Friday, December 31, 2010

Oil is rising again...

Same ol'e story... See Business Week article.

Well, it seems as if the battle we had for 2009 and 2010- the battle on derivatives trading and futures, especially in the commodities market- will be the battle again for 2011.

Don't look for the GOP to make any substantial headway in this issue. They are more in line with Wall St. than the Democrats. Even though a few key staff from the Obama administration have gone on to work for Wall St. and he also has plucked a few Wall St. folks to work for his administration.

Will we see $5.00 a gallon oil by 2012? Yes, if the trend continues and nothing is done about the futures market for oil. What does that mean for the rest of the world? Well, for China is means higher costs for production, which means higher cost for the inexpensively made goods many people import from China.

For the Caribbean, it means another year of skyrocketing prices in almost everything. Damaging the prospects of strong growth. The Bahamas has been well over $4.00 for a gallon of gasoline. Everywhere, except for Trinidad, has seen oil prices at ghastly levels. In fact, Trinidad produces oil and they have kept their oil per gallon price to under $1.00. Can you imagine that? Gas for a buck US?

It isn't fair... but, blame the US congress for not acting more strongly on separating the oil market from the dollar. And, now, also blame Ben Bernanke for mulling- in open forum- the possibility of a $600 billion dollar injection of cash into the American economy- which no one has made the attempt to ensure that the flow of this injection, goes only to Main St. and not at all Wall St.

This is the life.

Saturday, December 25, 2010

Merry Christmas folks..

From the staff- mainly me- from Global View Today, I wish to send out a very Merry Christmas and a Happy New Year!

Have a blast!



Wednesday, December 15, 2010

All hopeful for a better 2011!

As it turned out, 2010 certainly is a year most people could afford to forget, if the traumatic effects of economic uncertainty weren't so fresh. I haven't given up on predictions, but just that predictions are predicated on what the nature of the policy prescriptions allow. As with the fluid nature of the tender times in economic history, projections, can be changed or affected within day's notice. With that, growth forecasts perhaps need to adjust to what are the drivers and causes for fear or misconception on the economy currently and about what could, should, is and has been allowed to happen on a month on month basis!

Regionally, there hasn't been any Caribbean country, aside from Trinidad and Tobago, that had anything to be gleeful about- T&T has natural resources, mainly oil, so, the cost of production of local goods as well as the export of oil and oil bi-products to supplement their economic model, served them well. For everyone else- political issues aside- it has been dismal.

Latin America, as with the African continent, began and is going through the structural adjustments that many have wanted for at least 50 plus years! Hence, their seeming stability, through the worst of it, should be of no surprise. They have embraced freer markets, began curbing the tendencies of an over saturating the public sector, as well as received Chinese investment, to the tune of billions. Also, moving forward in a most progressive manner, they have taken a diagnostic approach to their development and have, as policy, employed the techniques- while still under review- of diagnostic methodology like the Human Development Index and Human Opportunity Index, as a staple of economic adjustment and performance barometers.

Switching gears towards our neighbor to the North: America is still in the doldrums. It's so seriously difficult to address that commentators have stopped talking about the economic numbers and simply reverted to the old method of tax policy to affect some type of change in the circumstance. In addition to the fact that 2010 was an election year, the economy took a back seat to the Tea Party, posing as paragons of economic virtue. The "comprehensive" economic stimulus was ineffective as well as with the tax policy as a component of it, as employment still hovers around 10 percent. While much was done in the past two years president Obama was in office structurally, it appears as if not enough was done to stimulate American productivity and boost exports in addition to unlocking consumer loans from banks.

Additionally, the USA is now mulling over what analysts would coin "American Stimulus 2!" To be fair: it's American Stimulus 3! The Troubled Asset Relief Program (TARP) of 2008- while it was coined as a bailout for financial firms and the toxic assets they were exposed to- was a stimulus plan in itself, in that it attempted to stimulate banks to lend by removing the risk to exposure to the investment products that were creating higher risk portfolios, which in effect were preventing them from lending. The second plan was the American Reinvestment plan of 2009, which did more to add value to an uncertain American future on the global economy, rather than it providing short term strengthening domestically.

Europe isn't any better. The Euro-zone is in a particular and severe crisis. The problems with Portugal, Ireland, Greece and Spain (PIGS), has put the idea of the largest currency union at its harshest testing point. The risk of a disintegrating Euro-zone through the debt contagion of weak performing Euro-zone economies has everyone concerned. While inflation has been stable, the euro isn't- the Euro, being the glue that holds the zone not only together in strength, but together in anguish.

The European Central Bank (ECB) can do nothing about the risk of a devaluing euro as a result, if countries continue to fudge their financial statistics and report, falsely, on the dynamism of their economies, in addition to them having the lack of political fortitude to revalue their economies to what it should be- i.e., weak performing, Euro-zone economies, not on the scale of France and Germany, especially as it relates to agriculture, manufacturing and financial markets. Furthermore, the markets have dealt, severely, with the PIGS as sovereign bond yields have risen as well as the market for homes has collapsed with the financial sector, frozen in fear.

