The America’s Cup multiplier effect
Ever wonder what drives an economy? Where does the money come from in circulation?
Most people don’t think about this because normal day-to-day living constraints take far greater precedence. Somehow, the necessary access to money is just there. Will it always be so?
All of us should understand the compounding effect of direct and indirect foreign investment infusions, especially on an island this size that will always be subject to global economic pressures and fierce competition from other offshore island business opportunities.
In an almost closed society, the way Bermuda used to be, money supply circulated in almost perfect harmony; money is deposited in the bank; loans are taken out against those deposits, interest rate varying little. Remember those days of 7 per cent deposits and 9 per cent mortgages — a textbook example, one might say?
Of course, most countries now, except failed states, are globally interlinked. Such that in enhancing the money economy story, the entry point is the increased infusion into the country of dollars from the outside.
For the last three years, finalising with the five-week America’s Cup 35 extravaganza, we have witnessed an upfront, blazing real-life demonstration of wholesale large cash infusions from foreigners — finance vernacular for foreign direct and indirect investment — into our whole society.
Complaints, always complaints no matter the effort that was made, have been made that this was a closed circle, it did not benefit everyone.
Readers, I completely reject that statement.
But since I like facts, not fake news, or fictionary pictures, let’s demonstrate.
We will utilise the taken-from real life example of just one AC35 crew member family (say from Europe) arriving into Bermuda several years ago. Every single one of these processes of government, companies, and personnel who aided this crewman and family in their relocation, earned additional cash from foreign direct capital infusions as below.
Direct foreign capital investment
• Work permits
• Legal advice
• Immigration / resident fees
• Consumption taxes
• Landing fees
• Transhipping and freighter charges inbound and outbound
• Air flights, both commercial and private, entry fees
• Customs fees
• Dock personnel loaders
• Freight movers
• Government payroll taxes
• Daycare and schools’ tuition
• Landlord — private and commercial rentals
• Property maintenance: plumbing, electrical, landscaping, water, cleaners, paint, infrastructure
• Furniture and accessory shops
• Property and marine insurance and collateral services
• Hardware stores
• Laundry services
• Home care services
• Gas stations
• Bike and auto repair, vehicle driving lessons and inspection stickers
• Vehicle sales and government vehicle tax — ouch!
• Boat sales and rentals, again government luxury tax
• Boat docking and repairs,
• Transportation: buses, taxis, limousines, ferries
• Hotels, guesthouses, private homes
• International delivery / postal services
• Construction crews, building materials and tools, ie cement
• Equipment operators
• Legal, accounting, tax services
• Stamp duties,
• Pilots and navigators
• Social media providers, drones, heli-aerial flight
• Restaurants and bars
• Personal care: stylists, nails, spa therapy
• Medical: doctors, hospital, pharmaceuticals, dentists, health insurance and out-of-pocket costs
• Utilities, internet, cable, electronics support
• Adornment: clothing, shoes, accessories, embellishments
• Souvenirs, media
• Grocers and wholesale suppliers
• Advertising — some free — priceless
• Foreign cash converted to Bermuda dollars with that tidy FX tax to government plus the commissions to our banks, new account fees, investment advisory services
• Insurance, property, marine, hedges
And, let us not forget the incredible array of mega-yachts ringing the America’s Cup 35 racecourse every day of the events. Bermuda has never hosted this number of floating palaces together at one time, ever, in our safe harbours. Their guests all required products, services, and hospitality during their stay, too.
Have I left something or someone out? No? Yes, let me know?
However, again every single action taken above benefited people, companies and government.
Indirect foreign investment
Then, seamlessly, in the magic of increased money flows, the original cash is turned over, over, over, and over again as expenditures and income to others in the circular flow of goods, services, labour, income, expenditures, savings, and capital improvements. On and on the cycle goes in continuous motion as the foreign direct and indirect capital infusion travels through the monetary system.
Every single individual, financial institution, and government included in the list above benefits directly, then indirectly. Government receives additional cash to service financial assistance, training, pensions, and support programmes. Charitable groups and non-profits receive additional funds to provide social services.
Individuals and their families may manage to have cash cushions to carry over relative support. Temporary jobs may turn permanent. New business start-ups succeed, hire, grow from initiatives taken on for this event. So much positivity.
This is it. This is what Bermuda needs, every month, every year. Excitement, global exposure, increased sales, increased employment, increased personal consumption, increased foreign direct (and indirect) investment (love those foreign currencies), decreasing debt = financial success.
How can we forget the thousands of people in crowd euphoria late in 2015 on Front Street during the celebration of the Louis Vuitton America’s Cup World Series. In my lifetime, this was the largest crowd party ever — even the tourist arrivals en masse in the 1950s and 1960s did not begin to equal the LV scene. Yes, I remember those old days clearly still.
We are amazed at the agility, resourcefulness, and commitment of all participants to this wonderful premier event. We thank them and are proud of them all.
The 35th America’s Cup Village vendors, our local businesses, met the challenge of keeping visitors and spectators alike replete with festive culinary treats: producing 2,500 homemade pies per day, barrels of popcorn, Bermuda fish sandwiches, pizza, and numerous other traditional Bermuda eats and drinks. This was a demonstration of more tremendous examples of increased money flows and business profits.
It is so simple. This is what Bermuda needs. We know what to do — now let’s make it happen on a consistent, planned basis to generate future financial success for ourselves, our families, our businesses, and our island.
What more could you ask for?
Circular flow of money: Wikipedia by Bureau of Economic Analysis (BEA), US Department of Commerce, October 2014 — Measuring the Economy: A Primer on GDP and the National Income and Product Accounts, Public Domain, (goo.gl/VzVK8w)
Martha Harris Myron CPA PFS JSM: Masters of Law — International Tax and Financial Services; Pondstraddler Life™ financial perspectives for Bermuda islanders with multinational families and international connections on the Great Atlantic Pond. Contact: email@example.com
Maria’s ‘mind-boggling’ devastation
New mom shares parenting tips through blog
Ministry silent on Evans reports
Late flight times to Bermuda really stink
Growing yoga business opens second studio
Crash on North Shore Road
Career transition service set up
Houllier bound for Bermuda
Take Our Poll
- What will be the best way to create needed new jobs?
- Attract more international companies
- Grow the population
- Reduce the number of non-Bermudian workers
- Develop new business sectors other than international business and tourism
- Retrain the workforce
- Total Votes: 5529
- Poll Archive