The latest chatter on the local newsfeed is about Barbados’ scheduled repayment of $928 million dollars by end of 2029. To avoid attracting the wrath of government’s senior economic advisor Dr. Kevin Greenidge, Barbados borrowed $870 million since 2018, the difference of $58 million is interest due supporting Greenidge’s argument that IMF money is the cheapest in town if compared to what is available on the open capital market.
The blogmaster is happy to observe the concern being expressed by all and sundry about the accumulation of the public debt- foreign and local- by the BLP government since 2018. However, we should not forget how we got here.
Successive governments have been responsible for our current debt level which is reported to be about $13 billion. Barbadians have been reassured by Greenidge the $870 millions borrowed from the IMF represents a small 6.4% of total debt. Wonderful. The government has stoutly defended the borrowing by reminding the debt level was 18 billion when the Mottley government took office in 2018. Ideally if the pay down was from earnings, we could be satisfied the country was positively addressing repayment BUT it was largely due to a debt restructure.
We read retired professor UWI Michael Howard skepticism presented in the press this week and Dr. Robinson had his say in today’s Nation. The debt is too high. However given the design and current state of the local economy it is a problem we will have to tolerate for a generation or two IF corrective measures are taken now.
A more immediate concern is protecting the health of the foreign reserves. The longer the conflict between Ukraine and Russia continues and serves to undermine the global financial market and disrupt global supplies to small island developing states, there is a chance of foreign reserves being compromised. It was reported the increase in import cost of fuel for Q1’22 compared to last year was significant. The the root of the debt accumulated is successive governments lazily satisfying the conspicuous consumption behaviour of citizens. Citizens have skin in this game.
The crisis that is unfolding in Sri Lanka should remind small developing countries like Barbados what is possible. This week the government of Sri Lanka banned the sale of fuel for two weeks. A person does not have to be ‘smart’ to understand the implications of making such a drastic decision.
Sri Lanka suspends fuel sales for two weeks as economic crisis worsens
Ban on sales to everything except essential services comes as nation tries to conserve fuel supplies that are barely enough to last a single day
A Sri Lankan security official stands guard outside a fuel station that ran out of petrol in Colombo, Sri Lanka on Monday. Photograph: AFP/Getty Images
Agence France-PresseTue 28 Jun 2022 01.30 BSTLast modified on Wed 29 Jun 2022 05.10 BST
Cash-strapped Sri Lanka has announced a two-week halt to all fuel sales except for essential services and called for a partial shutdown as its unprecedented economic crisis deepened.
The south Asian nation is facing its worst economic meltdown since gaining independence from Britain in 1948, and has been unable to finance even the imports of essentials since late last year.
As fuel reserves hit rock bottom with supplies barely enough for just one more day, government spokesperson Bandula Gunawardana said the sales ban was to save petrol and diesel for emergencies.
Gross Central Government Debt stood at (BDS $millions):
Gross Central Government Debt = Domestic Debt + External Debt+ Domestic and External Arrears
Of the gross debt owed by government, external debt stood at (BDS $millions):
According to the central bank report the uptick in in external debt was due to an increased reliance on policy based loans, the benefit of which kept the average interest rate on debt stable. The blogmaster assumes the benefit of a policy based loan besides its purpose of targeting specific sectors for reform and strengthening is the low interest rate.
In the period 2018 to 2021 the government borrowed as seen on the central bank graph, total debt to GDP was recorded at 136.3% with foreign debt being 33.9% of total debt. It should be obvious a large component of USD1.5 billion in foreign reserves is the result of heavy inflows from policy based loans contracted in the pandemic years of 2020 and 2021.
From the following graph it should be clear Barbados’ debt load should not be viewed through a political lense. Successive governments have accessed heavy borrowing – both local and foreign to finance government’s operations over the years. The slowdown in the global economy caused by the ongoing pandemic has had a devastating effect on the economy of Barbados by eroding gains from the debt restructure administered in 2018. With the fickle tourism sector the major foreign exchange earner, Barbados has to be hopeful it continues to rebound to be able to honour its external debt obligations. Hopefully our planners at the strident insistence of the citizenry will make this a strategic priority.
This raises the point of concern indicated in the email received from a concerned BU family memeber, who are our foreign creditors and are Barbadians comfortable that having mortgaged the future of our great grand children, there is sufficient capacity of the country to service its debt. In 2018 local and foreign bondholders suffered a ‘haircut’ because debt to GDP was too high and the country suffered several downgraded by credit rating agencies.
The blogmaster does not have a listing of our local and foreign creditors. However the concern China has aggressively been increasing its stock in the island has been refuted by financial consultant to the government Avanish Persaud, evidencing that China’s exposure in Barbados represents ‘only’ $300 million or less than 3% of the 13.3 billion gross government debt.
While it is comforting that foreign debt as a % of GDP is low, in real terms in represents a liability the country will struggle to honour given our heavy dependence on one sector to earn foreign exchange. To make matters worse, in the short – and possibly medium term – the ongoing conflict in the Ukraine will create additional economic pressure with the price of commodities forecast to spike.
The government owes it to the country to implement a plan to disrupt consumer behaviour. The typical Barbadian aspires to buy a car, travel and to engage in a level of consumption spending on durables that is inimical to the national interest. The blogmaster is not suggesting that individuals should not aspire to acquire material things to appease a sense of aggrandizement. However, if it means Barbadians are being encouraged to cut off the nose to spite the face then we are spitting in the air.
Are Barbadians aware of the perilous state of affairs we are operating in?