Additionally, the ECB has done very little about inflation, even though it has remained stable. The issue with inflation is that employment is still very soft. So, glittering reports on a stable inflation rate in the Euro-zone may be misdiagnosed, due to a lack of appreciation on the real reason behind inflation drivers in Europe.

Inflation in Europe is tied directly to production and production is tied directly to employment. Employment is tied to consumer demand and consumer demand, is soft because of uncertainty in the labor market as the labor market as with the United States is affected by higher productivity levels in Asia- China and South Korea, respectively. When understanding that the unemployment rate through Europe is over 10 percent, while bond yields have plummeted- which signifies a state financing issue that was caused by weakness in the general economy- the issue shouldn't be low inflation, but current deflation with the risk of hyper inflation when the economy picks up again, if the drivers for current inflation statistics remain misdiagnosed.

China looks stronger than normal over any other Asian countries. The Renminbi has been revalued, almost simultaneously as the Chinese stimulus package began to turn consumer spending inward, as opposed to their export focused economic model This not only giving the Chinese consumer more purchasing power, but makes investment into China more expensive at value. Additionally, the Chinese government has taken steps towards cooling their overheated real estate market, which was grossly inflated due to speculation- the revaluing of the Renminbi is a part measure as it would limit investments in all areas and not just real estate, in addition to an imposition of a real estate tax as well as imposing a higher down payment requirements for persons wishing to purchase a second home.

As for the Bahamas: we are in a cast to ourselves. The market for tourists in the US is still soft, while tourist arrivals are up in The Bahamas from last year this period, but not back to their previous levels.

Foreign Direct Investment related projects are getting a fresher look. Baha Mar, as well as with the fourth phase of the Atlantis/Kerzner development, should be enough to keep many Bahamians busy in 2011.

There should be greater assurances that these developments impact on a greater, more meaningful scale. One can only wait to see how the dynamics of the socio-economic agenda push matters moving forward. Certainly there should be a close eye on all and sundry, as money begins to be spent on these developments.

With all things of note, I wish for everyone, from family, to friends, to my loyal readers and the editors of the news outlets that keep my commentary in the public square for all to share, a very Merry Christmas and a Prosperous New Year!

Sunday, December 12, 2010

Raising the price on the poor...

Cool article from the McKinsey Quarterly about the success in Bangladesh with Grameenphone and their ability, through commercially driven methods, of delivering more socio-economic benefits to the poor rather than government sponsored programs for the telecommunications market.

See article.

The only issue is that this is only in terms of undeveloped markets in telecommunications. Also, undeveloped markets where services is not only sub-optimal, but also unavailable to many people, let's say, at least 1/4th of the population, enough for initial private investment to gain scale from new consumers.

Other than that, it was great insight into some of the complexities of private led vs. govt. sponsored programs.

Monday, November 29, 2010

Diagnosis before presumption!

Development economics has evolved over the last 30 years. The "new school" has been shifting from the free market, or, market sensitive ideology of economic development and more towards the development of individuals from a structural standpoint. In this vein, the view is that markets don't make people- people make the markets and hence a focus on people, is vital.

The reason why economists are now taking the development agenda to another height, is because of the obvious fact that unfettered free markets, without social responsibility or human development components built in with them, leads to instability if safety measures aren't put in place to protect market participants from fraud, malfeasance, external shock to the system or the loss of confidence in the market and its actors, which will result in it inhibiting trade and commerce- just as we have seen the system collapse under the previous global crisis. All of which has cost taxpayers trillions of dollars world wide, reduced productivity and retarded civilization.

Under any circumstance, the market can and will be controlled, massaged or shocked by an actor or actors, which in a sense is the logical first effect out of any earthly circumstance. This, in the most direct sense, means that actors, from all sides, whether they are private developers, consumers, the government or welfare recipient, all play a part in the system and a system which is shaped by their attitude and behavior.

However, structural developmental approaches to the economy isn't without its critics. Some say that market forces rule and should not be ignored. Yet still, the argument that markets rule, emanates from proponents that, ironically, do more to make the market move- especially when money talks. Some also would argue that people are better off to themselves- if this would be the case, we would not need laws, rules, regulations in the market or in society. So, the arguments against incorporating a more people approach, are left wanting at their fundamental core- who else would make changes, keep order and ensure things go smoothly, if not people.

To be quite candid: there is not, never was and never will be a free market in the truest sense. Subsequently, there is not and never will be effects caused by trickle down in the truest sense, without intervention. The market is nothing without the actors. And, with regard to trickle down economic theory- which many authors have unconvincingly, to this author, argued their theoretical understandings on why they adhere to the trickle down effect- it never is trickle down. In fact, the trickle down, happens after an actor, or, actors, have loosened the pump to allow water to flow- to be as poetic as I can possibly be.

