Submitted by Looking Glass
Stimulus is the word all over the place. Even the opposition calling for a stimulus package to get us out of the crisis. According to the PM, the current crisis–whatever that means–does not require fancy language just a careful explanation.
Okay. A system that favours selling profitable assets and reliant on borrowing cannot be dynamic. You are in crisis when you incessantly over-borrow, misused much of it (not you the PM) and forgot to service the debt. Without earnings from trade the best you can do is borrow new money to service old loans. As previously indicated we were in crisis long before the current USA triggered the global financial crisis. The debt like the high tide keeps on rising. Socially the rustication of scholars is a sign of crisis.
Yes the current world financial crisis originated in the USA and will impact us, primarily because we are import dependent and have next to nothing to export. As such job loss cannot be the direct result of the global financial crisis. In this context the call on Bajans to spend more (of what they don’t have) smacks of incongruity. The bail-out stimulus packages in the USA and Europe are reserved for the banks and financial institutions, the car and associated industries such as car parts makers, suppliers and dealerships. The bailout stimulus package is focused on value added production.
Bailing out banks (nationalization if you prefer) is nothing new in the USA. That is where the money is. Banks lend to business to buy and start new business, to home owners by way of mortgages….and short term loans to those deemed worthy. They are the fuel for the economic engine. In 1933 Congress decided that small depositors needed protection from bank failure and created the Federal Deposit Insurance Corporation (FDIC), which took over Continental Illinois in 1984 because it was too big to fail. Then Government and the banks bailed out the Savings and Loans, and the Long Term Capital Management (a hedge fund founded by two Nobel Prize professors). So far about 14 small banks have been ‘taken over’ and many more are in the wings.
If cars don’t sell the manufacturers and a whole range of suppliers, marketers and dealerships are in trouble. As the saying goes as Detroit Goes so does America. The car industry is America’s value added production and job generation machine. Ongoing decline in car sales would generate substantial job loss in the other non-related industries (the domino effect) and would be reflected in reduced consumption, mortgage difficulties and impact other non-related sectors.
Nowhere in the world are companies engaged in other forms of manufacture being bailed out by their governments. China began building new cities and a domestic economy long before the crisis. Now do we have any value-added industries in need of protection? If so would someone enlighten this fool, or BLP ‘sympathiser’ as some with nothing to say would have it.
1) Why was Clico’s bail-out necessary? None of its subsidiaries on the island are value added. The assets it has in AIG are safe now that the US owns 80% of the company. The bail-out of AIG began last September, which means the government and Clico knew or should have known that Clico’s assets were safe. The collapse of AIG–owner of Lloyds of London–was the direct result of derivatives it held during the credit boom. “Some $440 billion in credit default swaps were on its books before the collapse.” Its insurance and mortgage divisions are at least relatively okay. Perhaps those who decide I am short on details will try to justify the bailout.
The fact that we can’t pay our pensioners—which is not new—suggests the possibility of a shortfall or deficit in the benefit asset scheme. How much of our pension plans is invested in Clico and where have they gone? How much of what we invested in Clico and its subsidiaries has gone into the purchase and building of high rise properties in Florida? More importantly, does Clico have enough hard cash or reliable assets to cover its obligations and insurance policies? And what about the low income housing venture with the NHC? One suspects that Clico Holdings Barbados assets base of $1.4 billion may be less in real terms.
Bear in mind that when the bond market tanks down goes the value of pensions and other things. Finally, Florida Law protects real estate which essentially rules out the possibility of legal action against Clico to recover ‘lost assets.’ Trinidad by assuming control of CL Financial could gain ownership of the Florida properties. And don’t be surprised should Uncle Sam knocks at CL’s door
2) The $7.5million Tourism Relief Bailout. The recipients in this sector don’t guarantee or bring tourist to the island, have no control over who will come from where or how much they will spend. They are not suppliers for whom an implosion would reverberate throughout the local industry. All they do, like the independent taxi man sleeping at the port to catch a fare, is linger and wait to make money off the tourists who come. And no one bails out the taxi man who may go a day or more without sufficient fare to cover his gas bill. They will continue to lose foreign exchange for reasons beyond their control: our inability to position and market the product effectively. All the bailout does is to give this group of people money for nothing which raises a question or two.
3) It doesn’t take $40million grace the Convention Centre with proper kitchen facilities. Refurbishing the Centre has little or nothing to do with product development. I see no value-added here: a few temporary jobs, more imports, no revenue generation and more debt. It seems a heavy price for creating an impression of due diligence for the ministry.
These actions suggest an ongoing case of monkey see, monkey do, monkey told what to do. What if our situation represents something more than a recession, or would lead to more, or that our policies are not sustainable. What if the anticipated $1.5bn loan does not materialize? What will we have to sustain us or to pass on to the next generation? We may be setting in motion a set of shining vanities, illusions if you prefer, as distant from the truth and reality as Pluto. Does anyone really know, understand or care? Next time a more creative way to spend the $57.5 m in bailout money.
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