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WILD COOT: US dollar as reserve


Harry Russell

WILD COOT: US dollar as reserve

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In October 2011, I wrote two articles: Central Bank Alert and The Thin Edge Of The Wedge. I sought to show the tendency of certain countries to move from a dependence on the United States dollar as the world’s reserve currency, that is, a currency in which countries continue to settle debts and keep balances and securities. Perhaps Barbados now has so little that it does not matter.
Today I send you a provocative link, (http://pro.stansberryresearch.com/1304PWAUP2YR/PPSIPA06/?h=true) that you can access on your computer if you have half-hour to spare. The first ten minutes of the presentation can be ignored, but the rest of the opening gambit is food for thought. The last part is a sales pitch and can also be ignored.
For those without a computer, the goodly gentleman is saying that the American dollar is fast losing its position as the world’s reserve currency. We need to pay close attention to this as it reflects a similar underlying problem in Barbados. Perhaps we may be annoyed with the stand of the United States Congress in objecting, among other things, to the spending of Washington and saying that the United States debt is unsustainable.
Countries, especially China, would be watching the confusion in Washington and the possible impact on its investments. Surely China would be considering alternatives for investments and possibly a diversification of any new investments from the United States. The prospects of regularly putting $85 billion to stimulate the economy, and propping up that with the printing press, cannot be a good signal to the world.
Just as the United States government will get less and less support for its increasing debt, here in Barbados the Government is getting less and less support for bonds despite the favourable rate. (This is one way of halting our printing press, but maybe we will see Government forcing the banks by changing the law.)
The proposed debt swap on the London market is envisaged to follow the unsuccessful market foray in early October. It should be explained to the people as it involves our taxes. We buy back our existing bonds to mature in 2022 at a discount, and hope to float 12 years bonds to mature in 2025. The three years’ difference is the foreign exchange reprieve. We should be told what is the eventual dollar loss expected. Remember that we are like Millie, ‘wid de wire tie rung she waist, an de razor cut up she face’.
Instead of going to Brazil, we are in the well and trying to get out. This investment in Almond that has been splashed across the headlines is not going to mean anything now. As a matter of fact, the side issue of the sale of Almond Casuarina has negative implications for Barbados. Remember all that is legal is not necessary right. A woman might be legally yours but it is not right to beat she up. Couples’ anger can be appreciated. We are like a drowning man catching at a straw.
Almond in St Peter has cost us and will cost us dearly even though we say we are getting the funds from China. Are we sure that we know all of the details of the Sandals Gift Horse – 1 500 jobs in three to four years. Gabby should inspect the beach when the hotel is finished, to see if access is like others already in Barbados.
I would advise the Prime Minister to be careful how he “talking” about FATCA (Foreign Account Tax Compliant Act). America has the upper hand in as much as all commercial banks in Barbados need to have a correspondent relationship with banks in the United States. Remember the Patriot Act. Just as the United States made all banks institute compliance after 9/11 and banks were in pucketary.
The no-confidence motion tabled by the Opposition was met with stony silence. That is bad. Government members were quietly saying, “You tink you gine jeopardize we pension; this gine down to the wire, February 2018, unless one ’o we ded”.
Why are people annoyed with the Minister of Finance for fighting fire with fire? People say all kind of negative things about him and you expect him to turn the other cheek. That is only in the Bible, and they nail you to a cross for that. Apologize what!
• Harry Russell is a banker.

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