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Aye…a Foreign Currency Problem

Submitted by Wily Coyote

Barbados has been experiencing a significant reduction in their Foreign Currency Reserves over the last several years. The reserves are presently at about 4 weeks, this should be noticeable with shortages of goods within the island, however this is not the case. One would have to ask why this is; a shortage of foreign currency should limit the purchase of imported goods and result in shortages. There are likely several reasons for this to be happening in Barbados with respect to imported goods.

  1. Concessions to large Foreign owned business, Sandals, Cost U Less, Sandy Lane etc. result in no Foreign Currency inflows from these businesses which allow these companies to operate outside currency controls, and
  2. Large retailers domiciled outside of Barbados i.e. Massy, Cave Sheppard, Sagicor etc. have the capacity to purchase their goods outside the controls of Barbados currency regulations and then import their goods into Barbados with foreign exchange immunity, and
  3. World tourism commerce is no longer transacted in the visited country, i.e. Foreign tourist buys a vacation package to Barbados in France, pays a travel agency, airline etc. in France with Euros. This French agency now pays another off Shore Company in USA which represents the accommodation provider in Barbados to their off shore account. So far none of this Foreign Currency has reached Barbados. This off shore provider who represents the Barbarian supplier will now transfer to Barbados ONLY the COST portion of the Barbadian supplier. In years past all of these transactions would have taken place in Barbados with foreign currency.

These Foreign Currency transactions do not significantly impact these Barbadian businesses; it does however directly impact all Barbados government offshore transactions as they need Foreign Currency to pay for all their goods and services. Lots of foreign currency outflows with limited inflows results in Foreign Currency Reserves being depleted and not replaced.

Pegging the Barbados currency to an individual Foreign Currency is no longer practical in this new age of world commerce. Pegging to a basket of foreign currencies maybe a solution, however this scenario is also fraught with significant risks. Barbados best solution is

  • reduce government expenditures,
  • increase productivity,
  • reduce the payroll significantly (50%), all civil service promotions done on merit,
  • eliminate 70% of the state owned enterprises,
  • privatize potentially profitable SOE’s to NOT FOR PROFIT companies/corporations,
  • drastically improve efficiencies within government,
  • have all SOE’s maintain financials and be audited annually,
  • remove life pensions for government ministers,
  • implement a MEANS TEST for all government social payouts,
  • run a balanced budget,
  • country must learn to feed themselves without relying on food imports, and
  • FLOAT the currency.

In order for the above to be implemented Barbados will need the IMF’s financial assistance and more importantly IMF DIRECTION, MONITORING, MEETING SET OUT GOALS, TIMETABLES and BIG STICK SUPERVISION. Barbados dire financial situation requires drastic adjustments to Bajan lifestyles and government operations. Barbadians must start to live within their mean.

The Featured image is a Marla Duckaran chart.

90 responses to “Aye…a Foreign Currency Problem”

  1. David Avatar
    David

    Here is a related link to the Barbados Sustainable Recovery Plan being floated by government the result of a collaboration the other stakeholders have been distancing themselves if you follow the language. Click on image to read the document.

  2. millertheanunnaki Avatar
    millertheanunnaki

    @ Wily Coyote:
    “The reserves are presently at about 4 weeks, this should be noticeable with shortages of goods within the island, however this is not the case.”

    So we have reached, finally, the inevitable fork in the road where there must be a trade off between the elimination of conspicuously extravagant consumption of imported goods and services among Bajans and the necessity to live within thier means with the sustainable recovery of local agriculture the main beneficiary.

    The ‘noticeable shortages’ are just around the corner the same way that elections might just be around the corner or to use one of Sinckler’s catch phrases, “shortly”.

    What is a ‘most pertinent’ question to ask is what kind of financial instruments/assets is that “4 weeks” of foreign reserves made up?

    Does it include the special drawing rights (SDRs) lodged with the IMF?

