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Written by Ng E-Jay
01 May 2013
Last week, Prime Minister Lee Hsien Loong said that in order for salaries to increase, we need to have economic growth. While this may be true in most developed countries, the correlation between Singapore’s economic growth and wage increases has broken down in recent years.
Take a simple example. Our GDP per capita, on a Purchasing Power Parity (PPP) basis, is near US$60,000 — one of the highest in the world; in fact one of the top few. Yet, our wage levels are only comparable to Hong Kong or Taipei — they lag far behind developed cities like New York, Sydney, Frankfurt, London, Paris, Auckland, or Tokyo.
As people gradually realize that gold is neither an insurance policy against the ill-effects of central bank money printing, nor a safe haven with which one can weather a crisis in the financial markets, psychology in gold will fundamentally shift. If, within the next few weeks, gold and silver do not re-take previous support levels with strong price action, we can safely conclude that the current secular bull market is over. The next one may be decades away. In the meantime, financial assets will outperform gold and silver and will be better long term investments.
The current global monetary system is the first ever experimental, truly global fiat currency system totally unbacked by gold. In this article, I describe how this system evolved from the former Bretton Woods system established after World War II. Nicknamed Bretton Woods II, the current system has become notorious for engendering asset prices bubbles, periodic inflation, and general price instability.