The following discussion with a Nate Hagen was interesting for the blogmaster and exposes a huge gap in the local space of new perspectives to solving problems and generating scenarios for consideration to use Hagen;s thought process. A shocking observation given the level of investment in education post independence.
It is obvious the social and political prattle we continue to hear – more of the same with minimal attempt to engage in needle changing interventions.
Here is the discussion the blogmaster thoroughly enjoyed compliments of BU family member Bentley.
As Ursula K. LeGuin the amazing author said “We live in capitalism. Its power seems inescapable. So did the divine right of kings. Any human power can be resisted and changed by human beings. Resistance and change often begin in art, and very often in our art, the art of words.”
While reviewing the voluminous news in the blogmaster’s inbox this morning the following podnote from Bloomberg piqued the interest. The content is not 100% relevant to Barbados, it targets US consumers. However, it reminded the blogmaster of the pressing need for local homeowners to be protected at a time COVID 19 continues to wreck havoc on homeowners.
In one of many national addresses delivered by Prime Minister Mia Mottley a few weeks ago, she advised us that Minister Ryan Straughn was assigned the task of working with the “financial sector to address the issue of retail and commercial mortgages and loans, to allow individuals to have a greater level of certainty over the next 18 to 24 months”. She went on to include utilities in the rescue effort. It is more than one month since she issued the statement and the blogmaster is not aware of a progress update. As the saying goes – while the grass is growing, the horse is starving.
We are also reminded that the Barbados Association of Retired Persons (BARP) in 2013 promised then that reverse mortgages were to have been available ‘as early as this year’. A search of several websites of financial entities while blogging on the issue this morning came up empty.
The prevailing economic circumstances triggered by the rampaging pandemic has created an urgent need to expand the definition by government of who are vulnerable groups. There is a large so-called middleclass unable to meet monthly mortgage payments who must be protected. So-called because this group is a paycheck or two away from returning to the family house to beg for a lodging. In the current market not only do they stand the risk of losing homes but the equity which represents years of labour as they struggled to achieve the dream of owning a piece of the rock.
The blogmaster is always the first to acknowledge that “uneasy upon the head who wears the crown”. We are living in unprecedented times and when the politician comes to mind, we are reminded of Joseph Conrad’s “words, as is well known, are the great foes of reality”. Barbadians must continue to believe that our leaders charged with the job of navigating the global tempest that currently assails small and large nations – small island developing states being more vulnerable – will be successful in the undertaking of avoiding the rocks, reefs and other obstacles of the time.
Recently I received an email from a desperate retail investor raising serious questions about her investment in a well-known Caribbean fund manager. I know the feeling. The world is still trapped in an acute financial crisis which experts are only now beginning to understand and which is concentrating minds when it comes to where to invest your hard-earned money. One widely shared view, even by leading central bankers, is that the 2008/9 crisis was the worst since the 1930s depression. But there is a growing body of work that suggests that the 1980s recession was far worse as far as businesses were concerned than the 2008/9 crisis. It is a thesis that Professor Chris Higson and his colleagues at the London Business School are doing some empirical work on, and colleagues in the US are doing similar work and their conclusions will help us to see the bigger picture. The important question on the micro level is: how do companies respond to financial crises? What happens to their balance sheets and to profitability? Modern portfolio theory makes a number of assumptions, one of which is that investors are informed; that they are rational; and that they know what they want. We know that customers, including investors, quite often do not know much about the enterprises that they invest in; that they are not rational, often investing at the top of a bull market and sell at the bottom of a bear market. Few appreciate that equity investments are for the long haul, a minimum of five years. Obviously, this is not a Quick MBA in corporate finance, but just to give an idea of what is involved in retail investing and some precautionary steps to take.
Before looking at the firm you intend to invest in, have a deep look at the sector and how rival firms are performing. What are the long-term prospects? Where does the firm fit in the wider landscape? Is it growing, if so, is it organic or growth by acquisitions? Few firms separate organic growth from acquisitions in their financial reports. Then there is the inflation illusion: a firm that claims to be growing through sales must adjust for inflation, once this is done, quite often real sales growth is negative. In fact, even in good years, few firms have real growth. This flows in to what Joseph Schumpeter called ‘creative destruction’ – the death and birth of new firms.
A strange thing happened to me on Monday September 19th 2011. I went to deposit some US cashiers cheques (bank drafts I received from family last week ) to my savings account with a local bank that has been operating in Barbados for some years. I proceeded to fill out the deposit slip in front of the teller and told her that I was depositing two US bank drafts.
