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DataPlumber
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March 20, 2013, 04:02:44 PM
 #21

After it has taken off in the US, other parts of the world will start to take notice and a true competitor will emerge like how London/Singapore/Hong Kong/Tokyo/Shanghai emerged as financial hubs after New York showed the way...
I predict the opposite to happen (worldwide adoption well before it's a household name in the US.)  People in the US have an irrational faith in their fiat currency, while the rest of the world (Argentina, and pretty much everyone using the Euro, especially Cyprus) know a LOT more about how currency really works.  (And what happens when it doesn't.)
Oh and that part about pretty much everyone using the Euro knowing a LOT more is completely false. People using the Euro are mostly expecting a hard currency in the spirit of the Deutsche Mark. Yes the discussion about the Euro faltering is more developed in some places in Europe, but mostly in Eurosceptic Britain, and there mostly out of spite. Even the keenest sceptics of the Euro within the Eurozone think that reverting back to a national fiat currency will solve their problems.
I guess what I meant to imply is that they're finding out a lot about how currency works, whether or not they wanted to know.  I would hope people would take time to educate themselves and better understand what's going on, but I'm a nerd, so that's what I do.  I have to remind myself that not everyone is inherently curious.

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jinni
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March 20, 2013, 05:09:49 PM
 #22

I'm thinking, a place like Singapore or Hong Kong could adopt BTC faster than most other places. Simply due to small concentrated population and a tendency towards little or no taxation. Additionally Asians love gambling, which will make the attraction of BTC even greater as we will surely see huge fluctuations in BTC until $100k+/BTC.

Just because income tax is low, it does not mean the goverment does not tax.

Besides the usual tricks of the trade like Inflation, with CPI ~6% with real inflation 15%-20% p.a. since 2009, and Forced Pension Fund(~35% of your income paying negative real interest rates). Singapore is unique in taxation that the government monopolises necessities and creates artificial scarcity to enjoy profit margins of 1000%. In short there is a huge spending tax.
Namely,
GST 7%
Million dollar flats (~cost 40k to build, sold at 400k - 1mil based on size)(99yr lease, not owned)
~125k tax to own a car(excludes cost of car)
~$5-$10 a day toll charges for driving(ERP)
Public Utilities/Telcos all owned by Government-linked organisations (Our electricity costs about 3X of US, we have one of the worse 3G speeds in the world due to telco cartel http://www.reuters.com/article/2012/05/10/uk-singtel-wireless-idUSLNE84901J20120510)
Extreme overcrowding to increase tax revenues and drive up house prices/depress wages

If you add all of these up, Singapore is probably the most taxed nation on earth.

CPI: Your CPI figures are exaggerated. If you look at the last 25 years the SGD is one of the better managed currencies inflation-wise.

Real inflation: How to estimate this truly? Still it is true for all fiat currencies and Singapore doesn't stand out.

Most taxed country: Yeah right! I would like to see those calculations. My back-of-the-envelope calculations put Singapore at a 20-25% tax rate as a precentage of gdp (one of the lowest).

Anyway: I was thinking of the no capital gains tax in Singapore and Hong Kong as a great boon for BTC exchange.
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March 20, 2013, 05:14:35 PM
 #23

I have to remind myself that not everyone is inherently curious.

This is a great, great, great shame!

However I think most children are born curious, they just get taught not to be.

The financial crisis has certainly opened my eyes to the reality of what fiat is.
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March 20, 2013, 06:06:57 PM
 #24

CPI: Your CPI figures are exaggerated. If you look at the last 25 years the SGD is one of the better managed currencies inflation-wise.

Real inflation: How to estimate this truly? Still it is true for all fiat currencies and Singapore doesn't stand out.

Most taxed country: Yeah right! I would like to see those calculations. My back-of-the-envelope calculations put Singapore at a 20-25% tax rate as a precentage of gdp (one of the lowest).

Anyway: I was thinking of the no capital gains tax in Singapore and Hong Kong as a great boon for BTC exchange.

CPI : I don't pay attention to these as they are obviously rigged like elsewhere. But for facts sake, http://www.tradingeconomics.com/singapore/inflation-cpi
From 2007 - today, they have largely been in the 4 - 6.5% range

Real inflation : My cost of living for essentials like food/medical/dental/haircut has gone up on average 15-20% every year in the past 2 years. Im not including cost of driving as only millionaires can afford to drive here. Certain things like public transport has gone up less (5-10% p.a.) as it is indirectly run by the government and costs are offset by poorer service(longer waiting times, fewer train trips, fewer buses)

The largest tax is the CPF which is not reflected in government revenues. It is siphoned off to reserves or sovereign wealth funds better known as Government gambling fund by the locals. You will only get this money back upon hitting the retirement age which is every increasing and which will be worth a fraction of the purchasing power you put in as they have always paid negative real rates.