A report in the local press yesterday piqued the curiosity. It detailed former Minister of Finance Chris Sinckler will be working with the region, including Barbados “with the reform of the international debt architecture and issues surrounding vulnerability of small states”. His involvement is as a result of an engagement with former employer Caribbean Policy Development Centre, where he was Executive Coordinator before serving in the Thompson and Stuart administrations.
A quote attributed to Sinckler – “It is critical to see how Barbados and the Caribbean can access money and develop finance on a concessional basis”.
The news item does not interest the blogmaster because Sinckler presided over a very challenging economic period as Minister of Finance and was the face of economic policy in the former administration. His appointment reminded the blogmaster how we have become slaves to debt at the level of the individual and government, technically one and the same.
There is the text book definition what is good and bad debt, we get it. Committing to a debt which helps to develop the individual to be marketable, grow and protect earning capacity, we get it. At the government level, to borrow within serviceable limits to create opportunities for citizens to enjoy quality living, we get it. Notwithstanding the foregoing it has become obvious accumulating debt is the preferred option above revenue generation in the prevailing culture of managing our affairs. According to the 2019 Financial Stability Report household debt increased by over 200% between 1999 to 2019. In the same period government’s struggled to manage the debt to GDP increased from 60% to close to 160% has been copiously documented.
It is fair to draw a conclusion the majority of households are carrying significant debt- acerbated by a deep haircut by the government in 2018 on some domestic debt compounded by the 18 month pandemic. It is also fair to describe Barbados’ economy as trapped in a vicious debt cycle given its highly leveraged state. The correlation between rising household and government debt must not be ignored. Accumulating debt has become a ‘fashionable’ first option by individuals and government alike.
In a world where debt financing is the preferred option, financial institutions as the owners of burgeoning individual and government debt have grown in importance. Something has got to give. The conspicuous consumption model to which Americans and others in the West have become addicted will not work for Barbados. We simply have no sustainable export earning options available in the short to medium term. Our problem is the exponential debt accumulated in the last 20 years has broken the back of the camel. We have sown the wind and it is time to reap the whirlwind.
As a people we have to demand better from our policymakers. Tired narratives and warm over policies must be unequivocally rejected. As individuals the time has come and gone to take ownership of home affairs by making smart decisions. Getting fat from debt financing is not the recommended way. Unfortunately if we are unable to correct, it will be done for us. In fact it has already started.
During our lives, we will harm many people, both intentionally and unknowingly. We will harm them by doing harmful things, and by failing to do helpful things. That harm is a debt that we must pay. We may never know the number of people whom we have harmed. The spaghetti of consequences of all our actions and non-actions is unknowable to all, except to the One who is all knowing.
OUR DEBT PROBLEM. If someone harmed a child, then they should give an account, and make amends, to the child’s parents. We are all God’s creation, and we are all guilty of harming His creation. Each of us must give an account of our actions, and non-actions, to our Creator. Therefore, we all have a serious debt problem. God managed our debt problem by sending his Son, Jesus, to pay everyone’s debts. Therefore, Jesus became the Messiah of all mankind. Since Jesus paid our debts, God appointed Him as the one to whom everyone must give an account, at the end of their lives. Interestingly, both the Bible and Qur’an acknowledge Jesus as the Messiah, who will judge all people, after their brief time on this Earth has ended.
DEBT FORGIVENESS. The arrangement to have our debts forgiven is fair, and entirely within our control. We will be forgiven to the same extent that we forgive others. So, if we only forgive someone 60% of their smallest debts to us, then we will only be forgiven the same 60% of the smallest of our debts. At the end of our lives, those who have no debts will have qualified themselves for fulfilling and exciting employment. Those who decided to keep their debts, would have automatically condemned themselves to a bitter and miserable unemployable existence, with others who have done the same. But there is another judgement.
POLITICAL JUDGEMENT. Enoch describes an inescapable eternal damnation, for politicians who implemented oppressive policies. That is why politics is the most dangerous activity for any human being, and should only be done by selfless persons who want to serve, and not enrich themselves and their supporters. It is useful to read Jesus’ words to the oppressive leaders of his community. “You serpents, you brood of vipers, how are you to escape being sentenced to hell?” (Matthew 23:33) So, oppressive politicians should not be feared – but pitied.
KEEPING DEBTS. Jesus predicted a horrific scenario where most humans will not want to be forgiven. Tragically, it has come to pass. Many refuse to acknowledge that their actions have harmed anyone. Their attitude is described in Proverbs: “This is the way of an adulterous woman: She eats and wipes her mouth and says, ‘I’ve done nothing wrong.’” (Proverbs 30:20).
We think that nothing is wrong with abortion for convenience and sex slavery, both of which are illegal in Barbados. We think that no one is harmed with: pornography, bribery, no-bid public contracts, political discrimination, etc. When preachers of the Gospel remind persons of their debts, and urge them to live debt-free to avoid future unemployment, some get offended.
The most reckless thing that a human being can do, is to reject the offer to be debt-free. The most short-sighted thing that a human can do, is to accumulate and retain debts. The most certifiably lunatic thing a human can do, is to tell Jesus, their Messiah and Judge, to begone.
The blogmaster read the following article over night while perusing the financial newsfeed.
Patriotic Barbadians that understand these matters are obviously concerned negotiations have stalled with external creditors. We have to go with communications being dropped in the public space.
Commonsense support that it is not unusual creditors will push back against having to take a haircut. Barbadians wish the White Oak negotiating team well, as a country we have a lot riding on the best outcome.