    Is there any clearly enunciated and timetabled provision in the Barbados Sustainable Recovery Plan (BSRP) to borrow foreign money to shore up the foreign reserves in order to defend the peg of the Mickey Mouse Bajan dollar in the short term when the other overseas loan sharks come around circling for their pound of Bajan flesh?

    Is it in the interest of any incoming ‘alternative’ administration (and certainly in the longer-term interest of the country) if the loitering moribund administration -looking to take away all remnants of the former’ pride and industry’ of Bajans even the broken down kitchen sink- would just stop overstaying its time and testing the patience of the electorate?

  3. Wily Coyote Avatar
    Wily Coyote

    @David

    Recovery Plan has LOTS OF NICE WORDS AND GRAPHS, what appears to be lacking are THE DETAILS and BIG STICK SUPERVISION. The document includes a lot of forecast scenarios
    that are highly unlikely to be realised. Wily has seen numerous government documents like this in the past several years that have mounted to nothing more than “south coast toilet paper”.

    Document looks to Wily as electioneering propaganda.

  4. David Avatar
    David

    @Wily

    Cant disagree.

  5. David Avatar
    David

  6. Artax Avatar
    Artax

    Wily Coyote February 24, 2018 at 8:18 AM #

    “Document looks to Wily as electioneering propaganda.”

    Wily Coyote

    After thoroughly reading the document, I have to agree with your comments………and more so after reading the preamble clarifications to the document, issued by Charles Herbert and Toni Moore of the Private Sector Association and BWU respectively.

    As it relates to one of your (and Solutions Barbados) suggestions re: “remove life pensions for government ministers,” I am in agreement with a suggestion made by a contributor, relative to “abolishing” the political appointments of Parliamentary Secretary, which are usually “bestowed” upon certain supporters and losing candidates of political parties.

    Under the current DLP administration, a number of their losing candidates were appointed Parliamentary Secretaries, including Patrick Todd, Harcourt Husbands, Irene Sandiford-Garner and Jeptar Ince. The other losing candidates were appointed as Senators, Ambassadors or on boards (George Hudson is a board member of the newly formed insurance company to replace CLICO).

    I have a PROBLEM with ANY political party USING tax payers’ funds to “employ” candidates that lost general elections. Those candidates should return to their previous employment, seek employment or the party should support them.

    What more Harry Husbands, for example, can contribute to education than Permanent Secretary June Chandler? What legislation has Husbands played a major role in conceptulizing or enacted for the benefit of education? In other words, what significant contributions have Parliamentary Secretaries made to the development of Barbados?

    Unfortunately, we prefer to disenfranchise the “working class” from a legitimate right of employment, by “eliminating 70% of the state owned enterprises”………….. send home workers from the Transport Board, UDC, RDC, NHC etc, first………. as opposed to taking a “holistic” approach to all unnecessary government expenditure…………

    ………….and allowing the “political class” to BENEFIT FINANCIALLY at the EXPENSE of the same disenfranchised “working class.”

  7. Bush Tea Avatar
    Bush Tea

    Artax
    Since when have parasites been judged by the contributions that they are able to make to their hosts?
    Success for a parasite is the ability to get fat while milking the host – just to the point of death if necessary.
    It is this parasite-type thinking that justified the return of their 10% pay …with backpay and the general attitude of the political class…..
    Enuff said….. 🙂

  8. David Avatar
    David

    @Artax

    By your reasoning the hatchet should extend to the consultants as well.

  9. Prodigal Son Avatar
    Prodigal Son

    Artax

    I totally agree with your post.

    Dont forget the proverbial nipple sucker, Darcy Boyce who is so in tuned with feeding at the trough that he has never even given a thought that he should face the electorate. But why should he since he can get whatever he wants off the backs of the taxpayers?

    …..less we should forget the other nipple sucker Maxine McClean.

    The Senate should be abolished if it is to be kept in its current state………waste of taxpayers money on a privileged class.