I know that they normally take 30 days to clear so that was not a problem and it was my savings account after all. The teller took my drafts and went to speak to another employee who sat behind a desk. She came back and told me that I cannot deposit these drafts to my account. So I asked her how else can I deposit them? She told me that it will take 30 days for them to clear and I must leave the drafts with them and when they clear they would put it on my account. I asked her how were they going to prove that I gave them these bank drafts? I also stated that I needed an official receipt on their letterhead that I have left my drafts in their possession. The teller then pulled out a receipt book that was bought at a Bridgetown stationery and showed me. I asked in my best scornful voice if that was their official receipt? She replied with a yes and that they would put their stamp on it. I asked if I lost my receipt or if they lost the book, how would I prove that I gave them these bank drafts. She said that, that was a new procedure in the bank. I told them that was a backward and back street procedure and I have never experienced this in all my life banking in Barbados. I took my drafts and left.
A migrant worker picks up a bottle of water during a break from his work near a construction site at Beijing’s Central Business District Monday, Aug. 16, 2010. (AP Photo/Alexander F. Yuan)
While many people on here on BU blog on much trivia and whilst many citizens in Barbados itself talk and engage in much foolishness and crap, and are systematically being sidetracked by many Eurocentric Westernized into doing so, we in the PDC, and we suppose some others too in Barbados, are presently learning that the Chinese have just overtaken the Japanese as the world’s second biggest economy in terms of GDP, and are on course, according to a few talking heads in this western hemisphere, to overtake the Americans – who are presently the world’s biggest economy – in the next 3 0r so decades ( See Link)
However, the fact that the Chinese were at some points in the past bound to overtake the Japanese eventually, would have been seen from the time of their (the Chinese’s) implementation of particular state capitalist industrialist ideologies, principles and programs during the time in which such statist trends and events were categorized under the rubric as The Great Leap Forward – in the post World War II era under the Late Great Mao Zedong (1893 – 1976); from the time they would have implemented market capitalist imperialist industrialist ideologies, principles and programs that fell within the embrace of the introduction of greater Western market style reforms to a Chinese economy that hitherto was centrally planned, in 1978 under the paramount leadership of Deng Xiaoping (1904 – 1997) – and which were thus seen to be centered around the building on the positives that had been ushered in in the period of the Great Leap Forward – which though too had its own fundamental problems; and from the time they would have executed more of the same capitalist freemarket ideologies, principles and programs that would have inevitably led to profound increases in the strong holds that both Chinese and Western Capitalism have had on the Chinese economy, since the emergence of Jiang Zemin ( 1926 – ) as the paramount leader of China in the aftermath of the Tiananmen Square protests crackdown in 1989, and right up to this juncture with the present paramount Chinese leader Hu Jintao (1942 –).
The popular online newspaper Barbados Todayreported (20.07.2010) the surprising loss incurred by the Central Bank of Barbados (CBB) in the amount of 9.4 million dollars. It is unusual for a Central Bank to report a financial loss in Barbados. Barbados Today quoted President of the Barbados Economic Society Dr. Winston Moore, “The Central Bank of Barbados reporting a loss is a rare occurrence in Barbados. The Central Bank is commonly referred to as the government’s banker, that is, it manages the assets of the central government. The loss reported by the bank implies that the institution was not able to earn enough interest revenue, fees and commissions etc to cover its operating expenses. There are a number of implications…” In response Governor Delisle Worrell referred to 2009 as an “especially challenging” year.
The Central Bank of Barbados has always enjoyed a good reputation at home and abroad. All governments and all politicians have unhesitatingly quoted Central Bank statistics to support arguments. At the start of the global recession the Barbados banking system received a high ranking from the global financial community. As the regulatory body for banks in Barbados the Central Bank would have shared in the praise. The continuing financial stability of Barbados will depend on the good work of our Central Bankers.
Those following the current global financial crisis, particularly events unravelling in Europe (EU) would have taken note of the call by French President Nicolas Sarkozy and German Chancellor Angela Merkel last week to ban ‘short selling; and ‘naked credit-default swaps’ on sovereign bonds.
Credit-default swaps are derivatives that pay the buyer face value if a borrower — a country or a company — defaults. In exchange, the swap seller gets the underlying securities or the cash equivalent. Traders in naked credit-default swaps buy insurance on bonds they don’t own. Naked short selling involves selling a security without ever being in possession of it.
