You Asking Me to Invest?

One thing this blogmaster knows from reading evaluations about the 2008 global economic crisis, it rubbished classical economic explanations. In fact the crisis served to popularized behavioural economics which is described as “an important link between economic and psychological sciences in the analysis of individual decisions especially combining psychological assumptions with economic decision-making analyzes, draws attention with its approach to the 2008 global crisis“. In simple terms the classical economic approach assumes individuals will be rational and consumed with self in decision making. Injecting behavioural economic considers psychological factors that serve to motivate people, force attitudes and create expectations.  Using the theory of behavioural economics the conclusion was made that the 2008 global meltdown was more than a financial crisis, it was a crisis of confidence.

In recent years both political and NGO talking heads have been trotting out the message Barbadians should save in the credit unions because the movement is seen as more supportive to empowering Black and working class people based on its philosophy. They should challenge a risk averse mindset and use the billions in savings lodged in the banks to invest or buy equity stakes in businesses. In recent weeks the government has indicated a special arrangement will be established to attract citizen investment in renewable energy program. The government is on a mission to persuade risk averse Barbadians to INVEST.

There is an interesting inference to the 2008 global financial crisis and the austerity period Barbados has been navigating for the last eleven years. Although acknowledged  there was a financial meltdown in 2008 in the USA – bear in mind the Barbados dollar is forever pegged to the US dollar – Barbadians ignored the failing economic indicators and maintained a lifestyle not reflective of the harsh economic environment. The irrational behaviour by Barbadians- including the government- has been responsible for the current perilous state of the economy.

In the book Stolen: How to save the world from fictionalization  by Grace Blakeley, she wrote, “when people are uncertain about the future, they may behave in ways that seem irrational – for example, saving when they will receive little return for doing so, or spending far above what they can afford. This is because in the context of uncertainty, people prefer to hold liquid (easy-to-sell) assets – and they tend to prefer to hold the most liquid asset of all: CASH (blogmaster’s emphasis). Liquidity preference means that, the higher the levels of uncertainty, the more people save rather than spend“.

The same is true about business behaviour and how investment decisions are taken. Blakeley states, “this kind of uncertainty marks business’ behaviour even more than consumers’ and affects their investment decisions. If businesses’ confidence about the future turns, they are likely to stop investing. These lower levels of investment will result in lower revenues for suppliers, who may have to lay people off, who will reduce their spending, leading to a fall in economic activity“.

The point to be made is that it is not enough to expect Barbadians will behave rationally by answering the call to invest, there are underlying psychological reasons to consider. How does a government committed to transforming the way we do business understand the psychological factors at play in Barbados? Has this government with a bevy of communications people on payroll developed a strategy to counter the underlying psychological factors? So much learning from the 2008 meltdown but have we learned anything?

 

 

 

221 comments

  • @TLSN

    Steady on. He is highly respected and he carried out his ‘research’ which proves that immigration will significantly contribute to societies. One thing we know he is living in a blinkered world, Plato’s Allegory again.
    I do not blame him, I blame the silly journalists who run to him for quotes on every subject. But you are right, there is obviously a plan to introduce mass immigration and they are softening up the public. If Bajans do not agree then they will be criticised as backward and primitive.
    They have run out of ideas after 19 months and are grabbing at anything. Barbados is a failed state. It will end in tears.

    Liked by 1 person

  • David
    “…..Mascoll has assured us many times 70 cents out of every dollar remains in Barbados…”

    David,
    Not quite. The two of us seem to be interpreting what Dr. Mascoll said differently.

    Dr. Mascoll has been reminding us that Barbadians have a marginal propensity to consume (mpc) of at least 70%.
    This means that out of every dollar they receive, Barbadians spend at least 70 cents. Since almost all of what they spend the 70 cents on is grown or produced overseas, money going into a Barbadian hands ultimately creates a major drain on our FOREX.

    He was advancing the classical argument constantly used for not giving Barbadians significant salary increases.

    Like

  • SirSimpleSimonPresidentForLife

    I am no economist (obviously) but Jeremy need not worry about whether older Barbadians will get used to apartment living.

    In 20 years time more that 90% of Bajans who are now 60 or older will be dead, [me too] so we can make do with a 6 foot plot in a cemetery, or 6 inch cube on our grandchildren’s dressing tables, or we can be tossed into the Atlantic. We won’t need a whole 500 square foot apartment. Demographics 101.