  10. Tron Avatar
    Tron

    Dear all,

    the Barbadian problem with debt and forex is like a very heavy train or a jumbo jet. Even if you press the brakes NOW it takes ages to stop. The BLP is right that even they cannot turn the tide within one or two years. Simply look at Southern Europe: Crisis since ten years. It will take 20 years = 1 generation to turn the side. Or ask the Frustrated. He pointed out that the restructuring and selling of all these unworthy statutory corporations needs lots of money.

    Before Barbados ever returns to the path of prosperity things will get worse for a while. Devaluation, IMF, robbed ministers, emigration to Panama, Guyana etc pp. In the meantime we face more false national pride than true industry.

    However, the good thing is: Barbados already reached the stage of 8 years crisis out of 20! Only 12 more years to come.

    p.s. I endorse Wily´s list of austerity. One thing is missing: A detailed file like https://www.barbadosparliament.com/uploads/document/2ccc0057c95ca4d270bb5633d88d8d7e.pdf with all civil servants to fire. Barbados needs somebody like Stalin working personally all night to sort out the lazy laggards with an iron fist and an icy cold heart.

  11. Prodigal Son Avatar
    Prodigal Son

    What is so disheartening after reading this so called plan is that this PM told his DLP loyalists in New York that he would keep the failed Stinkliar on as the Minister of Finance if he should win a third term and that Greece is failing and Stinkliar is not the minister of finance there.

    What an idiot! This man is tone deaf.

    One person asked him why would he not take over the Ministry of Finance…..the man mumble jumble some BS that all the opposition to the Stinkliar is because he went to school at the Garrison and that people also have a problem with him as PM because he went to school at Foundation.

    No Fumble, we who were schooled at Foundation are ashamed of you…….you are not representative of the values and principles of Foundation. You through your incompetence has brought this once proud country to its knees.

    I cringe everyday I traverse Barbados thinking we have regressed 15 years………..our country is in a mess as a result of the laying off of the workers of Beautify Barbados and it would seem as if the malaise has so engulfed most people that they are no longer taking pride in their surroundings…….
    ……….the country is nasty with garbage scattered all over
    ………people are crying out for buses
    ……… people are crying out at the state of the QEH
    ………some schools are falling apart under the pressure of angry children and lack of funds ………roads are literally falling apart
    ……….sewage is flowing in the streets on the south coast and they dont seem to care if or when the problem is fixed….not the DLP’s problem, it is the BLP’s fault
    ……… the economy has been downgraded 23 times…………….

    So…………What difference does it make after seven other failed plans? Another failed plan at the close of their term in office.

  12. Artax Avatar
    Artax

    @ Bushie

    It is this type of thinking that makes the “political class” believe the state owes them something…….and while they tell the “working class” benefits such as tertiary level education, for example, is not an entitlement…..

    ……..they have free access to state funds enabling them to afford payment of their children’s fees at universities in the UK and US.
    ++++++++++++++++++++++++++++++++++++

    David February 24, 2018 at 10:13 AM #

    “@Artax: By your reasoning the hatchet should extend to the consultants as well.”

    David BU

    YES!!…….Consultants as well!

    I had intended mentioning consultants….unfortunately, I forget to include them in my contribution.However, I remember making a previous contribution to this forum relative to government consultants.

    Recall during the first few days of becoming Prime Minister, David Thompson severely criticize the number of consultants that were appointed under the previous Arthur administration and presented a list of those person and the associated fees.

    However, after the “hue and cry,” Thompson proceeded to replace a number of those “BLP consultants” with DLP appointees. For example:

    Cranston Browne replaced Mark Williams as “Special events co-ordinator” in the Prime Minister’s Office;

    Hugh Foster was appointed as consultant to the Tourism Ministry;

    Undene Whitaker replaced Hamilton Lashley as government’s “Advisor on Poverty Eradication;”

    Patrick Gollop was a consultant as the Transport Board;

    Peter Wickham was CBC’s resident consultant and political analyst and replaced Sidney Simmons as CBC’s lone “talk show” moderator;

    And as recent as 2016, Guyson Mayers received a $300,000 consultancy “pick” to “oversee the National Risk Assessment and Mutual Evaluation Exercise of the Anti-Money Laundering and Counter Financing of Terrorism Regime of Barbados.”

