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WILD COOT: Did I say it?


Harry Russell

WILD COOT: Did I say it?

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The problem the Government has in my view is that it recognises now, I think, that rates of return are low and that you have to address this issue . . . not only if tourism is to succeed, but also if Barbados is to succeed. And I make this point because it needs to be made that economic growth, employment creation, all of those things in the final analysis comes down to two considerations, the extension of existing enterprises and the creation of new ones. – Owen Arthur on August 5, 2014 in the House of Assembly.
He is the economist. The Wild Coot is the banker. But a banker has to be aware of economic consequences to be successful. From Day 1 when our Central Bank followed the Americans and local banks by dropping the savings rate, I was warning about the move. The savings rate is the base rate in the banking system and the banking system is the thermometer of interest rates prevailing – what an investor expects to get for his/her/its money.
I spoke of negative interest rates (Ahead Of The Game, 9/6/14), (Sucking On Nipples, 28/4/14). Perhaps it (Central Bank) now realises that the misguided policies of the Government have meant that the banking community is now risk averse. (Our Poor Central Bank, 21/4/14 – “An old woman called to say, Wild Coot, didn’t you tell them all the time in several articles not to pursue such a low interest rate policy that the commercial banks were misguidedly ‘hollering for’?”. A Prodigal Son 7/4/14, The Central Bank should be ashamed to let the banks dictate – low interest rates. (A Banking Reality 3/2/14. ‘We are seeing the propensity among banks to make up for a decrease in interest earned from loans by an increase in fees.’ Ye stiff-necks!
The general public is invited to read what a respected Canadian institution says about low interest rates. (www.cdhowe.org/pdfComentary381.pdf)
While we have had our arguments. He woke me up one morning – “You Mr Banker, I am going to sue you.” My reply was, “Don’t sue me, respond”.
Short, intemperate, sharp and combative, I have found him. But there is another side to Owen Arthur. We have had pleasant, constructive engagements when we have been able to see eye to eye.
It is only in the financing of mortgages as a banker, in Barbados, that I have endorsed 100 per cent mortgages – and not in all cases. (You see a Bajan will be reluctant to lose his shelter.) Having the investor finance a percentage of the project is the norm especially in a business project. Servicing of the interest and principal requires a fine balance of the projected returns for the project to succeed. Sam Lord’s Castle is no exception. If the DLP Government had listened to the Development Bank, there would have been a different outcome to the Gems Project.
With low interest rates prevailing in the country, investors foreign and local can find other places to put their money. So that while it suits government and Central Bank to depress interest rates, the investors will find other options, and the banks will continues to assault the hapless public with inordinate fees.
Now the battle is all up hill as the Government faces a dilemma. Whether to raise interest rates now and commit to more costs for debentures and bonds but thereby open an attraction to investors or to sacrifice taxes by providing vultures with more concessions. Then a further demand for taxes will be inflicted on the population.
I beg to opine that Mr Arthur’s contribution will be lost on the relevant gentlemen.
“But Wild Coot,” says an old lady, “nobody is paying any attention to you, no matter your ‘questionable’ experience in these matters.”
Reminds me of the fable, ‘The Mountain in Childbed’. “I see an author at his table/ Saying: I am about to sing/ The war the Titans waged with Heaven’s King/ It sounds extremely promising;/ But when the book comes out, what do we find?/ Mere wind.”  
• Harry Russell is a banker.

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