Both sides agree the country of 300,000 people needs to cut debt levels. Yet talks have soured in recent weeks over how much of the burden should be borne by creditors in the form of deep haircuts or other terms. For its part, the government said it isn’t willing to negotiate targets established when it took a bailout from the International Monetary Fund last year – extracted from the Bloomberg report
Both sides seem to agree a restructure of the debt is necessary given the high debt burden and current state of the economy. What is at dispute is the amount creditors are being asked to leave on the table. Creditors have to protect their interest and the government having opted to SD will have to make it count given the damage to country’s credit rating and how it will be perceived by lenders.
However the foreign creditors will know that they have an overlapping interest with the government of Barbados. If the economy that is precariously perched on the economic cliff continues were to tank all that will be left is Hobson’s choice.
Time to close the deal!
Barbados Clashes With Creditors in Talks to Cut Greece-Like Debt
Barbados’ prime minister is butting heads with creditors over how to cut one of the world’s largest sovereign debt loads, creating a sticking point in the year-long negotiations to restructure the Caribbean nation’s defaulted dollar bonds.
Talks with foreign creditors have dragged on since last June, when Prime Minister Mia Mottley said she would restructure the island’s “unsustainably high” debt burden. While both sides said they are open to continued negotiation, they appear far from consensus.
A committee of creditors, who hold 55% of outstanding dollar debt, said Wednesday that they plan to unanimously reject a government proposal to exchange defaulted bonds for new debt unless the two sides negotiate together.
“The committee strongly believes that the launch of a unilateral exchange offer by the government of Barbados without the support of the committee will be highly detrimental to the country’s economic stability,” they said in a statement.
Both sides agree the country of 300,000 people needs to cut debt levels. Yet talks have soured in recent weeks over how much of the burden should be borne by creditors in the form of deep haircuts or other terms. For its part, the government said it isn’t willing to negotiate targets established when it took a bailout from the International Monetary Fund last year.
At that time, the government estimated debt had ballooned to about 175% of gross domestic product, meaning it owed around $9 billion. That would have made it one of the world’s most-indebted countries, trailing only a handful of others, including Greece, according to IMF figures. Mottley said she “will not compromise” on the goal of bringing that ratio down to 60% by 2033.
“We leave it to creditors to decide whether this is achieved through a par deal with long tenors and low interest rates, or face value haircuts with shorter tenors and higher interest rates. But the targets must be met in full,” she said in a written response to questions.
Mottley inherited a troubled $5 billion economy when she took office last May. The island known for its white sand beaches had been struggling for years amid competition from less-pricey Caribbean tourism destinations, crumbling infrastructure, and a currency that’s pegged to the U.S. dollar. She quickly struck a $290 million deal with the IMF and restructured about $6 billion in local currency debt.
The government owes around $700 million in dollar bonds, plus bank loans and other foreign debts, according to a spreadsheet posted to a website for creditors in January. Bonds maturing in 2035 have rarely traded in recent months, according to data compiled by Bloomberg.
The creditors committee said it put forth an offer two weeks ago “based on terms that aim to support the government’s debt and reform objectives while creating restructured instruments with broad market acceptance.” The committee said it is made up of long-term investors, regional central banks, individual bondholders and financial institutions and represented by advisers Newstate Partners and Washington-based law firm Arnold & Porter Kaye Scholer LLP.
The creditors contend that their offer would have allowed the government to reach its debt target a year later than it wants, according to people familiar with the committee’s negotiations. The committee’s position is that the government’s estimates fail to take into account certain revenue variables and that it is trying force severe restructuring terms on creditors to meet its debt targets, said the people, who were not authorized to discuss the negotiations.
White Oak Advisory, which is representing the government in negotiations, said the creditors’ offer “fails to meet IMF test for debt sustainability, and by quite some margin,” according to an email statement. “It is disappointing that Barbados continues to be faced with this kind of position after almost a year of negotiations.”
The following blogs authored by a young Barbadian Economist Simon Naitram who is currently an assistant lecturer at the University of the West Indies while pursuing a PhD from the University of Glasgow (featured image: Simon Naitram)
David, Barbados Underground
Life, debt, and now default. Barbados has reached the final stage of its illness. This isn’t our sob story. This is the tale of how we got here. This post isn’t a eulogy—it’s a lesson, a warning to our future selves.
The reason the government has defaulted on the country’s public debt is simple: the government just doesn’t have enough money to both keep paying back its loans and keep the country’s services running. The government chose to keep the country running.
How did the government reach this breaking point? Did the government simply borrow more than it could repay? The economics of government debt aren’t that simple. The government might have borrowed too much—it certainly made some bad financial decisions—but that’s not the real economic story.
The underlying economic mistake leading to default is that our government did not invest. It’s not that we spent too much money. Instead it’s that we spent our money on the wrong things. For a decade we did not invest in a brighter future. Nodebtw that we’ve reached that future, it’s a dark and miserable place.
A government’s debt is measured relative to how rich its people are. Bill Gates borrowing a million dollars isn’t the same as me borrowing a million dollars. The richer we the people are, the more money the government gets from taxing us. A 20% tax on $100 gives the government way more revenue than a 20% tax on $20.
Barbados’ giant economic hole is entirely of our own making. Our distress stems from one fatal flaw: we do not invest.
Let me make it plain. Investment in new businesses, new technologies, and new ideas is the only way to generate sustainable economic growth. Economic growth is not just an economist’s foolish cravings. Economic growth is the only path to prosperity. Investment is needed for economic growth, and without economic growth, we perish.
Why is it that we don’t invest? What can we do to fix this fatal flaw?
The first problem is that we save only 13.6% of our income. The rest of the world saves 23.1% of its income. Our savings are paltry in comparison to the investment hole we need to fill. We simply don’t put aside enough money for our businesses to invest.