  13. PoorPeacefulandPolitePensioner Avatar
    PoorPeacefulandPolitePensioner

    Barbados might end up having to issue a crypto-currency backed by breadfruit !! It will come to this if we don’t halt the leakage of US dollars caused by the extravagant consumer spending habits of certain sectors of the population. It would behove policymakers to raise taxes on petroleum products and motor vehicle imports which would reduce the hemorrhaging foreign exchange as well as close the fiscal deficit.

  14. Tron Avatar
    Tron

    Prodigal,

    “that Greece is failing and Stinkliar is not the minister of finance there”. Greece is failing because they have NOT their own currency anymore. They sold national sovereignty 18 years ago for the EUR. Now Angela M from Dark Iron Land is commanding the fate of all formerly free lands of Europe. Like Sauron in Lord of the Rings. No independent fiscal policy anymore but commands from Berlin.

    And what is Barbados doing??? Exactly the same. The peg is a unileratal accession to the USD zone. Nothing else. Barbados has no independent fiscal policy. Whatever the men and women in charge in NYC and Washington do, Barbados must follow.

  15. SETH Avatar
    SETH

    The justification for having a peg of 2 to 1 Barbados dollars to the US$ was to take the risk of short term currency fluctuations out of the equation for the small island economy that Barbados has. The assumption when a peg is set has to be that GDP and money supply printed will maintain a reasonably constant ratio to that existing at the time the peg is set.

    In Barbados the ratio has got way out of wack. Simply too much money being printed which ends up to a great extent being spent on imports that have to be paid for in US$. Add this to the problem of leaking FX caused by off shore billing systems etc and one can conclude there needs to be some massive changes in the way money supply and fx inputs are controlled.

  16. David Avatar
    David

    According to the CBB reporting the monetary base is approaching 8:1.

  17. Tron Avatar
    Tron

    After devaluation to 1:8: A discount of 75 % for international investors on their local debts in BBD. A profit higher than slavery and Maloney´s ops together. The earners of local currency pay, the international investors win.

    Thank you Chris Sinckler! Maybe there is a job left for you at Credit Suisse or Goldmine Sucks.

  18. Kevin Avatar
    Kevin

    I think this government or the next should do as Tom Adams did and banned the importation of certain items into this country like cars for a couple of months.

  19. guyaneseonline Avatar
    guyaneseonline

    Reblogged this on Guyanese Online.

  20. Hal Austin Avatar
    Hal Austin

    Tron February 24, 2018 at 11:23 AM #

    Is this a serious contribution, or just being provocative?

  21. Aye…a Foreign Currency Problem

    […] Barbados Underground […]

  22. Wily Coyote Avatar
    Wily Coyote

    @David

    The CBB evaluation of 8:1, I suspect is several months out of date. Marla Dukharan was estimating this last spring(2017) based on Barbados currency in circulation to debt levels. We all know that the currency printing machine is fully maintained and in operation continuously for the past year. I suspect thus ratio is now closer to 10:1 If not greater.

  23. Tron Avatar
    Tron

    Hal,

    Irony, sarcasm – and a prediction what will happen.

  24. Tron Avatar
    Tron

    Wily,

    “free floating” will mean free falling currency during the first years down to 1 USD = 10 BBD.

    We will see lots of politicians with missing fingers where they had golden rings before. The remaining civil servants and other local inhabitants of HMP Barbados will need some gold to buy food.

  25. David Avatar
    David

    @Wily

    To be fair to the government and CCBB the printing machine has slowed with the appointment of Haynes. Bear in mind the cash reserve requirement for commercial banks was increased largely as a mitigation measure.

  26. Hal Austin Avatar
    Hal Austin

    Tron February 24, 2018 at 1:07 PM #

    What I find interesting is that it is the same mind-set, the debate, with the same argument and looking for a positive outcomes every time.
    I am shocked and disappointed at the obsession with the party debate and the almost total absence of any sound economic discussion, given the oncoming general election.
    .

