WILD COOT: Scary billions
This is foolishness! Mr Minister, those people that you and the Central Bank are valiantly trying to protect will be worst off in the long (short) run. There is a reason why the limit was placed on Treasury Bills.
When there is a calamity, and it will come, the people who will suffer most will be the poor (maids, gardeners, shop attendants, road workers, and so on), whose income will not play catch-up, and the very civil servants that you do not want to lay off. When we have to devalue, their income will not be compensated by any non-commensurate increase. It’s the whole country with which you are dealing.
Let me lay it on the line as true as John 3:16. If you raise the Treasury Bills limit by $1 billion, even with the new notes, it will be spent locally and will find itself impacting negatively on our foreign exchange outflow. If it is spent on capital projects, it will still have the capacity to impact drastically on foreign reserves. This is like night following day. The limit was put there for a reason. It is like putting a gate on a jail cell. Just ask Sir Courtney. I understand your dilemma, although I did not understand what passed for logic last week on the radio.
Now that we have over-borrowed from the National Insurance Scheme, now that our banks are not buying bonds and debentures and are playing “dixie doodle”, now that we are taxed to the hilt and that taxation is bringing diminished returns, now that your Treasury is unable to function without the embarrassment of having its cheques questioned, now that you owe Tom, Dick and Harry, you turn to printing money? And our system is already over-liquid. Barbadian dollars can only be spent in Barbados. They are not like US dollars or the pound sterling that can buy oil. The move is one of desperation and members of the Senate, if they have Barbados at heart and irrespective of party allegiance, should send this piece of legislation back to the House.
The billion dollars thing is not the billion dollars to which I referred in my last article. The billion dollars that should have gone into our foreign reserves and about which I asked the Central Bank for an explanation, and over which it “dissed” me, is something else. The Central Bank should answer me and say that I am wrong, if I am, because each time that I buy a loaf of bread or a fish cake, I pay taxes and those taxes go to pay all of the officers’ salaries and support the comfortable environment in which they are habituated. So do not tell me that you are not accountable to the public of Barbados. Don’t you know how to get money from commercial banks?
According to Google and Google is not always right, “Time has proved that the Central Bank can best function in these capacities (regulate monetary policy and provide notes) by remaining independent from government fiscal policy, and therefore uninfluenced by the political concerns of any regime. The Central Bank should be completely divorced of any commercial banking interests.” Amen!
There is too much secrecy and silence from people who yesterday were in the shadows and are today’s experts on things about which they would have sworn they knew nothing hitherto fore. This includes the Wild Coot too and some prominent members of the public. Previous prime ministers who were bold enough to assume the Ministry of Finance had to beat a hasty retreat from the printing press as wise heads prevailed. But then again there were wise heads in the equation. Now it may be different.
While it may be simplistic, do the maths. One billion dollars of foreign exchange; one billion dollars new spending power; 45 cents in each dollar spent going in foreign exchange. Foreign exchange depleted by $450 million in short order, but the day saved for the Treasury. Make sense? Don’t we see signs of what happened in Cyprus, as most of our debt is in local currency? Do not say that the money will be used gradually. It is needed urgently.
Countries like Jamaica at one time had an advantage in that their foreign debt was discounted on the international market, and international buyers saw an advantage in investing in Jamaica by demanding from its Central Bank the local currency equivalent at the official rate. Not so with Barbados. In Cyprus, government raided people’s savings. I wonder what Sir Frank is saying as he was not in favour of a $90 million stimulus. This is a billion dollar stimulus. Am I alone?
• Harry Russell is a banker.