To go even further with regard to trickle down theory: actors not only have to first loosen the pump for trickle down to even begin to, in fact, "trickle down", but also, persons, to whom this trickle down is presumed to be trickling, must be in a position to catch the water that is supposed to be trickling. What use is it to give a man a hammer, if he knows not to use it? What good is it to give a woman an apron, if she knows not where the apron is to be used? What good is it to open a door, if the person knows only to enter in through the window? What good is it to assume or presume that the allocation of any benefit or entitlement, would go towards the best suited purpose? Under which theory, will there be a setting, or, set, of indicators and variables, where it is decided that this is and will be the best fit for one and all? There isn't any. Just ill fitting presumptions, assumptions, catch phrases, idioms and "well established facts" to bolster misplaced conventional wisdom in an evolving world.

This fundamental underpinning of market economics and as a result, development economics, is the challenge of the new century for developing nations and the under served in emerging markets and developed markets- i.e., the overall challenge of having all parties, from all sides of the spectrum, understand their role in the scheme of things from the position that they make the market and not the other way around.

To segue: Keynes and his work on demand side economics, after long hours of intensive analysis, made his position clear when his idea by blatantly speaking to, at least, government led intervention in the economy to spur growth.

The mixture of private sector innovation, government intervention, support, the level of market closure, investment incentives or socio-economic programming and policy making, is where the test of a market system and its resilience becomes a matter of ideological importance. In addition, what information and salient idea should take form, at what time, when, where and how it will be administered under it's best fitting relative purpose- after variables have been delineated for a particular outcome- should also be of critical importance. To this extent, diagnosing the nature of the problem as well as prescribing solutions that affect a desired, positive, outcome, in addition to it not doing damage to the existing structural successes, is also vitally important.

Being diagnostic rather than presumptive should be the first thought of approach when dealing with structural development matters. But, how do you ask a policy maker to diagnose a problem where he feels that it is not his position to be in the diagnostics business? How do you impress that the "well established facts" are irrelevant to what folks are dealing with today, during an economic downturn, or, worse, when things are "good"- especially under the pretense of market forces led laissez faire?

It comes down to the mode, thinking and ability of the actors in the system to always have in mind ways of removing binding constraints from the system, increasing the market share for a greater amount of persons entering the marketplace as active participants and taking all parties involved to make the right determinations on what fits best for persons to have an opportunity at a larger piece of the pie.

Technical expertise is valuable at all times. Knowing that you have to diagnose the problems, knowing what tools to use out of your diagnostic kit and then having the will and wherewithal to sustain continual diagnostics and act upon all first best information, is no easy task- probably why the presumptuous of us prefer to just assume things will happen as it "always" has. However, putting ourselves in the right frame of mind to have the confidence to attempt it, is critical even at this juncture where thought on what's right and presumptions on conventional wisdom seems to be popular again.

Sunday, November 28, 2010

Ireland gets Financial Aid...

Well, the stabilisation of the weaker EU countries has begun. See here an article from the Business Week online Magazine on how Ireland has just now won a financial aid package from the EU and IMF to the tune of 85 billion Euro's-- just over 113 billion USD. Business Week article

The fear is the contagion of the financial crisis. As you well know, contagion risk after the first financial crisis, brought on by the USA, was not seen as quickly and hence, the current global recession was deeper and more severe.

Ireland is no where near the level of the USA in terms of financial clout, or interconnectivity throughout the world, but it may seep slowly in through to other, relatively, smaller EU countries and emerging markets that dabbled in Irish markets- particularly with sovereign bonds.

Ireland was not on the same stabilisation package as Britain was during the onset of the US led financial crisis. So, help reaching Ireland was late and was not an option at the time- as the thought was that their impact and contagion would be minimal.

However, fears over spread of contagion is evident, by at least IMF and EU leaders.

Tuesday, November 16, 2010

Cholera epidemic in Haiti..

Over 10,000 people are suspected to have Cholera in Haiti. This is a serious concern. The news broke a while ago, but it is worth repeating. As you know, the Bahamas has more than their fair share of Haitian immigrants that come to the Bahamas-- an epidemic in Haiti, may mean a spread of the disease in the Bahamas.

At the very least, we should all be concerned about Haiti, overall. As you would be well aware, the earthquake last year in Haiti, still has the country on it's knees. Development Aid is still hard to get to the areas that need it the most. And, with a major disease outbreak, things may get more difficult and hard to manage. See attached a video from the UN on the seriousness of the outbreak.

Wednesday, October 13, 2010

IMF/World Bank Group has a new Chairman!

Prime Minister Hubert A. Ingraham of The Commonwealth of The Bahamas, was recently elected to the post of Chairman of the IMF/World Bank Board of Governors this October. Congratulations are in order! All Bahamians and Caribbean people should hail this achievement in our hemisphere's history. His supporters should be as pleased as punch-- as well they should be. His detractors are probably saying to themselves; "Dear God!". Then again, some people don't care either way, because they want to know: what does it have to do with me? They all have their reasons to feel what they feel.