And yet, commercial banks don’t want our cash. They offer us a ridiculous 0.05% interest rate on our savings. Why? In 1990, the banks lent 68% of our savings to businesses. Lending to businesses is risky, but it is productive investment that generates high returns and grows the economy. In 2018, the banks have lent only 28% of our savings to businesses! Banks have stopped channeling our funds into productive economic activity—which is in fact their one job.
For those who have experienced several election cycles, it is tiring to hear career politicians alarming us that every General Election is critical to Barbados’ future. It is now a standard claim that is used by all political parties to encourage people to vote. However, the aftermath is the same.
After the election results are announced, and the jubilation had ended, the politicians normally gather around the trough. They are surrounded by their political supporters who hope for spillage when the politicians feed, while the rest of us begin to realize that nothing would really change.
Since our independence 52 years ago, we have only had two political administrations, the BLP and the DLP. They both made promises to properly manage Barbados’ economy, and we believed them. However, all they have done is to bring us to the brink of economic ruin. They have both brought us to where Jamaica and Guyana were before their currency was devalued – out of all good options.
With Barbados national debt exceeding 150% of GDP, which is significantly higher than the 40% GDP debt upper limit that the IMF warned us not to cross, we can expect the devaluation of our dollar. Since we have no local banks, we can expect everyone who is paying a mortgage, and is not earning foreign currency, to lose their house within 3 years. We can expect most of the middle class to be reduced to poverty. That is only some of the austerity that they are promising us.
For the first time since our Independence, all politicians in Barbados appear to be telling the truth. If we have the misfortune of electing any other party than Solutions Barbados, Barbadians will receive the severe austerity that they are promising.
After bringing us to the edge of the cliff of economic ruin, they are now promising to push us over. They promise us that if they are elected, then we will be forced to take their bitter medicine and harsh austerity. They blame us for living above our means, when it is them who have borrowed above our ability pay. Why do we have to pay for their gross mismanagement?
Well, they can keep their bitter medicine for themselves. In a Solutions Barbados administration, the only persons who will have to take bitter medicine are corrupt individuals, because they alone deserve this correction. However, there is prosperity for everyone else.
Solutions Barbados is a group of Innovators who tend to improve whatever responsibilities they are given to manage. They have an average of 20 years of managing through innovation and are offering to use their experience to the benefit of all Barbadians.
Grenville Phillips II is a Chartered Structural Engineer and the founder of Solutions Barbados. He can be reached at NextParty246@gmail.com
Grenville Phillips II, Leader of Solutions Barbados
This is the most crucially important general election that we have ever had since our independence. We are so much in debt that we are facing economic ruin. If any successful political party fails to significantly improve the economy within their first year in Government, the majority of Barbadians will suffer unimaginable harm. We are realistically looking at most of the middle-class being reduced to poverty within the next 3 years.
With so much to lose in this general election, voters need to examine each Party’s economic plans. However, that is clearly asking too much of voters who have more immediate concerns. In recognition of this, the US has a non-partisan Congressional Budget Office that examines political plans and determines their effect on the economy.
For this critical general election, Barbados desperately needs a set of non-partisan accountants and economists who are willing to put aside their political biases, and honestly examine the effects of each Party’s plans on the national economy and society. I am calling on the Barbados Economic Society and the Institute of Charter Accountants of Barbados to form a joint committee to do just that – for all of our sakes.
The criteria for membership of this committee should be agreed with all political parties. The joint committee should critically examine each assumption used in each Party’s economic plans, because we cannot afford to get it wrong this time. It is in all of our interests to know whether a Party’s plans are likely to work, and any deficiencies in a Party’s plans that need to be corrected before they are implemented on the public.
While this can serve to protect the public in some way, it is not fool proof. Despite all political parties knowing full well that there is no more money left to pay for reckless political promises as in the past, some Parties will continue to make them, because that is the only way they know of getting elected – but this time, they know that they will be blatantly lying to the public.
Since we have run out of time for any more political games, Barbados needs a guarantee that we can return a political product if it is found to be defective. One such method is to allow voters to recall all members of Cabinet after their first year in office, if their economic plans fails to meet the measureable improvements promised. With this method, politicians are less likely to make reckless promises and are more likely to keep responsible ones. It is much better to hold by-elections in those constituencies than to put Barbadians through any more unnecessary suffering.
Solutions Barbados is the only party offering to do what the other parties have not done, namely, properly manage public services, reduce our national debt, allow public workers to be promoted on merit alone, and root out corruption. Our plans have been published for the past 2.5 years for rigorous public scrutiny, and we welcome having them scored by any non-partisan group. It is now time for every political party contesting this important election to either ‘put up or shut up’, because we simply cannot afford anymore broken political promises.
Grenville Phillips II is a Chartered Structural Engineer and the founder of Solutions Barbados. He can be reached at NextParty246@gmail.com
“… last week, former Prime Minister Owen Arthur scathingly criticised our plan...”
The closer we get to the date of the General Election, the more silly some politicians tend to behave. Perhaps that is why it is called the silly season. Last week, former Prime Minister Owen Arthur scathingly criticised our plan to improve the national economy. I wish that he had called me first to discuss his concerns, but it seemed that his only intent was to criticise it.
Our 4 point plan comprises: lowering taxes, improving the management of government services, depoliticising the public service, and eliminating corruption. It should be clearly stated that our plan is not some theoretical untried plan, but it is proven.
It is proven that a country takes in more revenues when it reduces its tax rates. Mr Owen Arthur himself proved this when he was the Minister of Finance, which is why we recommended that he deserved a knighthood. Now he seems to be rejecting his own proven plan in order to criticise us.
