Barbados Needs More Rigorous Debate On Economic Issues

Greenspan Book Criticizes Bush And Republicans

September 15, 2007

In a withering critique of his fellow Republicans, former Federal Reserve Chairman Alan Greenspan says in his memoir that the party to which he has belonged all his life deserved to lose power last year for forsaking its small-government principles. In “The Age of Turbulence: Adventures in a New World,” published by Penguin Press, Mr. Greenspan criticizes both congressional Republicans and President George W. Bush for abandoning fiscal discipline.

The book is scheduled for public release Monday. The Wall Street Journal bought a copy at a bookstore in the New York area.

Source:Wall Street Journal



Alan Greenspan the all powerful Chairman of the Federal Reserve is about to state publicly in his book that he is mad at President George Bush for “abandoning fiscal discipline” against his advice. The statement when contrasted with the mendicancy of our own regulatory body, the Central Bank, caused us to reflect on how well Barbados is positioned to manage our affairs and compete in the emerging sophisticated global economy. Our view was reinforced after reading the article in the business section of the Nation newspaper which summarized the recent International Monetary Fund (IMF) Article IV Report – (seems that as a member of the IMF we have to be subjected to these periodic examinations). It is not surprising that the media continues to treat with such serious issues in a superficial manner. The Nation should really have a consultant Economist on board to provide careful analysis on the pertinent issues, a summary is not acceptable!

To be quite honest, BU have concerns but because we lack the training of Minister Clyde Mascoll and Professor Michael Howard, we have remained hesitant to share our views with the BU family on economic matters. We would still welcome Professor Howard to our online community to inject his wisdom on a technical area of study which we know him to be very proficient. He remains the only Economist in Barbados we trust to speak with a balanced view on the issues. We read the IMF jargon found on their website and frankly we came away with the feeling that it was a politically padded document no doubt prepared with the full collaboration of the Central Bankers and the people over at the Ministry of Finance.

The high level concerns which we have about the financial state of the Barbados economy is concentrated around the ballooning national debt, specifically the foreign part of the debt. We have read the prognostication by politicians and Economists who give the ratios say that that our debt as a % of Gross Domestic Product (GDP) is well within acceptable standards. The % of foreign debt if we recall correctly is that it stands around 6% or 7% of GDP i.e. $6-$7 out of every dollar earned must be used to make debt repayments. The good thing from what we see about our foreign borrowings is that the bulk of it is in US dollars, it avoids the problem which the country faced when we had to repay the the Central Bank loan which was in Japanese Yen. To the lay people in the BU household, this does not seem out of control at all. However, it is a foolish man who will not try to plan for the future and this is where BU have some concerns:

  • We alluded to what happened to a former government when they borrowed a loan in Yen currency at a low rate but when the loan matured the rate had risen and Barbados had to repay almost three times the amount it had borrowed. We can thank Denis Kellman of the Democratic Labour Party (DLP) for keeping this matter in the public light for all these years! Our immediate concern is what the Economists refer to as “the maturity profile” of our debt. Despite BU best effort we were unable to find information on the maturity dates of our foreign loans. Maybe we need to hire a geek to do the research! Can someone give us some feedback “on the maturity profile” of our foreign debt? We all remember what happened to Argentina in the 80’s when the repayments on foreign loans catapulted the economy into a tail spin, we think that they have not yet fully recovered from it.

  • Another concern according to the IMF report (p.5), 80% of our GDP is derived from tourism. Simple logic says that the sustainability and growth of the Barbados economy is linked to how well the tourism product goes. This should concern Barbadians because tourism is heavily vulnerable to what happens in the outside world. We all remember 9/11, the IMF report explained that the government in order to offset the decline in tourism post 9/11 engaged in “expansionary fiscal measures” which led to an increase in public debt. An additional concern is the increasing competition from non traditional tourist markets and the cruise ships industry which continue to lure tourists from Barbados. We have used this point as a forerunner to explain that the government of Barbados has committed to liberalizing foreign exchange in the near term. The point we are making here is the possibility exists that there is heavy risk associated with liberalizing the capital account. The Jamaica and Trinidad experiences provide some insight that foreign exchange outflows could outstrip inflows given the dependence of Barbados on tourism – to quote the IMF report:

Directors generally regarded the announced liberalization of the capital account as a milestone in the government’s strategy of regional and global integration. They noted that, while the removal of remaining controls is not expected to trigger large immediate market reactions, liberalization does entail medium-term risks. In particular, sizable current account deficits financed by short-term capital inflows could heighten the risk of sudden capital account reversals and challenge the credibility of the peg or force sharp and disruptive policy adjustments.