  27. Tron Avatar
    Tron

    Central Bank is distributing false money now without holographic patches. Obviously, Haynes cannot raise the cash anymore for proper printing money. Foreign printers do not accept any BBD. Maybe Central Bank should start printing toilet paper.

  28. Hal Austin Avatar
    Hal Austin

    Wily Coyote February 24, 2018 at 1:02 PM #

    What are the fundamental issues with printing money?

  29. David Avatar
    David

    @Wily

    Given that tourism is the key forex earning sector the point you make about leakage- something discussed exhaustively on BU- takes on significant importance. Where is the analysis from our educated independent sources?

  30. Talking Loud Saying Nothing Avatar
    Talking Loud Saying Nothing

    No creative industry. No agricultural industry. No energy industry. No manufacturing industry. No “genuine” service industry of worth. A tourist industry that has reached its sell-by date. No patents. An education system that has limited value and a population of copycats with zero original ideas. Do i need to say more? Oh and too much corruption!

    What value or merit does the private sector bring to Barbados? They talk a good game but in reality they are unable to compete with foreign companies. For example, the current french owner’s of Mount Gay have highlighted how outdated the previous Bajan owners were. With regards to the public sector…………………..

    Foreign currency reserves are irrelevant if the country has little of value to offer the world.

  31. Hal Austin Avatar
    Hal Austin

    Talking Loud Saying Nothing February 24, 2018 at 1:54 PM #

    Spot on, but this is not what Bajans want to hear. They want to believe they punch above their weight. It is a nation in denial.

  32. Wily Coyote Avatar
    Wily Coyote

    @Tron February 24, 2018 at 12:27 PM #

    This devaluation is not the fault of international investors, however they will in dead reap the profits of inept Barbados government management.

    @Hal

    “What are the fundamental issues with printing money?”

    If you have to ask such a stupid question, with the financial shape Barbados finds itself facing, then your definitely part of the PROBLEM and not a solution. Printing money indescrimently will result in what is about to happen, serious money devaluation and severe hardship for the populace for the next decade at least.

    @David

    Yes the money machine has slowed in the last few months, however ALL THE OFFSHORE BANKS are becoming very NERVIS. If they react negatively they could easily put Barbados into immediate SOVEREIGN DEFAULT. The question is ” is the guillotine better than the firing squad, the results are the same, patient is DEAD.

    @Hal

    I agree that we are not seeing any serious/sound economic discussions.

  33. Wily Coyote Avatar
    Wily Coyote

    @David

    I do not know but would hope the main forex generator is not tourism as the Barbados tourist industry is not sufficiently large to generate significant forex. In years past the major forex earners were off shore banking, productivity and then tourism in that order. The off shore banking industry in David Thompson’s time produced about 58% of the forex. Now that North American and European governments have been restraining/restructuring their respective off shore regulations Barbados offshore forex generation has shrunk to less than half it was.

    If Barbados has to operate with the forex majority generated from the tourism industry a 10:1 devaluation maybe highly optomistic.

  34. Hal Austin Avatar
    Hal Austin

    Wily Coyote February 24, 2018 at 2:14 PM #

    If you have to ask such a stupid question, with the financial shape Barbados finds itself facing, then your definitely part of the PROBLEM and not a solution. Printing money indescrimently will result in what is about to happen, serious money devaluation and severe hardship for the populace for the next decade at least.(Quote)

    Forgive my stupidity, but as someone who has been calling since 2008 for Barbados to against a basket of currencies and commodities, I can understand the devaluation argument.
    But are you sure you fully understand the likely impact on the economy from an over-supply of liquidity? And, if so, that there are no mechanisms to control it? I have aired all these views on BU on a number of occasions.
    Have you been following global macro-economic policies since 2008 and if so, what is your understanding? Have you ever heard of quantitative easing? What is it?