However, stepping around all of that; I have to say that this appointment is an important step for the Caribbean, as it would put attention on small developing state matters, at a most critical time in global economic development.

The question must be asked; what authority will prime minister Ingraham have that would cause there to be a change in the focus of the group? Firstly, he will have the authority to set the agenda of the board of directors on what should be discussed at general meetings, as well as, secondly, liaising between leading finance officials as to what should be prioritized on the agenda.

It is not exactly a position of total authority. Neither is it a position of sinecure, either. But, it is a chance for small states to have a voice placed in a position that clearly state what the situation is.

As we know, current, larger country issues, are allot different than developing country issues, and totally different than micro-state issues. This is where affecting global economic change becomes important.

The G-8 and G-20 countries have worked out some of their issues through the IMF already during this crisis-- an important move back in 2008 was the enlargement the SDR fund to facilitate a large stabilization fund for the G-20. By doing this, the fund attempted to stabilize larger countries and as a result, smaller states would also benefit.

Some argue that this method is outdated, because of the increasing effects of globalization and the shift in capital to large developing countries from developed countries, in addition to the misdirected use of capital inflows, which has placed smaller states down the line in the economic production order. This issue is particularly magnified when capital inflows are not infused into the main economy of smaller states, but rather used through offshore transfer points or in specialized investment vehicles that are headed for larger consumer markets.

A second question to be asked is; does Mr. Ingraham have the tools to address these issues, as well as other plaguing financial issues that small developing states have? No doubt he has the experience, serving his third non consecutive term as prime minister of The Bahamas, in addition to having international respectability-- or else he wouldn't have been in the discussion, let alone be selected as the Chairman of such a prestigious grouping. However, no one person has all of the answers. This is where we, as people who have a vested interest in a brighter tomorrow, have a duty to give input into these issues in a critical, broad based and impartial manner.

For instance, there needs to be a stabilization fund for external supply shocks, particularly with regard to oil and circumstances that affect food prices. Small developing states are, primarily, price takers in the market for oil and processed food. This means that they are victims of imported inflation, as well as victims of external supply shock caused by foreign externalities. Imports affect the level of foreign reserves and foreign reserves, are needed in order to purchase goods on the international market because countries look for a stable, recognized currency in which smaller countries can purchase goods with.

There is also a need for a separate, foreign reserve stabilization fund in the Caribbean. The process we have now, is that countries access the IMF stabilization funds on request-- some of the time after a lengthy process. However, the administrative cost and timeliness of accessing the funds, could be much improved if a standard requirement for a grouping of Caribbean countries is set, with flexible parameters on when this fund can be accessed-- this would also eliminate the problems that arise as a result the emergency nature of accessing the funds, and allow countries to take pre-emptive strikes when forecasts indicate that their foreign reserves may be impacted negatively.

Another major concern is the lack of Central Bank supervision and coordination in the region. Not that there is proper Central Banking coordination in any other region, but there is an opportunity to find a shared commitment on a coordinated, Central Bank policy. For one reason, small developing states are not like large states, because small states are dependent on any and every means to maintain macro-economic stability, unlike large countries that have the ability and the capacity to monetize debt, or dynamic enough to provide goods and services for consumption in order to create independent wealth and make money multiply on a large scale.

Coordinated central bank policy for the region, from a regional body, autonomous enough to enforce its own rules, but sensitive enough to be intelligently responsive to individual country needs, would assist with working closely with failed institutions as what we have in Haiti, and also equipped enough to handle the run away freight train in that of the Jamaican Central Bank.

Thinew body does not have to compete with the IMF for business. In fact, the IMF can go a long way with providing technical assistance, and supervisory controls for this grouping, or, sub grouping, within the Caribbean.

There also needs to be a way for Caribbean states to develop a sovereign bond-swap facility. The reason why it would be beneficial between Caribbean states is that it would be useless to attempt a bond swap with larger developed or developing countries to small developing countries, because of the size compatibility. However, the theoretical aspect of sovereign bond swap facility between small, but dynamically different by comparative economic scale, countries, can prove meaningful.

It would allow Caribbean countries to swap debt on one end, and build up foreign reserves on the other end, while having an added weapon in fighting domestic inflation in addition to giving an autonomous Central Banking body, a purpose for existence.

I'm certain that there are allot of pressing issues on the agenda, but let's see what the new Chairman has to say on the matter when he meets with his colleagues throughout this course.

Monday, October 11, 2010

Chilean Miners days from escape...

Sorry guys, been away for awhile. The only thing worth reporting-- other than the plugging of the BP Oil leak-- is that the Chilean Miners are days away from being free.

This underscores a major problem with deep coal and mineral mining-- the safety issue. I guess there is nothing you can do in Lat-Am Countries, but we should all be concerned about multi-lateral conventions on countries that do not mine with safety.