A Solutions Barbados administration will do the good and responsible things that Mr Arthur did, but will reject the irresponsible things. Mr Arthur lowered tax rates and realised record amounts of revenues. Yet despite this, he irresponsibly kept borrowing money, taking Barbados’ debt from the safety of 30% of GDP, past the 40% of GDP debt that the IMF warned us not to cross, to an unsustainable and reckless 90% of GDP debt. He is an economist and should have known better.
It is proven that better managed public services results in less wastage and a higher level of customer satisfaction. Mr Arthur knew this and to his credit, he did try to reform the management of the public sector. However, he failed miserably because he rejected the ISO 9001 Quality Management System when I presented it in 2004. I am sure that he is regretting that rash and unfortunate decision now.
It is proven that a politicised civil service can ruin a country. When he led the country for 14 years, did he make any effort to stop the politicisation of the public service? The Constitution of Barbados, Section 104, states that the Service Commission can recommend to the Governor General that the pension of any public servant be reduced or suspended due to being guilty of misbehaviour for which he has been removed from office.
In a Solutions Barbados administration, proven partisan political misbehaviour like approving and non-approving applications, providing and denying services, and frustrating processes, will attract immediate dismissal and suspension of the pension.
Finally, it is proven that corruption results in severe austerity for most citizens. This is because bribes are actually added to the cost of the good or service, which means that the public overpays for these things. Let me explain how this occurs.
If a contractor agreed to do some work for say $2M, a corrupt official will tell him: “If you want this job, then you must sign a contract to do the work for $3M, and when you get paid, then you must give me $1M.” Alternatively, a corrupt contractor will say to the official: “If you give me this job, then I will bill the Government for $3M, and I will give you $1M, because I can do the job for $2M”.
Both established parties regularly accuse each other of gross corruption. Therefore, both established parties appear to be very aware of, and very concerned about the levels of corruption in Barbados. Since they have both had multiple turns at the trough, then why are the accusations still being made? In a Solutions Barbados administration, corruption will be effectively addressed.
Grenville Phillips II is a Chartered Structural Engineer and the founder of Solutions Barbados. He can be reached at NextParty246@gmail.com.
Grenville Phillips II, leader of Solutions Barbados
History can be studied from an infinite number of perspectives, and no historian can study them all. I study history from several different perspectives, one being seeking patterns among nations. There seems to be a model that former colonies do not appear to deviate from once they have been granted independence. It currently comprises seven phases.
Phase 1 is the period of competitive elections, where politicians tend to compete by enticing voters with promises of free government services. Two dominant political parties typically emerge, each with its own philosophy of financing the country’s development. Typical financing methods include: taxation, borrowing, nationalising productive industries, or combinations of these.
Since politicians rarely have any relevant management experience, the country soon finds itself in debt. Once the debts exceed a maximum limit (40% of GDP), the debt becomes unsustainable.
Phase 2 is the period of the debt spiral. An economy in a debt spiral cannot recover unless the established political parties drastically change their development philosophies. However neither of them do and the debt accumulates until the country is on the brink of economic ruin.
Phase 3 is the period of the final election. Normally, the party who promised to place the country more in debt wins the elections. However, there comes an election when both established parties are fully aware that they cannot keep their election promises. But they make them anyway, since that is the only way that they know how to compete. Thus, they guarantee the economic ruin of the country.
Phase 4 is the period of military intervention. With a ruined economy, severe austerity and poverty becomes the people’s daily experience. Social unrest follows and it is directed towards the politicians. The people realise too late that the politicians have economically ruined a once prosperous country with reckless promises and corrupt practises. Concerned for their safety, the politicians seek protection from the military.
Phase 5 is the period of military take-over. With limited revenues, the government is unable to pay public workers, and the military starts to manage an increasing number of government services. Eventually, the military leadership grows tired of sharing power with the incompetent and corrupt civilian leadership, stages a coup and takes over.
Phase 6 is the period of military control. The military leadership have no experience in managing productive sectors of the economy, and are shunned by the international community. So they tend to develop alliances with ruthless dictators who teach them how to maintain control by intimidating citizens.
Outspoken speakers, writers and singers are persecuted. However, soon the paranoid leaders resort to the torture and murder of anyone suspected of being a threat to their rule. Needless to say, all women, except the very young and the very old, become targets of rape.
Phase 7 is the period of tolerated deception. After looting all that can be looted from the country, the military appears to submit to international pressure and agrees to hold a general election in order to select a civilian government. The military leader resigns, leads a political party and wins the general election, thus maintaining control.
Every former colony that became independent after World War 2 can find itself in one of the periods; although, surrendering a country to the IMF can prolong Phase 4. Barbados is currently in Phase 3. However, we have a unique opportunity to create an entirely new path.
By electing any established party, we would have selected the way of the one trough. It will be a Barbados where the political trough is the only one that will be filled. Politically favoured individuals will be allowed near the trough where they can only hope for spillage when the politicians feed. The rest of us can only hope that those near the trough will be kind.
In a Solutions Barbados administration, there will be no political trough. The rain will fall on all of us, and we will each contribute a small portion (10%) to look after our most vulnerable.
Photo left to right: Leighton Greenidge, Daniel Chalbaud, Cherie Pounder, Grenville Phillips, Kenneth Lewis
Every 5 years, Barbadians get an opportunity to look at their politicians’ report card and decide whether to allow them to continue to manage the national economy, or turn over management to a more competent group. Over the past 50 years, we chose not to look at their report cards, but instead simply listened to our politicians declare that they were doing a good job, and the opposition declare that they could do a better job.
Those of us who do not worship politicians normally made our voting decisions based on whomever was the most persuasive. I am an Engineer. How could I have been so gullible, naïve and lazy? Politicians cannot grade themselves. What was I thinking?
