, analysis, and asshole commentors.  



Sorry about the 'asshole', but I was trying to keep the illiteration going.