Capital Gains : Yes that is nice, but i highly doubt anyone with coins in any country would declare this.

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March 20, 2013, 07:52:46 PM
 #25

CPI: Your CPI figures are exaggerated. If you look at the last 25 years the SGD is one of the better managed currencies inflation-wise.

Real inflation: How to estimate this truly? Still it is true for all fiat currencies and Singapore doesn't stand out.

Most taxed country: Yeah right! I would like to see those calculations. My back-of-the-envelope calculations put Singapore at a 20-25% tax rate as a precentage of gdp (one of the lowest).

Anyway: I was thinking of the no capital gains tax in Singapore and Hong Kong as a great boon for BTC exchange.

CPI : I don't pay attention to these as they are obviously rigged like elsewhere. But for facts sake, http://www.tradingeconomics.com/singapore/inflation-cpi
From 2007 - today, they have largely been in the 4 - 6.5% range

Real inflation : My cost of living for essentials like food/medical/dental/haircut has gone up on average 15-20% every year in the past 2 years. Im not including cost of driving as only millionaires can afford to drive here. Certain things like public transport has gone up less (5-10% p.a.) as it is indirectly run by the government and costs are offset by poorer service(longer waiting times, fewer train trips, fewer buses)

The largest tax is the CPF which is not reflected in government revenues. It is siphoned off to reserves or sovereign wealth funds better known as Government gambling fund by the locals. You will only get this money back upon hitting the retirement age which is every increasing and which will be worth a fraction of the purchasing power you put in as they have always paid negative real rates.

Capital Gains : Yes that is nice, but i highly doubt anyone with coins in any country would declare this.

CPI: In the same time period it has also been -1. Hence why I was bringing up the longer time scale and the comparison to other currencies.

Real inflation: Inflation will always be subjective depending on what you purchase. When you bring up food, are you talking about the cost of staples at the cheapest shop or are you talking about the cost of eating out? If the cost of, for example, rice has increased 20% year-on-year that truly is worrying and a truer sign of inflation. When you talk about dental expenses, how much of those do you actually need if you take care of your teeth properly? When you are mentioning healthcare, could other people's increasing use of it affect your price? As in could it be that you in reality are paying for other people's treatment to an extent? Is it not true that Singapore is trying to attract medical tourists and that you end up paying a tourist-premium even though you are not a medical tourist? Yes I can see how you can view this as inflation, but will you not get stellar care for SGD in nearby countries a short flight away?

CPF: This is not a tax. This is your money with restrictions. The government guarantees a minimum return, which is better than many investors are getting anywhere. Especially for "risk-free" (read: low risk). Also, most people are not savvy enough to be able to invest something as important as their retirement safely. For most people the safe bet would be a bank account with around 0% nominal interest. Getting a guaranteed 2,5% is not half bad for most places. Sure, the government might be adding some extra risk, which if it makes a mistake it would have to raise taxes to pay. So at the moment, the government's "gambling" is preventing a tax rise or a 0 % interest retirement account.

Capital gains: people making huge profits from BTC trading would have an enormous amount show up in their bank account, which is suspicious to the authorities. Hence, owning BTC is no problem but if you sell them, Singapore is one of the better places to do that tax wise.

Look, I'm not saying the government isn't ripping you off. But I live in Norway, and I could make the argument that in reality I'm paying something like a 90-95% tax if you factor in the real cost to people of the incompetent politician's populist goals that hamper (if not revert) progress at every step. The only way for me to escape tax/inflation is to go to another country and use their prices and currency. Which is why I want to put all my money in BTC rather than in the NOK economy.
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March 20, 2013, 08:00:09 PM
 #26

When will there be a realistic competitor here.

Having one DECENT exchange is bad for business, I thought normal currency markets took a big slice ..


Yeah, that' s the question. After Mt.Gox transfering its business on US (overregulated) soil, there are quite good opportunities for some offshore (mean out of the western world economy) exchange. It' s hard to compete and start against the most liquid exchanger, but someone has to do it sooner or later. 

