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Africa Cup of Investments Conference 2013

Part 1

The theme of this year’s conference was “Challenging the Investment Mindset”. As in previous years it was a well organised, very interesting and informative conference that can only be recommended to anyone who has a role to play in the pensions industry.

James Richards, US academic and author of “Currency Wars: The Making of the Next Global Crisis” and David Murrin, UK academic and author of “Breaking the Code of History” both gave highly interesting and thought provoking presentations from an unconventional perspective.

Here are some interesting bullet points from the presentation delivered by James Rickards (author of ‘Currency Wars: the making of the next global crisis’). James is seen as a doomsday prophet by some of his critics.

  • The US is conducting financial war games, the first ever conducted in 2009.
  • Financial war games are a branch of asymmetric or unrestricted warfare and have been waged against countries such as Iran and North Korea.
  • Currency war III started in 2010.
  • From 1997 to 2010 the world was on a US Dollar standard where the US went all out to maintain the value of the Dollar. This was abandoned in 2010.
  • Led by the US Fed, many countries have pursued the course of printing money since 2012, that has led to their currencies all easing simultaneously.
  • Deflation is equivalent to deleveraging or depression, while economic growth is a function of growth in the labour force and a change in productivity.
  • While the US Fed has raised the money supply from US$ 800 billion in 2005 to US$ 3 trillion in 2013, the velocity of money has been collapsing since 2009 as a result of which the economy failed to respond positively.
  • In order to get the US debt to sustainable levels, the Fed has to;-
    • Get the economy growing in nominal terms whereby, preferably with low inflation of 1% and real growth of 3%;
    • Change consumer behaviour in order to bend the velocity curve and to get consumption going again.
  • The Feds worst nightmare in terms of managing the US debt levels will be a negative real growth rate together with negative inflation (or deflation). This means that tax revenues are declining while the interest rate mechanism to stimulate the economy is rendered ineffective.
  • As the US economy has not responded positively to the measures taken by the Fed it is unlikely that the Fed will start tapering the asset purchase programme.
  • The collapse of the global monetary system is considered a feasible scenario that may have the following consequences:
    • The monetary system will comprise of multiple reserve currencies in an unstable environment due to the absence of an anchor currency.
    • The world will move to a new gold standard with a gold price forecast to rise to US$ 7,000 per ounce.
    • Collapse of economies and social upheaval.

Hugely successful Patrice Motsepe, founder and chairman of African Rainbow Minerals one of the largest individual shareholders of Sanlam, shares his vision for the future of South Africa, that is as relevant to us in Namibia and should be heeded by our politicians and policy makers:

  • Quality education will determine whether our children will be able to compete globally and everything in our power must be done to ensure that our children will be provided quality education.
  • The education system has to position the learners for the job market where in the current system thousands of graduates have the wrong qualification.
  • An environment has to be created where the private sector can flourish.
  • The global investment community is critically important for our country yet it is frightened off by actions that produce negative publicity. Labour has to be engaged to create an environment in our country that will attract foreign investors.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.

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