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WILD COOT: Halfway up the creek

Harry Russell

WILD COOT: Halfway up the creek

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Banks are between a rock and a hard place. The position of Government at present is that it does not want to cut expenditure in the Civil Service, apparently for fear that those laid off will be unable to find alternate legitimate occupation. Moreover, many would most likely be Democratic Labour Party supporters brought on over the past few years to boost votes.
General taxes are slow in coming in, so is value added taxes as day-to-day living bites hard for everybody, including the very supporters and the high-ups. Hotels are unable to attract tourists; as external borrowing fails and as investment and mainly promises are pies in the sky. Support for Government paper has dwindled except from the Central Bank. The National Insurance funding has reached past its limit. Further funding of Government will jeopardize an already challenged National Insurance Fund.
Therefore the Central Bank is trying to support Government by holding an excessive amount of paper. In fact, printed money! (Mr Minister, you want to know where the foreign exchange is going?) But this cannot go on forever and the commercial banks are not taking up the paper. Rather, the commercial banks are going for car loans, mortgages and Christmas shopping in preference to assisting entrepreneurs in whom they have little confidence. But the commercial banks are playing a dangerous game.
The Central Bank has the power to force commercial banks to hold more paper by amending the percentage of government paper as against their loans and deposits. This would also limit banks’ ability to lend. Probably, the Central Bank is reluctant to act, as it will affect people’s access to credit. Government wants to keep credit available in the hope of growth. In addition, if the banks are unable to lend for the purposes advertised, their profitability would be further diminished. And so it is a cat and mouse game – with citizens as bait.
As seen in the media, commercial banks’ profits have been reduced because of the downturn in the economy. Banks have been finding unique ways of squeezing their customers. For example, they are promoting the use of credit cards even to the extent of not offering travellers cheques – use your credit card, they say. Well, for the use of credit cards, the interest rate on unpaid balances can reach as much as 35 per cent; there are yearly renewal fees; a percentage is charged to the merchant for facilitating the purchase; heavy late payment fees are levied; over-the-limit fees are imposed, and percentage charges are made for foreign purchases.
The control of limiting the amount of foreign exchange a person can use in a year seems to have gone by the wayside, as the use of credit cards abroad is being encouraged. However, the argument holds good that if Mr X, who owns a store, can have foreign exchange to import throughout the year for sale of panties from China, why can’t an individual go abroad six times in the year and buy panties in Puerto Rico with his credit card and come back to Barbados and pay the credit card with Barbados dollars? Good for goose, good for gander!
So is the Central Bank in a dilemma? Mr C is asking where the foreign exchange has gone? Banks are hitting back with the latest policy of not issuing travellers cheques and limiting citizens of foreign exchange by marking in the passport.
In order to profit, commercial banks are imposing heavy fees for spurious services, a practice which the Central Bank said it was looking into but seems to have optic diarrhoea.
The Government’s excess spending of more than it is collecting continues. We shall see what the outcome figures will be at the end of the year if the figures are to be believed, and if we are told about the amount for VAT returns, income tax refund pending and off-balance sheet payables and liabilities.
“Wild Coot,” said a telephoning lady, “I notice that in your book, The Diary Of Randy Old Coot, your character Sammy was doing Dixie since he was five. What used to happen then? Any pictures? Are we catching at red herrings?”
• Harry Russell is a banker.