Yes, but if MSB & MT regulations are anything like fund regulations or banking laws, the US government has reach if transactions involved US citizens regardless of where the exchange is located. This is why foreign banks and brokerages are starting to turn away Americans - the due diligence, compliance, and potential for fines is not even worth their time. The IRS has exported compliance to all countries throughout the world. For instance, offshore funds do not accept US clients (exception for institutional clients, IRAs, etc.) due to regulations and taxation issues. Offshore funds always create US based feeders for American clients. And foreign brokerages have the same reporting requirements for US citizens no matter where they are located or on what the exchange the client is investing.

I believe the US thinks it has reach regarding MSBs & MTs, but I admit I have not thoroughly read through the advisories:
http://www.fincen.gov/statutes_regs/guidance/html/FIN-2012-A001.html
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March 21, 2013, 09:31:17 AM
 #27

CPI: In the same time period it has also been -1. Hence why I was bringing up the longer time scale and the comparison to other currencies.

Real inflation: Inflation will always be subjective depending on what you purchase. When you bring up food, are you talking about the cost of staples at the cheapest shop or are you talking about the cost of eating out? If the cost of, for example, rice has increased 20% year-on-year that truly is worrying and a truer sign of inflation. When you talk about dental expenses, how much of those do you actually need if you take care of your teeth properly? When you are mentioning healthcare, could other people's increasing use of it affect your price? As in could it be that you in reality are paying for other people's treatment to an extent? Is it not true that Singapore is trying to attract medical tourists and that you end up paying a tourist-premium even though you are not a medical tourist? Yes I can see how you can view this as inflation, but will you not get stellar care for SGD in nearby countries a short flight away?

CPF: This is not a tax. This is your money with restrictions. The government guarantees a minimum return, which is better than many investors are getting anywhere. Especially for "risk-free" (read: low risk). Also, most people are not savvy enough to be able to invest something as important as their retirement safely. For most people the safe bet would be a bank account with around 0% nominal interest. Getting a guaranteed 2,5% is not half bad for most places. Sure, the government might be adding some extra risk, which if it makes a mistake it would have to raise taxes to pay. So at the moment, the government's "gambling" is preventing a tax rise or a 0 % interest retirement account.

Capital gains: people making huge profits from BTC trading would have an enormous amount show up in their bank account, which is suspicious to the authorities. Hence, owning BTC is no problem but if you sell them, Singapore is one of the better places to do that tax wise.

Look, I'm not saying the government isn't ripping you off. But I live in Norway, and I could make the argument that in reality I'm paying something like a 90-95% tax if you factor in the real cost to people of the incompetent politician's populist goals that hamper (if not revert) progress at every step. The only way for me to escape tax/inflation is to go to another country and use their prices and currency. Which is why I want to put all my money in BTC rather than in the NOK economy.

CPI : That was a caused by short-lived spike during 2009 by flight to "safety".  But yeah, id rather not we not waste our time talking about CPI, unless you also believe inflation in US and Europe is within 2% target.

Real Inflation : Ill give you hard numbers then. If we are talking about open air hawker food stalls which is the only place the poor can afford to eat at, the price rises are not very evident, plate of rice + 3 toppings has gone from maybe $2.50 to $3 in the past 3 years. But ive found out that most of these hawker centres are government owned and rentals are heavily subsidised, possibly to mask inflation. In the same area, ordinary fast food outlets like Subway, price have risen 10% - 30% in the past 2 years.
Price of Subway Cookie $1 -> $1.30    30% increase
Subway raised 6" subs prices TWICE last year Eg Most basic Vege Delite $3.60(2 years back) -> $4.10(today)    ~14% increase
Haircut : $7 - $9 in 1 year   ~28% increase   (These are your economical neighbourhood barbers, 10 min haircut, not a salon)
Basic Teeth Cleaning at same Dentist ($50 -> $65 in 9 months)    30% increase
Seeing Doctor for ordinary Flu at suburban clinic($30 -> $48)  >50% increase
All my examples are largely the cheapest possible options you have in Singapore. Im not even talking about mainstream options or high class restaurants which have just gone nuts and charge $60 for a plate of pasta and are fully booked.
Most of it is largely fuelled by the property mania which has just gone bonkers caused by doubling of the population in less than a decade. Those who owned more than 1 property before this decade have become overnight millionaires or earn high rental income by just renting out 1 property.

CPF : They won't raise taxes to pay it out, they will simply print it. When you lock up 35% of your people's income, you basically have a powerful tool to deflate the money supply in circulation and get more leeway to print even more money. 2.5% return in an environment of 15% inflation is a bad deal anyway you look at it. And since all the money that is invested is classified secret, people will never know how much is being printed to cover up for bad bets. Judging from price rises, they are losing quite abit.