Perhaps larger countries can impose offshore mining restrictions on their own companies. But, that would hinder their competitiveness. Besides, with globalization so far advanced, large companies from developed countries would just move offshore for good.

But, in any event, glad to see that these miners will be going home.

Friday, September 24, 2010

What The Bahamas could have done!

Everywhere I turn, persons are asking me: "what has The Bahamas done during this economic downturn?" People from all sides, all spectrum's and all colours feel as if more could have been done to assist people during this economic downturn. Some have said that we have done enough. Perhaps it both could be right. Then again, it could be wishful thinking on all sides.

There is no question that conventional wisdom on recessionary relief was used for Bahamian economic policy making during this downturn, that is; 1. Welfare support to the poor and new poor and, 2. Tariff/Tax cuts to the private sector- even if both had to be revoked, as if the government was the Indian giver of last resort.

For the first part, welfare spending in The Bahamas went in 2008 and promoted as a way to help people to sustain the damages of the worsening economy. Two problems I have with this. One is that the governmental systems, particularly within the Social Services Department, is a little frayed and to some extent, outdated to handle the influx of persons they had received. Not only that the numerous reports from the Social Services Department showed this, but also the means testing apparatus to assess persons who may need assistance, is also a considerable challenge and even more a challenge when bearing in mind the personality issues that come about as a result of a lack of policy coherence and standard means testing for assessment.

The idea that certain persons didn't truly need the support, or would rather have spent their discretionary income on other non-essential items and in turn sought social support to subsidize their income and lifestyle, was something that was noted by The Minister of State for Social Services. In addition, in the beginning of the increase of funds to the social services department and prior to the Minister's acknowledgement, the Director of the Department went on record in stating that Bahamians, generally, do not take advantage of the resources made available. So, along with a lack of policy coherence, we have a pitfall with regard to economic relevance.

The fact that we need public sector reform, could not have been underscored any better than it has been with what we have experienced with this admitted, in-efficiently ran program, which did more to subsidize supermarkets rather than stimulate growth with creating jobs and investment.

The second issue is that tax cuts and exemptions were given to businesses at large in 2008/09. It was something that would keep business open and able to import cheaply and make goods less expensive, helping families with keeping cash in their pocket.

The problem is that it widened the fiscal deficit and deepened the public debt. The same has happened in America pre-economic crisis and post financial crisis; in that tax and tariff cuts were used to spur economic activity through the free market to keep investors and consumers confident, but the consistent recessionary pressure did more damage to the government's fiscal credibility as economic activity did not rise as a result and employment conditions worsened, which lessened economic transaction in which to tax.

This in turn, particularly in the case for The Bahamas, led the government- as with other governments world wide but for differing, prioritized reasons- to sacrifice economic growth and relief to businesses and the consumers who was intended to benefit, for fiscal austerity and even more so, as an attempt to salvage it's macro-economic credibility to investors in The Bahamas and abroad by increasing and stabilizing government revenue.

This has put The Bahamas back at square one; the social support has been downscaled after the recent 2010-2011 budget and on a small scale the year before, or negated due to the higher taxes and also the higher taxes/tariffs within the same time frame. This, while the economy is still slightly depressed, would more than likely dampen investor appetite while not solving the macro-economic issues with regard to long term and short term growth- with the government's fiscal issues still not yet fully clarified, during this unconventional and extraordinary economic downturn.

One thing that can be used as an anodyne to this situation, is if construction related activity is spurred either through state action (with appropriate targets set and reappropriations of rents set at key cyclical drivers), or at the cost of large scale developments that can employ mass scales of persons, or with private home buildings, private infrastructural renovations tied to a program geared to stimulate activity first, rather than provide tax breaks in the hopes it spurs activity, first. Every Bahamian construction affiliate, whether they are prime contractor or apprentice with hammer in hand, need to have a chance to work at a decent price and The Bahamas as a collective needs to benefit from that incentive.

A second thing is that an import tariff reduction program to the private sector, should be considered and tied to private sector employment; i.e., a program designed to create private sector employment, with subsidized salaries- if need be- by the government, through the reduction of tariffs for companies that wish to participate on the basis that they will employ a certain amount of individuals.

A third place to look, and with a more controversial issue, is with the cutting of the prime Central Bank rate; and the cutting of that rate, to supplement supported, commercial bank lending programs to businesses and consumers. While it [cutting the prime rate] may be less effective than it would have been had it been done at the onset of the crisis, with liquidity levels in the country now more than adequate, the government should be in a position to micro-monitor and give strong support to this segment of the market system and say firmly that it is in a position to stand behind the financial system in case the situation worsens, or in the event that new loan repayments may be affected and at risk of non-performing in the short term.

