The America’s Cup multiplier effect
Ever wonder what drives an economy? Where does the money come from in circulation?
Most people dont 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 Americas 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, lets 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
Immigration / resident fees
Transhipping and freighter charges inbound and outbound
Air flights, both commercial and private, entry fees
Dock personnel loaders
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
Home care services
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
Legal, accounting, tax services
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
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 Americas 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 Americas 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 Americas 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 lets 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
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