That said, despite all the points above, we have a very pro business environment(low corporate tax) and possibly the most attractive place for rich investors to settle down at(no capital gains). And having been to many parts of the world, id say our government is more  efficient than its other counterparts as well. Inflation can be dealt with by parking your money in sounder stores of values instead of banks and we don't have to pay capital gains for hedging against it. You can avoid CPF if you are self-employed. I don't think i could ever live in a country with capital gains.

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March 21, 2013, 11:17:59 PM
 #28

CPI: In the same time period it has also been -1. Hence why I was bringing up the longer time scale and the comparison to other currencies.

Real inflation: Inflation will always be subjective depending on what you purchase. When you bring up food, are you talking about the cost of staples at the cheapest shop or are you talking about the cost of eating out? If the cost of, for example, rice has increased 20% year-on-year that truly is worrying and a truer sign of inflation. When you talk about dental expenses, how much of those do you actually need if you take care of your teeth properly? When you are mentioning healthcare, could other people's increasing use of it affect your price? As in could it be that you in reality are paying for other people's treatment to an extent? Is it not true that Singapore is trying to attract medical tourists and that you end up paying a tourist-premium even though you are not a medical tourist? Yes I can see how you can view this as inflation, but will you not get stellar care for SGD in nearby countries a short flight away?

CPF: This is not a tax. This is your money with restrictions. The government guarantees a minimum return, which is better than many investors are getting anywhere. Especially for "risk-free" (read: low risk). Also, most people are not savvy enough to be able to invest something as important as their retirement safely. For most people the safe bet would be a bank account with around 0% nominal interest. Getting a guaranteed 2,5% is not half bad for most places. Sure, the government might be adding some extra risk, which if it makes a mistake it would have to raise taxes to pay. So at the moment, the government's "gambling" is preventing a tax rise or a 0 % interest retirement account.

Capital gains: people making huge profits from BTC trading would have an enormous amount show up in their bank account, which is suspicious to the authorities. Hence, owning BTC is no problem but if you sell them, Singapore is one of the better places to do that tax wise.

Look, I'm not saying the government isn't ripping you off. But I live in Norway, and I could make the argument that in reality I'm paying something like a 90-95% tax if you factor in the real cost to people of the incompetent politician's populist goals that hamper (if not revert) progress at every step. The only way for me to escape tax/inflation is to go to another country and use their prices and currency. Which is why I want to put all my money in BTC rather than in the NOK economy.

CPI : That was a caused by short-lived spike during 2009 by flight to "safety".  But yeah, id rather not we not waste our time talking about CPI, unless you also believe inflation in US and Europe is within 2% target.

Real Inflation : Ill give you hard numbers then. If we are talking about open air hawker food stalls which is the only place the poor can afford to eat at, the price rises are not very evident, plate of rice + 3 toppings has gone from maybe $2.50 to $3 in the past 3 years. But ive found out that most of these hawker centres are government owned and rentals are heavily subsidised, possibly to mask inflation. In the same area, ordinary fast food outlets like Subway, price have risen 10% - 30% in the past 2 years.
Price of Subway Cookie $1 -> $1.30    30% increase
Subway raised 6" subs prices TWICE last year Eg Most basic Vege Delite $3.60(2 years back) -> $4.10(today)    ~14% increase
Haircut : $7 - $9 in 1 year   ~28% increase   (These are your economical neighbourhood barbers, 10 min haircut, not a salon)
Basic Teeth Cleaning at same Dentist ($50 -> $65 in 9 months)    30% increase
Seeing Doctor for ordinary Flu at suburban clinic($30 -> $48)  >50% increase
All my examples are largely the cheapest possible options you have in Singapore. Im not even talking about mainstream options or high class restaurants which have just gone nuts and charge $60 for a plate of pasta and are fully booked.
Most of it is largely fuelled by the property mania which has just gone bonkers caused by doubling of the population in less than a decade. Those who owned more than 1 property before this decade have become overnight millionaires or earn high rental income by just renting out 1 property.

CPF : They won't raise taxes to pay it out, they will simply print it. When you lock up 35% of your people's income, you basically have a powerful tool to deflate the money supply in circulation and get more leeway to print even more money. 2.5% return in an environment of 15% inflation is a bad deal anyway you look at it. And since all the money that is invested is classified secret, people will never know how much is being printed to cover up for bad bets. Judging from price rises, they are losing quite abit.

