FuW: Savers are being officially expropriated

8. January 2022

For Karl Reichmuth, the financial system has decoupled from the economy. Only real assets offer a safe haven for wealth accumulation. (Image: Yvon Baumann)

By Eflamm Mordrelle | First published in “FINANZ und WIRTSCHAFT” on 06.01.2022

Karl Reichmuth, founder of RealUnit, wants to protect savers from inflation and the excesses of central banks.

Inflation in the euro zone was just under 5% in November. In Switzerland, it was significantly lower, at 1.5%, but here too the trend is clearly pointing upwards. The former private banker and founder of RealUnit, Karl Reichmuth, is not surprised. “Too much money in the system always leads to inflation”, although so far this only shows in the explosion of asset prices, he says in an interview with “Finanz und Wirtschaft”, and he paints a gloomy scenario: “There will be social unrest if there are no instruments like the RealUnit that allow for real savings.”

RealUnit Schweiz is an investment company that was listed on the BX Swiss at the end of November. The vehicle aims to allocate at least 60% of its portfolio to real assets such as precious metals or “productive capital goods” (see chart). “RealUnit is designed to ensure long-term value retention,” says Daniel Stüssi, the company’s CEO. The value of RealUnit is expected to grow at least as fast as the Swiss economy, i.e. 2 to 3% per year. In this way, purchasing power could be maintained even in an inflationary environment. “Resilience to crises is equally important. We want a stable course. Maximizing earnings is not the main focus,” says Stüssi.

Private parallel currency

The brains behind RealUnit see it not just as an investment product with capital protection, but as a kind of private parallel currency too. Thus, a stake in RealUnit can be held as a share or as a share token on the Ethereum blockchain. At least half of the investments must be held outside the banking system, currently around 57%. Physical precious metals and cash are insured and stored in various bunkers. The gold, for example, is stored in the Gotthard Massif near Amsteg.

But why the effort? Reichmuth could finally retire after a long, successful banking career at CS, as head of Luzerner Kantonalbank and, from 1996, as co-founder of Privatbank Reichmuth. However, he does not see RealUnit merely as a service to customers; for the 81-year-old, it can serve a social function. “In my decades in banking, I saw creditors and savers mostly on the losing side after inflation and taxes,” he says.

Indeed, in that sense, savers have always had to suffer negative interest rates. “Today, the saver is officially expropriated,” Reichmuth says. “My heart has always been on the side of the savers. Their virtue is being punished today.” he says. For small savers, cash savings are of little use for wealth accumulation. “I was able to build a house when I was 27; young people today can’t do that.”

Wealthy people, on the other hand, are invested in real assets, i.e. stocks, real estate, precious metals. “Creditors have always been taken advantage of throughout history, whether by kings, the church or central banks.” And for the preservation of true democracies, the “preservation of a well-off middle class” is necessary, Reichmuth writes in an anthology he published on the occasion of RealUnit’s listing.

Decoupled financial system

For Reichmuth, the role of central banks is particularly problematic: “The financial system has decoupled itself from the real economy. Central banks have abandoned the principle of keeping assets and liabilities balanced.” Central banks began to create money on a daily basis by buying assets such as government securities, he says, which expanded their balance sheets without limits. Capital is an investment, money a medium of exchange – the central banks have dissolved the distinction and thus made money unsuitable for storing value.

For Reichmuth, it is equally problematic that central banks increase the money supply without any corresponding economic growth and thus create fiat money, i.e. money that is detached from any no real value. He sees no end to this flood of money. “It will be hard to get out of the spiral of negative real interest rates in the next few years, the debts in many Western countries are too big. We are already in a crisis. Now it’s up to the personal responsibility of investors,” says the banker.

What is the way out? Reichmuth invokes Karl Marx, who said that “in the aggravation of a problem lies its solution.” It is no coincidence that there are 9000 different blockchain currencies today, he said. “A system that allows and encourages diversity is a better system,” Reichmuth believes. “There are already real estate tokens, gold coins and other backed assets in the decentralized financial system, as well as the broadly diversified RealUnit.”

International demand

The vehicle relies not only on precious metals and cash, but also on equities, which are particularly resistant to crises. “Companies need to have a solid balance sheet, be able to make money during a crisis and have a long-term dividend policy,” says Daniel Stüssi. This category includes large caps, such as Novartis, Roche and Intel, but also small caps, such as Vetropack Bucher or Wasserwerke Zug. However, a dividend would not be paid out with a view to long-term capital preservation and tax-free capital gains.

With a volume of just under 20 million Fr. RealUnit is still extremely small; so far, only Reichmuth himself and friends and family have invested. “We haven’t spent a single advertising franc yet, but we see a lot of demand. There will be capital increases this year,” says Stüssi. The main target is private individuals who are critical of the current financial system. Potential is also seen abroad because Switzerland is highly trusted internationally. “RealUnit is a mass product that will be in demand, especially abroad,” Reichmuth is convinced.

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