BACK IN MAY 2014, the Wild Coot wrote in an article headlined Doing What Cyprus Did: “All that glitters is not gold. So said some rah rah body a long time ago. What the Cyprus government did was to capture part of the vast savings of its people in order to repay debts that the country (substitute the people) owed. By raising the ceiling of treasury bills, bonds, debentures, tax certificates, etc. the government (of Barbados) is surreptitiously attacking the 8.6 billion-odd dollars that the citizens have in the various banks. But Wild Coot, how?”
How? I also said in an article titled Apotropaic Balls: “Bajans should use their copious savings to support the Central Bank. This would mean less money at the disposal of the banks. People have the money in the banks anyway, earning at the most four per cent, even two per cent, and they intend to keep it there following their risk-averse mentality. Why not help the country? I do not agree with how the Government is using the money, but it could save us from going abroad and begging unsuccessfully.”
I further advised in reference to Cyprus in an article captioned Balls Of Fire: “Now the whole world has a flagship. You know how Bajans like to copy. Most times they copy wrong except when our prime minister made one of his most admired statements. ‘There shall be no same-sex marriage in Barbados.’ However, if we were to copy Cyprus, that would be like caviar to Barbados. With six (eight) billion dollars in deposits, the debt, local and foreign, would be a walk in the park. This measure is too enticing for other countries anxious for a solution to their debt problems, not to sit up and take notice. Perhaps, the argument that the debt was incurred on behalf of the people is valid. Also valid is to make them shoulder the burden.”
Well, this is exactly what our Central Bank has done. Only the application of the money is different. What has been done with the millions of dollars raised in the 5.5 per cent and 7.5 per cent bonds? Has that money reduced our debt or has it only breathed life into our struggling Government? The boast of the Central Bank as to the effectiveness of the bond haul seems to be hollow as all that it has done is to partly resolve a current financial local crisis.
In those articles I said: “Instead of directly depriving the citizenry by grabbing the savings in the banks, savings that do not belong to the Government, we increase the value added tax that everybody has to pay on food, electricity, gas, telephone, health services, legal charges, etc. Like a cow in the slaughterhouse being hit with an electrical charge instead of cutting its throat. This is more humane.” The Government has done both, taxes and bonds.
What has happened is that the Central Bank has achieved the following things. It has removed the money from the banks that do not want it for risk-lending to entrepreneurs, and placed it in the hands of Government. It has freed up the commercial banks of paying interest and allowed them more profit and a greater spread (at one time there was the threat of banks leaving), and it has put the country in a weaker position for revival as the banks can now make enough profit without taking the chance on entrepreneurs. You see the effort now by the Central Bank to issue guarantees? That is doomed to failure. Banks are “perlixing” now. One bank requires a minimum savings balance of $5 000 or else there is a penalty of $10 per month for savings. Good gracious! And the Central Bank is howling about the effectiveness of its bonds strategy.
Once upon a time when we had Sir Courtney ’bout here, he used to sent his minions to visit the commercial banks. May I ask the Central Bank when was the last time it took a stroll into a commercial bank? Or is it too embarrassed as its own balance sheet cannot stand the light of day?
You know, the world is changing. For example, we once had a full workforce planting, weeding, cutting and loading cane. Now a big heavy piece of machinery with one man can do the job of 100 people. This is replicated throughout the industries. So too is the distribution of wealth. The one man who has the big piece of machinery, or the iphone, is creaming the profits and it is left to a Government to ensure that the Wild Coot can survive.
• Harry Russell is a banker. Email quijote70@gmail.com
