by Simon Black: Eight
Simple Truths You Need To Know About 2012
received a great question from a reader, Chuck, who asked, “Simon,
I’m going to HK in 10 days to open a bank account, and I know
there are options to do this in several foreign currencies. What
foreign currency would you recommend to hold over the longer term?”
I could never
make a personal recommendation as I’m not a financial advisor,
nor do I know the details of your situation. But let’s review
Hong Kong is an excellent place to bank. One of the best in the
world, in my opinion… and I say that as someone who keeps a
lot of money in Hong Kong. Why? Because the banks are strong, stable,
innovative, and well-capitalized.
I have far
fewer concerns about a bank going under in Hong Kong than I do in
the US or Europe. And in Hong Kong, with just a few clicks, I can
move money into gold or any number of currencies.
easy to open an account in US dollars (USD) in Hong Kong. Now, the
downsides of holding USD are clear – continued expansion of
the Federal Reserve’s balance sheet coupled with excessive
spending habits of the US government make it an increasingly worthless
piece of paper in the long run.
There is a
flip side to this view, though, as we have discussed before. Historically,
the USD has been viewed as a safe haven currency. When things get
bumpy in financial markets, financial institutions and foreigners
tend to hold dollars.
to view the biggest debtor in the history of the world as safe,
yet this is due to a few factors – the dollar’s free-floating
convertibility; the ridiculous size of the US dollar (and bond market)
which makes for easy liquidity; and the US government’s guarantee
to never default (by simply printing more).
Hong Kong banks
also offer a plethora of other currency options – like the Singapore
dollar, Australian dollar, Korean won, Canadian dollar, and in some
cases the Norwegian krone.
These are typically
export-oriented countries with healthier balance sheets. They have
better fundamentals and a much brighter future. In a sane, rational
world, they are the obvious choice… and still make sense with
a much longer-term view.