Like many others, I simply wanted to trust that our politicians knew what they were doing. I just wanted to participate in Barbados economy and leave the management up to what they told me was an experienced and competent political class. Our dollar appeared stable, the transition of power between BLP and DLP was non-violent, and we were not a dictatorship. So while everything was not perfect, I was convinced that they knew what they were doing. Oh, how wrong I was.
It was in 2015 that I just happened to see our politicians’ report cards by accident. I read the IMF reports for Barbados and I was shocked to learn that we had been failing as a country for the past 20 years. The IMF informed Barbados and other developing countries that we could use debt to finance our development, but they warned us that our debt should never, under any circumstances, exceed 40% of what we as a country made in one year, which is called the Gross Domestic Product or GDP.
Twenty years ago, the BLP took Barbados past this maximum ceiling that should never have been crossed. However, rather than quickly return to the safety of under 40% GDP before anyone found out, they recklessly and arrogantly took Barbados’ debt to an irresponsible 90% GDP. Why on earth and in heaven did the BLP do this? If they thought that it was necessary for us to cross the 40% maximum limit, then why not ask our permission, or at the very least, inform us. They had no right to plunge all of is into an unsustainable debt and almost ensure that our children will lose this country – no right whatsoever!
Clyde Mascoll recently challenged my figures on ‘Down to Brasstacks’ and shockingly declared that the BLP debt was good debt. I responded that my figures came from the IMF, the same source that he used when he was criticising the BLP for their reckless borrowing when he was leading the DLP. Further, the only good debt was any debt below the safety of the 40% GDP ceiling. Anything over that ceiling was irresponsible and reckless debt. I challenged him to discuss this issue with me at any time. He has yet to respond.
The DLP took the debt baton from the BLP and appear to have simply given up. They have allowed the debt to rise to about 150% GDP, which has taken us to the brink of economic ruin. In this upcoming election, the DLP will claim that they are doing a good job, but the IMF report card shows that they are failing miserably. The BLP will claim that they could do a better job, but the IMF and Moody’s report cards show that they were the ones who actually placed us in this financial mess.
After I read the report cards, I set about publishing solutions to the various problems hindering Barbados’ development, but neither established party appeared to be listening. Peter Boos subsequently offered similar advice, and he was informed that unless he was in the political trenches and got his hands dirty, that he basically had no standing to offer any advice. Since the DLP explained that the only way that they would listen to advice is if I got into the political trench, then into the trench I went.
Solutions Barbados was established in 1 July 2015, primarily to offer good advice to both political parties. However, despite being in the political trench with them, they still would not listen. Therefore, we will assemble 30 responsible persons in order to finally give Barbados voters a competent alternative to the two established parties. We are pleased to announce the following additional candidates: Kenneth Lewis, Leighton Greenidge, Daniel Chalbaud, Cherie Pounder and Betty Howell.
What Happens When An Unstoppable Force Meets An Immovable Object? Global Collapse Disorder & Destruction of the World’s Economic System
“Sooner or later we will all have to sit down to a banquet of consequences.” – Robert Louis Stevenson
Debt has been the wealth of the rich. David Korten warned us of “When Corporation Rule The World” that it would result in an instability that would ruin the lives of many – as major banks like Goldman Sachs, JP Morgan Chase & Barclays have run our world into a colossal derivatives bubble of some $800 trillion and growing. Although most are asking for greater accountability given a market out of control which keeps pressing an ideology of rapacious exploitation of environmental resources, as well as bedeviling the lives of the working poor with a debt mountain to climb – hardly ever seeing any individuals held responsible for their failures and negative outcomes brought about by their gambling actions.
The Apostle James in chapter 5 verse 1 through 6 pens: “A final word to you arrogant, rich (FOLKS): Take some lessons in lamentations. You’ll need buckets for the tears when the crash comes upon you. Your money is corrupt and your fine clothes stink. Your greedy luxuries are a cancer in your gut, destroying your life from within. You thought you were piling up wealth. What you’ve piled up is judgment. All the workers you’ve exploited and cheated cry out for judgment. The groans of the workers you used and abused are a roar in the ears of the Master Avenger. You’ve looted the earth and lived it up. But all you’ll have to show for it is a fatter than usual corpse. In fact, what you’ve done is condemn and murder perfectly good people, who stand there and take it.” (Cited from The Message Bible)
Divine justice served!
In 1720, noted cosmic-classical scientist Sir Isaac Newton bought investment shares in the trading company South Sea Company making him a wealthy man. Like many notable Europeans of his time who became rich off the backs of slavery and the misery of other human beings, as Newton’s wealth grew, his investments increased in the South Sea Company, eventually losing some £20,000 – a king’s ransom for that time, which almost sent him to the poor house.
But there’s a historical lesson here!
In Britain at that time, credit was at such an exorbitant level, with the Bank of England being so overleveraged, that the economy went from BOOM to BUST in 1797 and the bank had to be bailed out. So nothing new under the sun! The same occurrence took place again in 1825 and by 1844 the (BoE) had to receive assistance for the 3rd time.
We are on a similar trajectory in 2016/2017!
Due to Britain’s vast slave, cotton, sugar and mineral wealth from its pillage of its colonial slavery hubs, by the 1860’s, English banks had invested or loaned out so much of its customers’ savings – holding only 10% to 15% of deposits in reserve resulting in a MARKET CRASH by 1866 which almost brought down the entire house of cards and like the collapse of the then Lehman Brothers of the time – the banking house Overend Gurney & Co was the catalyst behind the fall.
Yet the pundits of economic history keep getting blindsided to the cyclical nature of human folly!