That said, despite all the points above, we have a very pro business environment(low corporate tax) and possibly the most attractive place for rich investors to settle down at(no capital gains). And having been to many parts of the world, id say our government is more  efficient than its other counterparts as well. Inflation can be dealt with by parking your money in sounder stores of values instead of banks and we don't have to pay capital gains for hedging against it. You can avoid CPF if you are self-employed. I don't think i could ever live in a country with capital gains.


Wow. Thanks so much for the figures!  Grin

It looks like the price elasticity of demand has significantly decreased.

CPI: Agreed, this truly is a bullshit figure anywhere you go.

Real inflation: I'd advise you to cook at home, buy an electric hair cutting machine and cut your hair at home, clean your teeth by yourself and in any way possible act in an economically rational way and go the extra mile to find complimentary goods. Do you have any figures for things like 20kg sacks of rice? Can you order electronics and other goods online for world prices?

Housing markets truly wreck economies. I'm incredibly against private home ownership. The best way is to have larger entities owning chunks of housing and most people renting. There also has to be strong legislation enforcing competition by striking down collusion. If construction costs are as low as $40k per flat, people shouldn't be paying more than $4-8k a year. If demand increases there will be a clear incentive to construct taller buildings. If too many people want to live in an extremely limited space (which is the case in Singapore), why not create an extra rental tax on non-citizens (non-citizens could do business within Singapore while not actually residing permanently there) to prevent citizens from paying more than 10-20% of construction costs (which should more than cover capital costs, wear and tear as well as profit).

CPF: Hmmm...I always thought this way of organising society was ingenious. It puts a limit to government, it prevents excess spending on folly and it encourages personal responsibility (take care of your health or your pension will suffer). Maybe this would work better if (1) people had a greater control of where to invest their savings and (2) the unit of investment was non-fiat.

Capital gains tax is not that bad if you never realize your gains (then you don't have to tax them). In Norway, if you have an investment company, that company will pay 28% corporate tax on the profits of the investment, then when you take that money out of the company (i.e. through a dividend) you will have to pay an additional 28% tax, the two total almost 50% (if you don't have a company but do it in your personal account there will be regular income tax of which the marginal rate is 50% if the amount is high enough (+your employer would have to pay a 14% tax on the wage)). When you then buy something for your money you pay a 25% VAT/GST/Sales Tax. As long as you are not buying a car or alcohol (or other products with extra taxes) the total is now 62,5%. There's also a wealth tax of 1,2%. On the other hand, if you work at the till at a supermarket and live the absolute cheapest way, you could still be netting USD 20k a year after housing and food while working 37,5 hrs/week and having 5 weeks vacation (including 20% income tax for that level wage and the employer paying 14% tax on top of that...so if you invest the USD 20k for many years and then realize your gains you would first have had to pay 34% tax + 2% compulsory pension, 36%. Then you would have to pay 62.5% on your gains making the total tax at 76%...if you have a high wage the total tax would be 81,25%).

In addition to all of this, and if you avoid buying alcohol or cars...there is a 300% tariff on imported cheeses and meats. Furthermore the cost of doing business or anything really in terms of bureaucracy, draconian regulation and an infrastructure that is 40 years behind is astronomical (I'm not even going to try to quantify this). In addition to this there is huge inflation due to the booming oil-based economy. In addition to that the Norwegian Government Pension Fund (an accumulation of oil wealth invested abroad), which while it is the biggest sovereign wealth fund in the world is not big enough to pay the elderly care and pension obligations of the ageing population of a country of 5 million. On on top of all of that a housing bubble is transferring wealth from the younger generation (buying houses) to the older generation (selling them), but assuming the older generation aren't spending all their left over money in Southern Europe while living out their last days in warm weather, there will be a 30% inheritance tax.  

Still, a streetwise person that works at a till and invests all his/her income over 10 years, move to, for example Singapore and assuming a modes 2.5% real interest have USD 225k after realising the gains. If the starting point is a 16-year-old set on living an ascetic lifestyle and you double the time period to 20 years then a 36 year old who worked at the till would have USD 500k and a 36 year-old that got education as an electrician would have USD 1 million when coming to Singapore (or any other country with no capital gains tax).

But in real life people spend their money on houses, cars and alcohol so there is no real future in sight even for one of the wealthiest and most socially progressive countries in the world. So I have no sympathy for Singapore...you guys aren't doing too badly over there (even if you could do better).

Edit: PS. this is all back-of-the-envelope subjective truth. But my figures should hold up relatively well.
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