Dear Readers
My last PPP (#1) Blog suggested buying USD, €, & £ sterling assets whilst the AUD is where it is. Given the money printing in all of these countries (and Japan), it seems inevitable that those currencies will devalue against the AUD and the Renminbi (if China doesn’t follow suit). One noted economist has the AUD at USD1.40. The USD has lost around 95% of its value since Richard Nixon decided to leave the Gold Standard. Given the policy purity in the Reserve Bank and the demand for Australian Government AAA securities, it is unlikely that Australia will follow a competitive currency devaluation strategy anytime soon, if at all.
Again, it’s a great time to buy foreign assets, but it is going to get worse for trade exposed SME’s or those who want to import venture capital to build them. There is a dearth of domestic venture capital in Australia since the comparative returns do not presently justify the risks. And importing it does not work for offshore venture capitalists in this devaluation climate.
The only thing you can do is offshore yourself. Sorry about employment prospects here, but we are talking survival, at least for a while. Rectification will take substantial reductions in nominal interest rates in Australia, further declines in commodities prices and volumes, and dealing with the flow-on effects in the Australian property finance market. If you don’t have a job, you can’t afford a mortgage. Doesn’t matter how cheap money is. 1991 here we come!
ABOUT DAVID MILLHOUSE:
An international entrepreneur based in Brisbane, with more than 30 years in venture capital and private equity internationally, David Millhouse is a specialist in venture financing and capitalisation. He is renowned for his management of high growth companies, many of which proceed to IPO and he has conducted business in the UK, Germany, Switzerland, USA, Canada, Singapore, Hong Kong, Australia and New Zealand. David is a scientist by original profession, with an MBA and LLM from Bond University in Australia.
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