By 1873, forty years after the Emancipation Proclamation, ushering in the end of the commercialization of human capital by British Quakers like William Wilberforce et al, Britain was by then the largest economy in the world. Britain’s empire status had been created from the plunder, pillage, poaching and trade in human cargo, creating wealth from misogyny, murder, malfeasance and from ethnic mayhem – wealth which today still props up these beleaguered monolithic nations.
Fast forward 143 years to 2016, Britain’s is the 6th richest nation in the world with a 2.8 trillion GDP according to World Bank figures yet with a DEBT to GDP ratio of 90.6% (Eurostat) with only France higher at 93.5%. Britain’s current DEBT is climbing to £1.7 Trillion with each person carrying a DEBT-LOAD of about £27,000 and DEBT per taxpayer of £46,000. These levels are unsustainable in the current economic climate given the DEBT-CLOCK of all major developed countries.
The conundrum we face posits the stark reality that the top 1% richest in our world received 95% of all gains in income wealth distribution which included BAIL-INS & BAIL-OUTS and with such profound levels of wealth inequality in the hands of the global ELITE – stashed away to the tune of some $52 trillion in offshore tax havens like Barbados, Bahamas, BVI, Cayman Islands, Panama and other Caribbean financial holding centres as well as other tax exile holding centers around the world, makes for a very polarized world indeed. This concretization of wealth is literally in the hands of 388 richest people in the world who own the same wealth as the poorest 50%.
In a new Oxfam report showing that the 62 richest billionaires own as much wealth as the poorer half of the world’s population but moreover, the wealth of the poorest 50% dropped by 41% between 2010 and 2015, despite an increase in the global population of 400 million in the same period; the wealth of the 62 richest individuals increased their wealth by $500 billion to $1.76 trillion.
Conspiracy or disparity?
The Oxfam report calls for urgent action to deal with this insalubrious trend showing that 1% of people own more wealth than the other 99% combined. The charity said that, in 2010, the 388 individuals dropped to 85 by 2014, then falling again by 2015 – concentrating greater wealth in fewer hands. The charity further stated that as much as 30% of the Africa’s financial wealth of its billionaires was thought to be held offshore with an estimated loss of some $14 billion in tax revenues – enough to pay for healthcare for mothers and children that could save 4 million children’s lives a year and employ enough teachers to get every African child into school.
This damning report on man’s voracious greed and wanton avarice! Yet if we look at how we got here, it is clear to see the DEVIL is truly in the details.
On 22nd October 1981, the national debt in the United States stood at $1 trillion for the first time in its history, having taken 200 years of US history to reach that staggering figure. However, despite taking 200 years to hit the $1 trillion debt ceiling, it merely took another 27 years to rack up another $9 trillion in debt – a 10-fold increase.
By the 30th September 2008, America’s debt had crossed the $10 trillion mark for the first time.
So in less than 8 years after hitting $10 trillion, the US government reported that it had hit the $19 trillion mark. So by 2008, with a major stock market crash, the banks had to be bailed out, in order to save the world markets from an Apocalypsus.
But where did all that money go?
Only God really knows – as most speculate into the coffers of Goldman Sachs et al.
America’s volatile debt levels are now estimated to reach some $30 trillion by 2026. Given that it took them just 9 years to rack up the last $10 trillion, it’s anyone’s guess how quickly this ceiling will be met.
Canada is not far behind, as it is also carrying historic amounts of debt which Justin Trudeau’s government will have to manage given their exposure. And it’s not just their credit cards and mortgages that are weighing on their wallets and the economy. Combined federal and provincial debt in Canada will top $1.3 trillion this year, according to a new Fraser Institute report. So even with a new government, Mr. Trudeau will find it increasingly difficult to stem the tide of borrowing to pay for essential services given the fragility of their bonds and sovereign wealth funds which does not paint a rosy picture for Canada’s investment & growth climate.
China is also in the dock, as the 2nd largest economy in the world finds its woes in the news of late, as the market is imploding and defaults are going through the roof – fueled by real estate and shadow banking, with property vacancy rates in Zhengzhou at an astounding 23% rate, as the government puts Chinese taxpayers on the hook.
China’s total debt has nearly quadrupled, rising to $28 trillion by mid-2014, from $7 trillion in 2007. At 282% of GDP, China’s debt as a share of GDP, while manageable, is larger than that of the United States or Germany. According to data from the US Geological Survey and China’s National Bureau of Statistics that was compiled by the Financial Times, in just 2 years (2011 and 2012), China produced more cement than the United States produced in the entire 20th century with much of the development in infrastructural projects – bridges to nowhere, zombie train stations, and infamous ghost cities resulting in rescue packages having been launched in large cities such as Wuxi, Nanning, Hangzhou, Tianjin, Tongling and Zhengzhou.
Japan is another JOKER in the house of cards given a budget for the current fiscal year that started in April 2014 totaling some 90.3 trillion Yen with a current debt clock of some $8 trillion and counting and with the current deficit financing bill allowing Japan to sell 38.3 trillion Yen in government bonds to fund the budget with the remainder being funded by taxpayer revenue, non-tax revenue and income from bonds earmarked for public works projects. Government expenditure is forecast to reach 43.9 trillion Yen by the end of September.
Assuming that the deficit financing bill does not pass, the Japanese government would have only 46.1 trillion Yen on hand resulting in the government possibly running out of money by the end of the fiscal year. Japan already has the world’s largest debt burden to GDP ratio, the size of its $5 trillion economy, and a breakdown in fiscal spending could increase skepticism that politicians are losing their grip on public finances where total government debt amounts to over 200% of the country’s entire GDP – a figure so large that the Japanese government spends 51.5% of the 43 trillion Yen ($430 billion) they collected in tax revenue just to pay the interest.