Banks are in the best position to pick the winners in this instance more than the state. But the state must be in a position to back economic activity and its inherent risk, and to some extent short term failure, at any cost, as a way to assure the public and as a provision to wash away the negative effects of action as it tries to support a greater good.

Sunday, September 19, 2010

Tune in to "Dare To Be Great"- Cable 12 Bahamas, 8:00pm on Monday 20th September, 2010.

Dear Friends,

Please tune in to Cable 12 Bahamas on Monday the 20th of September, 8:00pm for "Dare To Be Great" with your host the Master Motivator, Spence Finlayson and guest Management Consultant, Youri Aramin Kemp.

It is a fantastic taping and please feel free to send this along or tell friends to tune in. The show has already aired in Trinidad, Barbados and a few other Caribbean countries already through Direct TV and CaribVision. We talked a little politics, a little of the economy and we also started and ended with a little of myself on each end... great night!

Mr. Finlayson will also be hosting another live taping on Tuesday 21st of September, 2010 at 6:30pm with Mr. Ortland H. Bodie Jr. / aka Baby Pindling, aka Prophet at The British Colonial Hilton.... I hope you make an effort to attend and if you do, I will see you there!

If you wish to be a sponsor of the show, please feel free to contact Mr. Finlayson at:

Email: or or or by telephone: 242-364-4011...additionally by Facebook:

Much Love!

Tuesday, September 7, 2010

Trade Value up...

WTO Press Release.

Well, Trade Value is up 25%. No report on the actual trade volume. I think if you were to examine trade volume up to the date the latest trade value report came out, you would see there are some particular things involved with regard to the puzzling, as it seems, numbers.

The latest WTO report on trade volume was dismal but expected to rebound in 2010.
WTO Report

The interesting thing is that trade value, began to rise after China revalued it's currency. No doubt China played a huge factor in the evaluation process of the value figures.

So, it is not "more" trade. Or, even more "valuable" trade as it relates to volume-- but, simply, more value added due to currency valuations-- even without any empirical studies.

I guess it pays to read the news, all the time.

Friday, August 27, 2010

Getting around in New Providence!

The school year in The Bahamas starts off in full swing on August 30th. That means more road rage, late comers, accidents, short cutters through the petrol stations and all around Tom foolery. The road sight is not a pretty one, even during the off-peak season.

There has been varying reports on how much persons in The Bahamas spend on this stress called transportation. The number varies from anywhere between 20 to 30 percent of your salary on average on gasoline alone. Spending anywhere from up to $100 to $150 per week for a non delivery driver-- depending on your personal load (which can leave you quite broke) -- and with gas prices nestled at a comfortable average of $4.25 per gallon, that range estimate seems fair.

However, other reports have it that, roughly, only 20 percent of Bahamians use the public transportation system. Additionally, it is said that the average car per household is 3 for every 2 persons (I always wondered where some get these estimates?).

Why would one person need 1 and 1/2 of a car, is beyond me. But, that statistic becomes more severe in reality that when you travel the roads on a daily basis- with the ongoing road improvement project not making life any easier- you notice that the traffic on the island of New Providence is a miasmal mess.

Jitney (public transport buses) drivers are the worse. They would make Mother Theresa sin. They cut you off, block the road and stop anywhere to let on or off a passenger or just to count their change- I thought we had demarcated bus stops for all of this?

They, along with the idle day drivers- those people with absolutely nothing to do but drive around all day- need an intervention.

We need a better public transportation system on the island of New Providence, at least. We also need a comprehensive transportation system in Grand Bahama as well. But, Grand Bahama is for another article-- one word however, railway.

There was a position paper done by a few College of The Bahamas professors some months back. I have not had a chance to read the document, but some have been on the talk circuit, asking for change to the existing system. One change mentioned is that we should unify the bus system in The Bahamas, particularly for the system on the main island of New Providence, as a way to get more people out of their cars and on to te public buses. I have some thoughts on that.

During a discussion at a dinner with a few colleagues a while back, the issue about the public transportation system came up in that the individual bus owners, can't seem to come together on what the terms of an agreement on a unified bus system would entail. No party wants the other to be in total control, and no one wants to lose money if their routes were to change from one where it was profitable-- I wouldn't take that couchant, either.

A recognized bus union in The Bahamas, the Public Transportation Authority of the Bahamas (PTAB), has been working tirelessly, as it appears, in trying to create a unified bus system.

One of the things I think that they could look at, is that they should propose to the government or an investment bank, a plan for an intervention and attack the problem from a necessary, but yet expensive, standpoint. However, while it may be expensive in the short term, the long term benefit in that it would create a multi-shareholder monopoly union that is open to the market and would benefit us all.

What should happen is if that firstly the government should impose a moratorium on all new bus licenses. Secondly, government, with internal or external financing, should, by mandate, gather all license holders and make them one company.

Those who want out of the new company, their licenses should be forfeited and they should be given compensation in cash or with a minority share offering in the new company and paid out gradually.