  35. Hal Austin Avatar
    Hal Austin

    Wily Coyote February 24, 2018 at 2:28 PM #

    I agree that we are not seeing any serious/sound economic discussions.(Quote)

    What is really sad is that our academic economists have removed themselves from the public debate, either because they are contemptuous of the people, or are scared they be challenged.
    On the contrary, in developed economies, many of the world-famous economists, including Nobel Laureates, queue up to discuss the matters.
    We talk politics, not economics. To digress a bit, look at the abysmal management of the NIS and the appalling investment policies. Yet, the minister, chairman, CEO and other senior executives continue like there is nothing wrong. The people get what they deserve.

  36. David Avatar
    David

    @Wily

    Not sure about the offshore sector being a significant forex earner. Many years ago recall a conversation with the late Tony Johnson, former head of the BSE and economist by training, that Barbados had no scientific way of measuring the forex/revenues generated by that sector. You are saying this state of affair has changed?

  37. millertheanunnaki Avatar
    millertheanunnaki

    @ Wily Coyote February 24, 2018 at 2:14 PM
    “@Hal
    “What are the fundamental issues with printing money?”
    If you have to ask such a stupid question, with the financial shape Barbados finds itself facing, then your definitely part of the PROBLEM and not a solution. Printing money indescrimently will result in what is about to happen, serious money devaluation and severe hardship for the populace for the next decade at least.”

    Why are you taken aback by such a comment from the erudite Hal?

    He is the same guy who has argued overtime on BU that the holding of foreign reserves is a waste of resources.

    Mark you, the Bajan dollar is certainly not fiat currency hence its pegging to the greenback the currency of a country whose foreign reserves holdings are in excess of US$100 million (excluding gold) but significantly less than China who tops the FX holding chart.

    If there are no forex reserves where would the country Barbados get the money to invest in much needed infrastructural development to improve its economic earning capacity and engage in social modernization like proper housing and the much needed urban renewal programme, a pet project of the same Hal A?

    Borrow it on the international markets based on its current financial junkyard status?

    There are no natural tradable resources like oil, gold, diamonds, rare metals like titanium and large tracts of arable land to feed the Chinese.

    What other collateral can Barbados put up other than a dose of ‘sound confidence’ in its promise to repay as demonstrated by its ability to save something up for a rainy forex day?

  38. Wily Coyote Avatar
    Wily Coyote

    @millertheanunnaki February 24, 2018 at 3:34 PM #

    I know Hal has/is always saying Barbados dies not need FOREX reserves and it’s a waste of money. Hal is not clear in his philosophy how Barbados can pay it’s foregin obligations, in coconuts, borrowed money(which no body will loan them), barter goods(oh yes Barbados has few goods to barter) etc. In this world economy the GREEN BACK and a few other world currencies ARE widely acceptable for inter country loans and trades. Unfortunately Barbados currency dies not measure up, even though it’s pegged to the GREEN BACK.

  39. Tron Avatar
    Tron

    I can confirm for the offshore financial sector that there are by far less deals, trusts and captives than 10 years ago.

    Suppose you are an international investor. Ask yourself a simple question: Would you trust companies and persons from a country with 2X downgrades, where the elite has proven again and again that they mix up decimals and where judges think a bench at the supreme court is a place to eat and sleep? Or do you prefer a safe Investment in Bermudas, Luxembourg or Zurich?

    We do not know the exact numbers for forex flows, OK. However, this does not matter. At least the offshore financial sector offered high-quality jobs for academics. You do not need any education for the rest of the country: jobs as maids and cleaners in tourism industry and a public service where you become registrar at the supreme court with a 3rd rate exam.

  40. NorthernObserver Avatar
    NorthernObserver

    @Wily
    I think some of your proposals need more thought. We have the diagnostic and monitoring tools available, we are refusing to use them.

    Have several of these SOE’s been terribly mismanaged, or is there another reason why basic reporting escapes so many of them? SOME do provide valuable products/services worth saving, even if at a reduced level. A flat 70% reduction, is tantamount to ‘fear mongering’.