    Like

  • David
    November 12, 2019 5:37 PM
    “Walter how should we reconcile your comment with the mouthing of Minister Ronald Toppin re banks being made to do business with Cannabis sector the government is working to give wings?”

    David,
    Some states in the USA have legalized cannabis for recreational and other use. Therefore. local banks operating at the state and local level in the USA are free to accept deposits arising from the cannabis trade conducted in these USA states.

    However, the Federal Government has not yet given the green light to the cannabis industry. Possessing cannabis is still a criminal offence at the federal level in the USA. Thus, banks regulated at the federal level should not accept financial deposits from cannabis dealers.

    I am not a lawyer, but I suspect that if the Government of Barbados were to give the green light to using cannabis for commercial purposes, local Barbadian banks (we have none) and applicable financial institutions (falling under the control of Barbadian laws) would be able to accept financial deposits from cannabis dealers doing trade in Barbados. International banks, operating in Barbados, but falling under the long arm of USA federal regulation, cannot accept these “cannabis” deposits.They would be hit with severe fines and penalties.

    International banks do not march to the beat of Minster Toppin’s relatively tiny toy drum.

    Like

  • SirSimpleSimonPresidentForLife

    Re: Hal’s questions about carrots and lettuce and such, and John’s responses

    Why then do the boys of BU when they want to curse me, curse me about my efforts to grow my own food Why do they make it seem that the only people who grow food are those too stupid to be politicians, economists, journalists, engineers etc.

    I grew 400 feet of carrots this year. I am still working my way through eating them. I haven’t bought a Canadian carrot in months and I know that wiIl won’t eat any for the rest of the year (Hants, Northern and the other Canadians, please note that I have nothing against Canadians or Canadian carrots). I picked twenty 20 avocados on Sunday, gave then to the neighbors. I haven’t bought an avocado in decades and I eat many dozen every year. Will harvest three varieties of sweet potatoes tomorrow morning. Cassava and yam towards the end of the year. I have enough frozen okras to last me through to next season, and enough scotch bonnet peppers to last me for the rest of my life, lol. I bought some vinegar today and will preserve them this weekend. I have enough pesticide free banana leaves to make my conkies on November 30. And in addition to this i have lost 7 pounds between May 1 and now, and this happened without my making any effort to lose weight. But I very likely am depriving some gym owner of several hundred dollars of gym fees each year. And oh yes blood pressure typically below 120/80.

    So can anybody explain why those who grow, even in “small” quantities food insulted?

    I truly don’t understand it.

    Like

  • @sir simple.

    Ignore those that criticise you for growing food. People like you are the ones we need to pull us out of this hole of high food imports.

    Like

  • John A

    If I had a dollar for every time an import-substitution initiative was launched in Jamaica, Guyana, Trinidad and Barbados, I would be retired by now and living the Good Life in Vegas, Geneva and Paris.

    Import substitution has seldom worked. West Indians are not the most disciplined, energetic or resourceful people on the planet, but we can’t seem to face that fact. The post-independence stories of Guyana and Jamaica in particular are chock full of dozens of failed projects that were intended to save on foreign exchange.

    Learn from the past before you repeat it.

    Like

  • @Walter B
    International banks, operating in Barbados, but falling under the long arm of USA federal regulation, cannot accept these “cannabis” deposits.They would be hit with severe fines and penalties.
    ++++++++++++++++
    That maybe true today but the SAFE BANKING ACT now winding its way through the Senate after being passed overwhelmingly by the US House of Representatives will eliminate those penalties if/when the Bill becomes law. The Bill’s future lies in the hands of McConnell and he may be loathe to allow its passage as he has in the past but he maybe unwilling to buck the wishes of House Republicans who supported the Bill. In any event some version of the law will be passed after the 2020 Election.

    Vamos a ver.

    https://en.wikipedia.org/wiki/SAFE_Banking_Act

    Like

  • Sargeant
    November 12, 2019 11:14 PM

    “@Walter B
    That maybe true today but the SAFE BANKING ACT now winding its way through the Senate after being passed overwhelmingly by the US House of Representatives will eliminate those penalties if/when the Bill becomes law.”