The new multi-shareholder monopoly should finance a new and improved public transportation system, exclusive of taxi's and tour buses. This new system should be complete with new bus terminals, bus stops, a new route, new rate system and machines for fare top up's, modernized payment options, a new fleet of buses- eco friendly of course- and be open to the public via the national stock exchange, in order for investors to be able to participate as well enable the new entity to raise funds other than from private, angel investors or by random fare hikes.

The short term political pain would be with mandating bus owners into the new system. But, if compensation is financed via a pay out option for persons who don't want to be a part of the new company, as well as compensation for the loss of vehicle use during the transition period for persons who want in, these things should ease the burden of change. With that, a loan repayment that is sensitive to the issue of change, as well as creates a minimum bus fare floor in order to finance repayment in an orderly fashion, with sliding fares for peak and off peak times, this matter can be worked out-- before we get to performance bonds and the rest of the financial drolls.

Another pain would be during the transition period of the phase in of the new system. Sensitive execution is required, especially if licensees are to be compensated during the period of transition and also if the transition is gradual and phased in via the most used routes, as a way to minimize the effects of the temporary loss in service.

The long term benefits would be the upgrade of an essential public good, more persons using the public transportation system instead of their 1 and 1/2 cars daily, a new company to be listed on the national stock exchange, a cleaner environment, savings to the average consumer on fuel, an efficient and reliable bus service along with a new industry complete with everything from administrative staffing, to mechanics, to bus drivers along with the creation of a private sector entity, financed with government bonds or backing- an entity that can actually pay off its debt to the government or other parties or being co-owned by the government via shares, while providing a useful and essential public good in addition to it being sensitive to individual livelihood.

Whatever plans are worked out, government intervention is unavoidable if we are to break this stalemate- everyone knows, from the licensees to the average citizen, that we need a better public transportation system. One that is sensitive to the livelihood of the licensees as well as the public at large.

Monday, August 23, 2010

Notice how everyone stopped talking about the economy?

It doesn't take a man with x-ray vision to see that most news stations have stopped talking about the economy. Some have even resorted to talking about foreign news- ala the miners trapped in Chile.

It's still a pretty bad state we are in. Things are getting a little better, but until you see investment pick up in the USA, there is nothing much anyone can do.

In the meantime, we have to keep focused on the signs for recovery other than investment flows.

I have to admit: I have not been watching as carefully as I used to, but I will do more.

Sunday, August 22, 2010

No one want to win these days...

Well, it appears as if no one wants to win an election out right these days. Just a few short months after Britain had its first coalition government, Australia is now going through a similar problem.

The current Australian Prime Minister, Julia Gillard, leader of the Australian Labor Party, has hurt herself.

She called a snap election in attempts to take the conservative party off guard, after beating former PM Kevin Rudd in the last election very handsomely, and is now unsure if whether or not she won outright.

Apparently, the independents are large in numbers and have no allegiance to any particular party. So, they are holding Mrs. Gillard at ransom, for her own hi-jacking!

Funny thing politics is...

Sunday, August 8, 2010

Two scoops of recession and a pinch of budget cuts!

The word on the streets is now there is a possible double dip recession in America. This is a considerable concern for not only large manufacturers in Asia and Europe, but also for smaller economies in the Western Hemisphere as we depend on American investment and tourism.

The American stimulus plans have run out of steam, with unemployment is still unacceptably high. President Obama, on the other hand, has said that there is no need for concern over a double dip recession in America- but, forewarned, is forearmed and the will of the possible, may not be the will of a natural course of events.

Simultaneously in and around Western European and American Consensus economic policy circles, is that budget cuts- and in some instances tax increases- is what should be done to stem the tide of fiscal deficits, even during this still yet sensitive time in the economy.

However, the ideas that: 1. Consideration’s over the option of more economic stimulus is out of the question and 2. Tax increases, in particular, is a desirable option, need more fleshing out in terms of their intended impact from a purely theoretical standpoint.

The first and obvious truth is that the American stimulus package did not go far enough. In fact, it has far less impacted America and the world, much more than it was billed to help.

For one reason, employment did not substantially grow over the course of the stimulus being rolled out. About 9.5 percent of Americans are unemployed, with business confidence still very low. In addition, the stimulus money way spent in areas that had little to do with the private sector, but rather with government sponsored programs that were and are short lived.

Service related jobs were not factored in to the American stimulus package, other than from “shovel ready” jobs- which were temporary- in addition to that creating more services related activity which didn't have a manufacturing base to support it.

For example, leading up to passages of both, The Economic Stimulus Act of 2008 and The American Recovery and Reinvestment Act of 2009, beginning from January 2007, business inventory rose by nearly 25% while service related work over manufacturing work increased considerably.

This displayed as well as created a major problem with the American stimulus plan; as the service related jobs were built around the government sponsored programs, they were not based on supply and demand for private investment along with an increase in manufacturing jobs outside of automobiles- which was also a government sponsored program for three of the top four automakers in the USA. And, as the money dried up, so too did the jobs and the economic multiplier effect that it temporarily displayed.