    A floating dollar could be a disaster, we cannot handle, given our current financial resources. If ‘fear’ sets in, and Bajans have a long history of fearing the worse, we could end up with triple digit inflation.

    It is one thing to preach productivity, another to achieve it. If employees have years of ingrained experience where “it doesn’t matter”, the turnaround isn’t as easy as implementing ISO. Ditto for “efficiencies”.

    The expenditure/revenue mix are related to balancing budgets, and managing them to effectively to produce results in line with forecasts.

    In conclusion, until we get to the root of the problems, willy nilly cutting and slashing, will reduce expenditures, but potentially create an impetus for a further round of emigration, and we just might lose those we would otherwise like to keep.

  41. Talking Loud Saying Nothing Avatar
    Talking Loud Saying Nothing

    I am frustrated with these long-winded conversations. When a mother or a father are no longer capable of raising their kids then it is normal for the authorities to remove these kids from the care of their parents.

    The current crop of political parties are incapable of leading and improving the prosperity of the country. I should also add that Bajans remain ill-equipped to stand on their own two feet and are a people who have always preferred to be led.

    We need to find a surrogate – and fast! Don’t whisper it too loudly but recolonisation may be our only salvation.

  42. Hal Austin Avatar
    Hal Austin

    Wily Coyote February 24, 2018 at 3:54 PM #

    I know Hal has/is always saying Barbados dies not need FOREX reserves and it’s a waste of money……(Quote)

    I am now familiar with the Barbadian discursive habit of misinterpreting opponents arguments, either deliberately or through misunderstanding.
    Every modern nation needs foreign reserves to cover for a once in two hundred years event. The last event of this proportion that too place in Barbados was Hurricane Janet – and the nation survived.
    What I have said is that foreign reserves of Bds$1bn is a waste of money; it is like having money in a savings account while at the same time having outstanding debt.
    I have said that a much better approach would be to invest in the derivatives futures markets, which would give us an opportunity to use the Bds$1bn in more rational ways. I also appreciate that local central bankers are not necessarily expert on playing the derivatives markets, but this could be outsourced.
    Also, that approximate $10000m could be better invested for the benefit of the nation: keep $500m invested in Treasuries and bonds; $50m t0 $100m could be used t o establish a balance sheet post office bank, using the existing 18 post offices branches; and using the ret to ring fence the current NIS budget and establishing a sovereign wealth fund with a mandate to return the base rate plus.
    The major problem in the case of Barbados is sovereign debt and that depends on the contract agreements that government has signed. It can be safely argued that almost all these contracts, even with local banks, require repayment in US dollars. Blame that failure on the government’s negotiators and lawyers.
    The other indirect problem is the widespread use of the Greenback as legal tender; this should be outlawed and make it a criminal offence that any business or private individual found in possession of more than US$10000 would be prosecuted and have the money seized. ALL foreign money should have to pass through a bank or approved bureau de change.
    The orthodoxy about foreign reserves is out of sync with developments in global economic performance.
    Under Trump, the Us is retreating from the global battlefield and the dollar is losing its diplomatic power.
    The renminbi is increasingly challenging the Greenback and is increasing its influence. At present, China settles 25 per cent of its foreign debt in its own currency and has clearing banks all over the world. Even the normally conservative |Germans now include renminbis in its currency reserves. Why not Barbadians?
    In terms of over-supply of liquidity, the real threat sis from asset bubbles and inflation. We have now been targeting inflation successfully for over 30 years, and with asset bubbles this surplus cash could be removed from the economy by increasing banks’ capital reserves. There are also other tool to control inflation and asset bubbles.
    Since the 2008 banking crisis, the US, ECB, Japan, and UK have all introduced quantitative easing (printing money) of varying degrees, including the saving of the US car industry.
    RBS bank, rescued by the taxpayer, has just returned a profit for the first time since then. Northern Rock is returning to profit.
    Finally, trading is bartering; but as I have said, the Bajan should be pegged against a basket of currencies and commodities.