    Sargeant,
    Thanks very much for the link showing the USA legislative update. I had no idea that developments were taking place with such breakneck haste. But then again, given the potential billions to be made, we should not at all be surprised to see the USA, the bastion of capitalism, removing all obstacles that could stop the money from flowing.

    Given these moves on the part of the USA, I know that you are not at all surprised to see Caribbean governments now speedily changing their approach and attitude towards cannabis.

    With respect to Barbados, if I were allowed to bastardize some of Red Plastic Bag’s lyrics and apply them to the marijuana referendum issue, I would write:
    They will rig me up in draft,
    If I don’t pass, I gun really laugh.

    Like

  • @Sarge
    the story from the cannabis producers in Ontario, is the classification of cannabis on the Schedule 1 list of controlled substances in the US, blocks potential federal approval. And could create Senate hurdles. As recently as 2016, the DEA refused requests for the reclassification of cannabis. Should the SAFE Act pass, does it create precedent for other Schedule 1 substances?

    Like

  • Simple Simon,

    I think what you are doing is way smarter than what most are doing. That is why I am planning to join you just for my own use and that of my immediate family. I am looking forward to it. Hope to be up and running by March. I cannot wait to feel useful. Will keep you posted.

    Like

  • Walter,

    “De-risking Demystified” should be the name of your comment.

    Like

  • @NO

    Its not a slam dunk but as WB noted there is a lot of money at stake and as I suggested expect some movement after the 2020 Election. The folks in the “Red States” would prefer not to have their constituents reminded in the lead up to an Election that they voted to support any law legalizing marijuana…….

    https://business.financialpost.com/investing/cannabis-industry-hopes-safe-banking-act-will-spark-new-wave-of-growth-especially-in-u-s

    Like

  • @Ewart

    You only fail the day you stop trying.

    Like

  • Donna
    November 13, 2019 1:06 AM

    “Walter,
    “De-risking Demystified” should be the name of your comment.”

    Donna,
    I never really thought for one moment that there was any mystery attached to the concept of de-risking.

    PS:
    I would really love to get my hands on some of those vegetable goodies that you and Simple Simon will be producing next year.
    I know that I will be accused of being a Casanova and trying to cozy up to you ladies, so I will send my sister to collect them.

    LOL

    Like

  • NorthernObserver,
    Your last link shows any sensible investor what stocks he/she should invest in now.

    Like

  • Walter,

    You may not have thought there was any mystery. That is because you knew what it was. What I really meant though is that you laid it all out in a simple manner that the average person could understand.

    PS. Simple Simon and I are eligible for the senior games. You are welcome to pass a joke or two. Tastefully done, of course.

    Liked by 1 person

  • SirSimpleSimonPresidentForLife

    Walter and Donna: The sweet potatoes are turning out nicely. I peeled one, sliced it, and threw that and some cut up okras in some left over soup.

    Delicious and filling.

    Walter if you were my neighbor today would be the day that you “got lucky”. Avocadoes for all of the neighbors today.

    Like

  • @ Walter

    I asked you for an idiot’s guide to de-risking, partly for myself, but also following a confusing definition given by an academic economist in another publication. I thought as an actuary coming from you it will carry a greater punch. It has.
    However, it still will not stop people with limited knowledge, and journalists with no knowledge, from speculating.

    Liked by 1 person

  • SirSimpleSimonPresidentForLife
    November 13, 2019 3:29 PM

    “Walter and Donna: The sweet potatoes are turning out nicely. I peeled one, sliced it, and threw that and some cut up okras in some left over soup.”

    SirSimpleSimonPresidentForLife,
    People who live in “town” (the St. Michael area) complain that they plant, but others reap.

    You seem not to have a problem with praedial larceny. Is that a reflection of the way you live with your neighbours?

    Like

  • SirSimpleSimonPresidentForLife

    Probably. We always share with the neighbors. But of course we have the challenge of the monkeys, although the monkeys tend not to trouble us in times like now when there is plenty of wild stuff to eat in the gullies. When it becomes drier and wild food in the gullies become scarcer then, trouble.

    But we rarely get any of the coconuts. We have been told that a coconut vendor comes with a truck and picks several bunches at a time. Maybe he is a “town man”

    So when I want coconut water i have to buy it at $12 a bottle.

    Sad.

    Like

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