On the back of this news the market was further disheartened by the news release that owning Europe’s Corporate Bonds has become more risky. On the domestic front the negative economic landscape in Europe is a foreboding prospect given its importance as a tourist market to the Caribbean. The latest Caribbean Tourism Report 2010 mentions a 6.5% and 1% growth in the USA and Canada markets but a 4.3% decline when describing tourist arrivals originating in Europe.
Is it reasonable for world citizens to have expected that many of the causal factors which precipitated the economic crisis in 2008; when the world witnessed the demise of Lehman Brothers and Merrill Lynch two of the largest Wall Streetinvestment banks should have been plugged by now? The biggest irony exposed by the financial mess is that we live in a world which now places value-added on the need for interconnectivity, this has facilitated the contagion effect. Simply defined, we live in a world where high salaried suits sitting in offices high above the ground can make decisions which can negatively impact our future and that of our children in seconds. They engage in speculative behaviours by accessing ‘synthetic investments’ which commonsense dictates should have been banned or severely curtailed soon after the collapse on Wall Street in 2008.
When it is dark enough, you can see the stars. – Persian proverb
Timothy Geithner (Obama’s economic “spin-merchant”) was in London last week to meet with George Osbourne – the new (“green-around the ears” Chancellor of the Exchequer) and as I looked at these two young whippersnappers, I realized why the current economic climate lacks vision, forethought and real men of true wisdom.
At the same time, I saw this age-old convoluted paradigm, all too reminiscent of the positional asphyxiation for which rich and powerful families and individuals find themselves is due to wanton greed and avarice – manipulating the destiny of men by wrecking markets to induce their agenda upon the world.
Theorists like CRUSOE* et al are firm in their convictions arguing that since the engineered market crash of 1929* caused “The Great Depression” – modern capitalism has seen a combination of crashes and crunches spanning a period of more than 7 decades – with a cumulative history which covers many hundreds of years dating as far as the 1700’s.
An even earlier part of that history reminds us of the Florentine Medici family (cf. Machiavelli) who were the catalysts behind putting 3 Popes – Leo X; Clement VII in the 16th century and later Leo XI who was elected Pope in April 1605 (and died within the month) into the Vatican (a city within a city – a nefarious mausoleum of cryptic artefacts, stolen priceless objects and stolen African “GOLD” reserves held by Jewish conspirators which could put the world economy in the ‘green’).
The power of the Popes over the ages have had a multifarious, yet malevolent influence on politics, art and architecture – this has been in part due their pre-eminence in European banking, in cahoots with the Medici Bank which was the most powerful European institution of its time, resulting in the Medici’s for a time being the wealthiest family in Europe (that is until the emergence of the Jewish Rothschild’s dynasty).
Theories like ideology are “rooted in the material conditions of life, but despite what we are led to believe or want to believe there is no unilateral or universal relationship between the…the relations of production and the political and legal superstructure. The structure of society exerts a determinative effect upon the ideas which assume prominence.
Economics like self-interest is not morally neutral. Economic estimates premised on the broad generalizations contained in “rational behaviour” simply cannot account for the plethora of ambiguities inherent in the human species. For this reason estimates could result in over-optimistic conclusions and misguided policies. Some people suggest business tax-cuts, concessions and cuts in personal income tax are needed to resuscitate the economy.
Proponents of tax-cuts, essentially those favouring the supply side economics approach, view them as positive and necessary. Tax-cuts they maintain enable people and business to put in more effort, work harder, save and invest more at home. As the economy grows there will be more income and profits to tax. This would allow government to recoup revenue lost through the initial tax-cuts and facilitate deficit reduction. In addition it would induce people to change their behaviour in ways appropriate and beneficial to the society. But will tax-cuts and concessions lead to economic growth and employment?
How exactly does one sell millions of shares ‘erroneously’? Particularly in such a company as P&G? And the professional commenters say that some of the other drops ‘could be’ for the same reason? Do the trading systems not have checks and balances, even when making trades? Of course they do.
Lol. What a load of bollocks.
There are some who are trying to hoodwink the public when the market dips i.e. trying to boost the market, artificially. As said before, the markets do NOT reflect true net asset values nor future earning streams of companies, the current prices are artificial. This view is particularly bolstered by references such as above, which identify the coming oil supply issue and thus pricing and product costs, inflation, standard of living etc.