  • The final concern which we have is related to #2. The level of foreign reserves of Barbados as at Mar 2007 stood at 2,116.1 million compared to Mar 2006 when the figure stood at 1,910.0 million. Are we as a nation comfortable that we have enough of a buffer to withstand the shock which the IMF identifies is possible when we liberalize the Capital Account? The government’s committed fiscal policy is to stop any foreign borrowing to ensure that the uncomfortable debt level currently being experienced is reduced.

The stakes are very high if we get it wrong with the International Monetary Fund waiting in the wings to assist if we stumble. We need our people to talk some more about the current economic policy of our government.

18 thoughts on “Barbados Needs More Rigorous Debate On Economic Issues

  1. I see that BLP has the needle stuck in 1994 Only 25, I realise you were only 12 years old then, but even you must realise that the world moves on, and circumstances change.

  2. No one can dispute the value of analysis be it of the press, economic matters or any matter of importance. But I fear that when used alone and especially as a tool of of criticism it often it leads to paralysis. It is like shaking a tree to get its fruit and not taking down the blossom also.
    I wonder what would have been the nature of the analysis two years ago if Barbadians had been asked to discuss the of Rihanna.
    I suggest that we need to think in terms of what can be and those things that we can agree on.
    Out of our adversity Barbados has created jewel after jewel . It is time we the debate be about self acceptance and turning our jewels into diamonds by put a band around them.
    I am not for one moment saying that all is well but let us not forget that the difference between COW Williams and other is that when he went to St Lucia and saw the hills, he first saw dollar bills, the tractors came afterwards. WE also need BLLOGERS OF HOPE.

  3. BirdPickMango the hope which you speak about is not bound in isolation. To travel on the journey of hope many barriers must be dismantled along the way, it is that process which can be very difficult. We suspect the scrutiny which we are currently engaged is all part of that process, so work with us …

  4. A possible reason for the lack of economic analysis may be some inconvenient truths becoming evident.

    That our currency and thus our economy is linked to the decisions being made by the Bush government should be a major concern to us all.

    Especially when the direction it is taking ( a 30% devaluation against the euro during his administration ) is being severely critcised by Greenspan, the man regarded as the maestro of fiscal stability during his long tenure at the Fed.

    I’m with you David, in wishing someone would translate the IMF report into layman’s terms, because from my amateur understanding of it we seem to be dangerously exposed.

    The only sections being reported are the favourable, cherry picked, phrases.

  5. In some part we agree with Linchh that there might be different viewpoints from the policymakers and the policymakers/politicians and the level of discourse would not be geared to the layman. However we think that this is an activity which must occur even if there may not be harmony. The dialog will help to ensure the best decisions are made. At that point the people can be involved…

  6. Do you know how money really works? (Hint – today’s monetary systems worldwide are built on a scam originating back in the Middle Ages).

    Check out the google video “Money as Debt” here:

    to see how the scam worked and find out why Sir Josiah Stamp, Governor of the Bank of England 1928-1941, is quoted as saying:

    “Banking was conceived in iniquity and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a happier and better world to live in. But if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create money and control credit.”

  7. Now Greenspan has let another cat out of the bag – except this cat was already well out for most thinking people and non-members off the Cheney/Bush White House Republican True-believers Club.

    Alan Greenspan claims Iraq war was really for oil

    AMERICA’s elder statesman of finance, Alan Greenspan, has shaken the White House by declaring that the prime motive for the war in Iraq was oil.

    In his long-awaited memoir, to be published tomorrow, Greenspan, a Republican whose 18-year tenure as head of the US Federal Reserve was widely admired, will also deliver a stinging critique of President George W Bush’s economic policies.


    Britain and America have always insisted the war had nothing to do with oil. Bush said the aim was to disarm Iraq of weapons of mass destruction and end Saddam’s support for terrorism.

  8. David, the comment that i made in another post was intended to suggest that the academic and the politician live in different worlds. However, while I agree that the Bajan public could benefit from more debate on economic issues, I feel that you should explain what you mean by “more rigorous”. As I understand it the term usual refers to precision or exactness in the use of hypotheses and concepts in analysis. However, this may conflict with your desire to have the discussion of economic issues pitched at a level that could be understood by the “man-in-the street”.

    Incidentally, you do not seem to disagree with some of the main conclusions in the IMF’s 2007 Art. 4 consultation report on Barbadoscontained in paragraphs 20 to 25, on page 14, which you describe as “politically padded”, and which you appear to have read. As you probably are aware, the Government is free to accept IMF suggestions contained in the Report, which I feel mainly points out the risks attached to the policies currently being pursued.