We’ve purposely left out the European Union as the fiscal analysis required for its individual nation states remains complex and to treat it as a whole makes even ECB figures appear doctored.
Finally, in the Caribbean, the situation is even more poignantly austere given that our developing economies – with precious few raw materials, dwindling exports and higher per capita living and income cost, find “a lot of the Caribbean countries are stuck in a classic debt trap,” says Carl Ross of Oppenheimer, a securities firm.“ The result has been a string of sovereign defaults in the region since 2010, in Antigua & Barbuda, Belize, Jamaica, St Kitts & Nevis as well as Grenada. Despite debt restructurings, Jamaica, St Kitts & Nevis still have government debt of more than 1.4 times of GDP. As a result, investors’ appetite for more Caribbean debt remains uncertain given that Barbados had to recently shelve an attempt to raise $500m in international markets.
A January 23rd report in the Wall Street Journal reported that investors pulled $58.7 billion of cash from “developing countries in recent years; particularly vulnerable, in investors’ eyes, were countries that regularly import more goods and services than they sell abroad,” which included Barbados and virtually the entire Caribbean.
According to Gail Hurley of University of Sheffield – she believes that by almost any measure, the Caribbean is one of the world’s most heavily indebted regions in the world. The recent 2008 financial crisis only made a difficult situation worse. Debt-to-GDP in the Caribbean stood at an average of 70.3% in 2012; for the Eastern Caribbean currency union the figure was over 91% in the same year. St. Kitts & Nevis is the most severely indebted country at almost 200% of GDP, closely followed by Jamaica at almost 150% (compare this to Greece with a debt-to-GDP ratio of 160% in 2013 and Portugal at 127%).
In Jamaica, debt service has consumed nearly 50% of total budgeted expenditures over the last 4 fiscal years, while health and education combined have amounted to only 20%. In Grenada, a similar picture can be found: in 2013, debt service consumed about 41% of government expenditures, education and health combined just 16%. At the last count, an incredible 37 debt restructuring programs across 12 Caribbean countries since 1990! That’s more than one per year. Something clearly isn’t working and governments like the Stuart Administration in Barbados needs fresh visionary fiscal thinking if they are to avoid a major devaluation in the dollar.
We have reached the fiscal CLIFF!
It is impossible to continue to restructure DEBT – overleveraging fragile economies and placing greater AUSTERITY upon the shoulders of the poorest in our world.
British PM David Cameron has been the first scalp in this evil process. Unsustainable levels of monetary madness include printing monies out of “THIN AIR” and funnelling vast amounts of pseudo-wealth into the hands of banksters, crony capitalists & evil oligarchs will only be a recipe that fast tracks us into that looming fiscal abyss.
Every government on earth seems impotent to stem the tide! The horses have bolted from the stables. There’s no coming back from this precipice. Collapse protocols will do nothing to help when the house of cards stacked with mindless JOKERS come crashing down.
May God have mercy on the starving billionaires who will one day have to stand in a soup line for a piece of stale bread the Devil kneads and a bowl of porridge brewed in the cauldron of witches.
So while some “trust in horses and others trust in chariots – let us put our trust in the name of the Lord God.” (Psalms 20:7)
As a result of the perilous state of the Barbados economy, accentuated by a recent 3 notch downgrade by Moody’s and a follow up visit in June by the IMF after a worrying Article IV Consultation in December 2013, the conversation about devaluation and management of government debt has become a topic of national interest. In the public’s interest BU highlights Walter Blackman’s perspective on the two issues which he shared on another blog.
Hants – Currently $1 Canadian = $1.84 bds. Cheffette all chicken roti cost $5.50 Canadian. So after a 5 to 1 devaluation the roti will still cost $5.50 Canadian but $60 Barbados. Please correct me if I am wrong.
Walter Blackman – Hants please allow me to reconstruct your question correctly. A Cheffette roti currently costs BDS$10.12. Since Canadian $1 = BDS$1.84, it would take Can$5.50 to purchase the roti. If the exchange rate were changed to Canadian $1 = BDS$5, the same roti that sells for BDS$10.12 would now cost only Canadian$2.02. In short, a devaluation would cause a product manufactured or produced in Barbados to become cheaper to Canadians. The economic argument usually made is that this cheaper roti price would induce Canadians to buy so much more rotis that Barbados would ultimately earn more FOREX selling the roti at $CAN 2.02 rather than at $CAN$5.50.
Election promises in a commercial/services economy lead one to wonder about the island’s development. Among other things the BLP promised to reduce the cost of living, cheaper electricity, fuel, tax relief and put money in the people pocket. Government does not own and cannot control the private sector. Are you going to take over the electric company or set up another one to make electricity cheaper? The country is terribly short of job generating industry, in tremendous debt and importing everything. Do tell the people exactly how you will reduce the cost of living and put money which you cannot print in the people pockets. You are the first political party anywhere to openly make such promises.
Development means to “expand or realize the potentials; to bring to a fuller or better state” and is both quantitative and qualitative. Growth means to increase naturally in size and is quantitative. Growth in crime, debt, foreign population and the loss or take over of profitable assets does not constitute development but amounts to progressive retrogression.
National Development incorporates the entire system. In part it involves certain socio-psychological intangibles and a culture that recognizes the limits to growth. Externally determined and financed “development” is contingent upon problematic and subjective circumstances over which we have no control. Tourism is a case in point. Where the marginal cost to government is very high the loss of real and human capital obtains. National Development is unlikely to occur even if the debt burden is substantially alleviated which is unlikely.