Forget gold, bonds, and Swiss francs – the Israeli shekel is the world's new tax haven

Post date: Feb 18, 2015 9:10:14 AM

"Forget gold, bonds, and Swiss francs – the Israeli shekel is the world's new tax haven" 

Journalist and author Matthew Lynn claims, in a special column for the financial website "In many ways, Israel is a hotter version of Switzerland. Interest rates are… still positive and the shekel has proven stable over the years even when undermined by the threat of war."

Recently, the global economy has been dealing with a sensitive situation on several fronts simultaneously – among other things, the risk of deterioration on the Greek-European and/or Russian-Ukrainian/European front, supplemented at the same time by the volatility and uncertainty of the oil market. It is a well-known fact that the higher the risk, the more investors tend to move their money to safe havens. Safe havens have been known for years by those involved in the global markets: the Swiss franc, US Treasury bonds, and gold were considered the best havens. In a special column published on the Wall Street Journal's, British financial journalist and author Matthew Lynn writes that today it is possible to say with the same degree of certainty that "none of those safe havens are as ' safe' as they once were".

Lynn analyzes how the Swiss franc, gold, and US bonds have lost their status as safe havens. "The market is wide open for some new havens," says Lynn and offers investors fresh alternatives: "Take a look at the Polish zloty, the Israeli shekel, and the Singaporean dollar," says Lynn, adding agricultural land to the list.

This is what Lynn has to say about the Israeli currency and market: "A small fiercely independent, financially conservative, high-tech nation, in many ways Israel is a hotter version of Switzerland."

"Like the Swiss, the Israelis have had to intervene in the market to lower the currency - a sure sign that fundamentals are driving it higher. Interest rates are not high, but at 0.25%, at least they are still positive. Over the years, the shekel has always been undermined by the threat of war, but if Israel was ever going to be wiped off the map it would have surely happened by now," says the British journalist in his column.

Other havens

The Polish zloty heads Lynn's list of alternative havens. "The Polish zloty is probably the safest major currency in Europe right now and arguably in the world," says Lynn, who cites Poland's incredible progress since its liberation from Soviet control in the 1980s. Poland's government debt is very low and growth is rising consistently based on the activity of the extensive population. Despite Poland's basic commitment to join the Euro bloc (Poland is part of the European Union but maintains an independent currency) the government's declarations show that this will not be happening in the near future, says Lynn.

"[Poland's] inherent qualities are likely to be more and more widely recognized, and the zloty will become a lot more sought after by global investors, so it may even appreciate in value. But even if that does not happen, it will certainly hold its value," says Lynn.

Lynn compares tiny Singapore to Israel – finding them similar, with the one significant difference that Singapore's neighbors are much more friendly. "With low debts and a hard-working population, there can be few safer homes for your cash, as its growing success as a private banking center shows," says Lynn.

Agricultural land is another asset that should be a safe haven in times of crisis, according to Lynn: "[For example] In the UK, land has gone up in value by 300% since 2003… far more than houses or equities," says Lynn, emphasizing the similar large difference in favor of land assets in extensive parts of the developed world.

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