  9. Linchh we don’t think that we are that far apart on this issue. The example of Mascoll and Howard debating the issue of population growth has already serve to be constructive in the eyes of the public. Mascoll today was able to elucidate on his newspaper debate with Howard and he should now be in a position to respond now that Mascoll has provided more detail. In fact Mascoll referred to Howard’s position as linked to 50’s ideas. We can only hope that Howard would feel incline to respond. The public is the beneficiary in this scenario, we need more of it.

    We are not in a position to agree or disagree with the IMF, what we can do is to voice our concerns and why and hope to get answers. Mascoll indicated that without borrowings the foreign reserves expanded by 300 million dollars. Our concern remains, with the liberalization of the Capital Account what is the plan to mitigate the risk identified can occur? We know more borrowings!

  10. AS I understand it, the IMF report supports the liberalisation of the capital account, largely on the grounds that the removal of restrictions will encourage more capital inflows. However, the report points to the need by the GoB to take action to minimise any sudden outflows of capital that would be possible in a liberalised environment putting pressure on the exchange rate of the Barbados dollar. The report suggests that this risk could be minimised by fiscal consolidation – increasing govt. revenues, while reducing expenditures, and paying down debt – while increasing the stock of “earned” foreign reserves. Obviously, more borrowing would not be consistent with the measures advocated by the IMF.

  11. Pingback: The IMF Article IV Consultation (Sorry This Is A Long Post) « Notes From The Margin

  12. David, I thought that NFTM,s commentary on the IMF 2007 Art. 4 consultation report on Barbados was little more than a collection of excerpts from the document. Persons who follow the IMF’s style of writing and understand that the report attempts to present both the Staff of that organisation’s view and that of the Government won’t find much to complain about.

    Incidentally, in another blog which discusses the prospect for an increase in the VAT rate, in the future, NFTM corrently draws attention to the trade-offs involved.

  13. Simply put if we could get Owing, Nicholls, Bannister, Wilkinson, Shorey, Cox, Lynch, Clarke to return to treasury what is rightfully our 1/2 billion dollars that they have extorted from us the taxpayers in cost overruns and just pure blatant crookery, we would have little need for the IMF.
    The ongoing problem in Barbados is just about everyone is aware that Owing and company are a dishonest pack of rats but those with the money to do developments in this island are also aware that all is required is to make a donation to Owing via Nicholls and any and every project will get its approval , even if this is a project that may create flooding further upline as was done with St.Peters Bay project.
    It is the raping of the reasury and the gross cost overruns that have us in dire straits, nothing less nothing more, lets ask our leaders back for a small portion of their ill gotten gains.

  14. Why are they going to send up my taxes when really the should be firing overpaid people like Allan Fields at CBC.
    This is my story yesterday I listened to the sports news on CBC in which they clearly stated that they were going to televising the remainder of the matches now this is on Friday evening with these matches to be televisec on Saturday morning not a lot of time to get the news wrong in.
    Now Saturday morning comes and there is no cricket on TV, I call the CBC and speak to a Guyanese woman who very matter of factly tells me they were supposed to be showing cricket but they did not get the sponsorship to show it, I asked her if the sponsorship issue did not relate to getting sponsors for the entire package?
    Having it announced on their radio station yesterday it would have suggested to me that something had changed and it was going to televised.
    We can over spend millions on the Oval, road works, prisons but refuse to give the citizens a little cricket on the scheme of things this really is small money.
    How sad can it be?

  15. David, thanks for trying to get a serious debate going. However, apart from your comments and mine, and possibly those of Idealist, nobody wants to discuss what the IMF report said. I do not dispute that the concerns expressed by other bloggers are not worthy of consideration, but I do not see their relevance to the topic that you introduced.

    However, I congratulate you on your effort to get a discussion going.

  16. I will also say that due to the obvious corruption that has been exposed by these blogs and the DLP that more people are coming out in support of the DLP and are now prepared to lend their assistance to to displace this gang of crooks that are in office.
    This help is coming in every form and fashion from traditional stong blp supporters to marginal ones, people are seeing the light and are begging for change to free themselves of these corrupt bastards.
    The party must act now to make those feeling uneasy and uncertain to be welcomed and be willing to share their vision and direction with these folks.
    They are those talking about voting for the DLP that have never voted for anything other than the blp this in its self is a clear statement of where the party is at in 2007 a long way from where it was in the 90’s, I did not just happen with the removal of Mascoll from the party the party became a renewed vigours vocal active party gone were the days that Mascoll would be leader of the DLP but be taking orders from Owing in the operation of the party.
    He Mascoll is just as corrupt and spineless as they in the party he joined and sought shelter with.
    May god give Mr Thompson and his party the strength the will and the courage to carry this fight to its successful conclusion to rid this island of the corruption that is the blp.

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