One big smoke and mirrors to hide the train coming at us. Why have we not heard about the problems in the trading systems that would allow such ‘erroneous trades’ before, after all these years of trading?
The BU family has discussed debt in earlier blogs, BU family Green Monkey member posted the video Money as Debt which presents the dark side about how debt is created and managed in the banking system. Another family member Looking Glass recently sent us the link to the video posted. What BU found interesting in the video was the reference to credit card debt being a key reason why many homeowners had to refinance mortgages. The refinancing placed them in a financially vulnerable position which primed many for the sub-prime debacle which was to follow.
The issue of debt is also relevant at this time of the year because Barbadians will join many around the world by jockeying for ways to increase their personal debt; all of this is in keeping with the spirit of the season!
The video is 55 minutes in duration and BU highly recommend it.
Khalil Gibran’s famous quote – “Money is like love; it kills slowly and painfully the one who withholds it, and enlivens the other who turns it on his fellow man” – pretty much sums up the two paradigms of man’s loci in regards to the proper or base use of what is a “medium of exchange”, an inanimate, non-sentient papyrus object whose sole purpose is a medium of exchange.
The question of what money is arises only when money ceases to function properly. In economic terms (properly understood), the answer to the question – what is money? – consists of four words: “Direct and Indirect Exchange.
The other question which arises is – can money be evil? This is where we enter the vale of profound morality and the praxis we place on how money affects those who have as against those who have not.
This issue is a complex paradigm to navigate as the swirling schools of opinion on the issue is as deep as they are wide. The epistemological arguments hinge on the age-old divisions of labor and the moral-philosophical theory of Biblical teachings coupled with the advancing forms of secular, political, ideologies which advocated a morality of rational egoism, free market liberalism and a new stratospheric level of greed, ambition and avarice in a world inebriated by “the love of money”.
The recent announcement to postpone the payment of salaries to civil servants on the eve of Christmas has to be viewed as insensitive by the government. Bear in mind there is precedent for paying salaries early at Christmas time. There is the recession which has impacted Barbados and by paying salaries early could have served to mitigate current hardship as well as pump the moral in the civil service. The decision to postpone the payment of salaries seems to feed the view the government is managing a ‘problem’. Even before the decision to delay salaries BU sources had confirmed that the Inland Revenue has been holding refunds and several government agencies have had overdue payables to the frustration of the civil servants responsible.
In recent months several individuals and companies have been complaining the Nation newspaper is being delivered late or in some case not at all. A BU source has confirmed the Nation newspaper printing press has been underperforming and in need of serious repair or replacement. We have a case above where the government may not be levelling with the people; so too the Nation Publishing company. Let us not forget the sufferation of the callers to VOB talk shows who have had to tolerate technical difficulties for over two years now. How do we measure best again? It seems we now live in times where the public aka consumer is being treated like jobby. We pay for a service and now routinely get mediocrity in return.
The question was asked by BU family member on an earlier blog, whether the Canadian banking system is as sound as the swirling perception. The strength of the Canadian banking system is of great interest to Barbadians given the heavy concentration of Canadian banks in our market.
Statistics Canada announced this week that the debt-to-income ratio of Canadians has hit a record third quarter high. Canadians have been spending mainly on houses and cars. Statistics Canada was piercing in its analysis by citing household debt as as the biggest risk to Canada’s financial system. The proof of the pudding will come when the interest rate starts to bend upwards. How will the debt burdened Canadian respond?
Comment on the crisis (global financial crisis) has focussed mostly on the US despite this being a global event (and, arguably, it was a French bank that truly kicked things off). You follow that trend. Yet in Barbados, most of the commercial lending system is sourced in Canada. Much play was made locally of a World Economic Forum survey (opinion-based) in October 2008 that ranked Canada first for the ‘soundness’ of its banks.
It makes sense to critical examine that view. That was originally why I was looking at the BIS data referred to above – for the large bulk of the private lending in Barbados is from Canadian banks. Unfortunately, Dennis scuppered the line of thought somewhat with that ‘co-mingling’ point.
Nonetheless, it is curious that the big 5 Canadian banks were all levered as high as their top 10 US counterparts in 2008 (and are much more so today) and yet are, allegedly, so sound. When I say ‘levered’, I mean how much tangible equity (the owners’ money if you like) supports tangible assets. The US banks today are levered at around 20:1 meaning $1 of owners’ money compared to $20 of tangible assets. (down from 35:1 last year). The Canadians are at about 30:1 (vs 37:1 last year).