  43. Tron Avatar
    Tron

    Hal,

    Thank you for your detailed elaboration about f/x reserves.

    1) Using forex reserves for investments: Good idea. However, WHO ownes these reserves? Even MAM does not know how the reserves are made up. So it might to possible that the MoF adds the CS debt(!) to the reserves which is contrary to any accounting standards. This could explain why Barbados lost so some many millions within a few days (money paid back to CS?).

    2) Outlaw USD. The use of USD begins in the taxi at the airport. In my opinion, an efficient economy should have no barriers against foreign currencies. Any regulation means high transaction costs. Example: To wire money to London in Bim, you need a permit and to wait 2 hours in bank. In Switzerland you do this at your computer in 5 minutes. It is simply a fact that Barbadians do not trust their own currency and that they prefer foreign currencies. I even assume that all the high import duties (including the last Social Nationalist Plantation Tax) have the reverse effect of weakening the BBD since the price for imported goods is excessive. People are replacing the official ways of importing goods more and more with more efficient ways … bypassing any local currency and local duties.

  44. Dr. Simple Simon Avatar
    Dr. Simple Simon

    @Talking Loud Saying Nothing February 24, 2018 at 4:22 PM “Don’t whisper it too loudly but recolonisation may be our only salvation.”

    Since colonization didn’t save us last time, in spite of 327 years of trying, can you please explain how it will save us this time? And will the neocolonial authorities need 327 years again this time? Or less time, or more, and if so how much more? 1,000 years perhaps? And what happens to the generations of people while the neocolonialists struggle to get it right?

  45. Dr. Simple Simon Avatar
    Dr. Simple Simon

    Barbados has plenty of smart hard working people. Why don’t we try working hard and working smart?

  46. System is Broken Avatar
    System is Broken

    @ Simple Simon

    You meant Barbados has a lot of idiot criminals calling themselve, Politrickians, Lawyer Liers, Corrupt Police and Judges.

    Only a fool would continue to occupy sewage paradise

  47. Dr. Simple Simon Avatar
    Dr. Simple Simon

    @System is Broken February 24, 2018 at 9:57 PM “You meant Barbados has a lot of idiot criminals calling themselve, Politrickians, Lawyer Liers, Corrupt Police and Judges.”

    I didn’t mean them. I meant the rest of us.

    The rest of us, that is most of us, are not criminals, liers,corrupt nor tricksters.

  48. System is Broken Avatar
    System is Broken

    But most seem to enjoy wallowing in shit/sewage whilst suffering in silence

  49. Bush Tea Avatar
    Bush Tea

    @ System is broken
    You meant Barbados has a lot of idiot criminals calling themselve, Politrickians, Lawyer Liers, Corrupt Police and Judges…… AND the rest are simple minded BRASS BOWLS WHO WORSHIP THEM.

    @ Simple Simon FPhD
    I didn’t mean them. I meant the rest of us.
    ++++++++++++++++++++++++++++++++++
    Explain the difference.
    The only thing worse than that lot …are the dim witted brass bowls who continue to tolerate – nay – to worship them.

  50. William Skinner Avatar
    William Skinner

    @ Hal
    Your position is no different from Clyde Mascoll. Mascoll argues that there is no need to hold substantial forex and that we should have pumped that money back into the economy. Of course when the reserves started to decline, he tried to make an about turn. Like so many around here , he sings according to his party.
    You will note that after two dozen down grades, the country has not gone under the ocean. The expected, and prayed for by some, catastrophic collapse has not happened. It means that our thinking about economic matters , is woefully out of line with modern economic theory, which in real terms went through the window with the growth of the Information highway, internet trading, the rapid growth of new business models and so on. The private sector that we depend on to drive our economy cannot be taken seriously because with very exceptions, they are still in the mule and cart era.
    Sinckler dont know his letft hand from his right.. On the other hand Mottley is going to rescue us with some high school document called a Covenant of Hope. We seriously in sewage street right now.

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