Even more so, a large amount of subsidies to private firms went towards technology, education and renewable energy. The first concern is that technology, need not be manufacturing based, especially with cheaper labor markets outside of the USA and global competition in the tech-sector being very stiff.

The second issue is that education does not stimulate the economy in the short term, especially when employment for trained professionals are even weaker than that of trained workers with years experience. And renewable energy is a new frontier and is a long way from being an economic staple for average consumers.

This added to the fundamental weakness in the structural economy of the USA- the main being that manufacturing has declined well below their peaks, even into the late 1980’s- , has led to current revenue shortfalls in addition to those forecasted.

The worst of it all is that countries in Western Europe, with Germany leading the way with respect to what they term “Ordnungspolitik”, are in the mood for not only budget cuts, but permanent budget cuts and tax increases as well as with Germany going through in the process of a wide sweeping deficit reduction program.

With the Euro-Zone and The USA representing over 40% of global GDP and, in turn, world production being affected by budget cuts and, in some instances, tax increases, the global economic outlook does not look so rosy, just yet.

Why are large European governments, with smaller countries following in lock step as much as they can, willing to sacrifice global economic recovery efforts rather than continuing to keep it afloat with additional credit?

The first issue is that it is seen that Keynesian spending, coupled with lower than normal interest rates, have not effectively dealt with the situation for the long term. In fact, I would be surprised if any economist, who is at the very least an observer of this crisis, would cant rip the public that government intervention is the measure that stops this recession.

With further respect to Keynesian spending, as a consequence, it, in effect, pulled private sector jobs into the government sector, with the government sector now being affected by budget cuts, which also signifies that if those government jobs were temporary- as in the case of the shovel ready projects- the private sector is back at square one and stuck with persons without the rigour of private sector competition, who would add dynamically less to the real economy.

A second issue is that sovereign bond yields affect public policy and economic policy making.

As government revenues decline, and if interest rates move lower, bond yields are adversely affected. For one, as the outlook for a country’s economic position worsens, governments find it harder to sell sovereign bonds at a higher rate. Secondly, as real “short term” interest rates move lower, in many instances, bond yields move higher as inflationary expectations are equated more so into financial risk matrices- which are also tied to the overall outlook of the economy.

Monetary policy is ever more important at times such as these. Interest rates have already been slashed, but this would be innefective if structural change and program design does not faccilitate the interest rate movements.

When the Central Bank is inactive with regard to market regulation, credit supervision and running the type of private sector related programs to assist banks with extending credit, while the economic landscape is still yet brown with deep-rooted buds are yet to take shape, using interest rates for private sector stimulation, is a zero option and an even more undesirable policy option to the extent it affects the bond market.

At the totally worse end, it is more damaging if monetary policy is not in sync with fiscal policy. It may lead to a loss to investors in the sovereign bond market as well as it may hurt Main Street in the short term if not negated by other economic policy measures.

From where I sit, it is a balancing act taking place in America and in Europe. They can afford to play the game with respect to large stimulus plans, budget cuts that affect economic recovery- while the smaller economies suffer as a result- and interest rate cuts- the latter probably causing what a liquidity trap.

Smaller countries are in a much different position and they need to monitor larger countries from a cautious perspective and continually seek to understand the causes of things.

The troops are coming home!

Well, it seems as if the troops are coming home- well, most of them.

It was announced that the USA plans to drawn down troops in Iraq to 50 k by September 1st. Allot of families are glad to hear that.

Will this destabilise Iraq? Who knows? Reports from Iraq are mixed on the matter. Some want the USA to stay longer, others want them to get out- in both Iraq and American circles.

I think the worst of it is over. Saddam is gone. The real battle for terror and the middle east is in Afghanistan. While there are terrorist elements in Iraq, they have never taken hold as they have in the no-man's country as in Afghanistan.

President Obama's mission to end the engagement with Iraq is finally here.

Friday, July 16, 2010

A plug for my blog on American-Xpress...

Dr. Jeff Cornwall, in his column space saw fit to plug my blog, as a way to give entrepreneurs who wish to go gloal, insight on the international economic trends.

9 Ways to Stay Worldly-Wise- American Express' "Open Forum".

"7. Track the trends. International economic trends can quickly turn a market opportunity into a financial disaster. If you’re engaging in business overseas, it’s important to keep a close eye on the world economy, from the budget deficit in Greece to the housing boom in China. The trends can change minute by minute, but you can stay current with blogs such as Mish’s Global Economic Trend Analysis, Global Economy Matters and Global View Today. "

I may not be everywhere, but I'm where the people who need to know serious and credible information, is.

Monday, July 12, 2010

The Chinese Connection!

There was a study tour coordinated and sponsored by The Chinese government, for Junior Caribbean Officials, during the date of May 17th and May 27th, 2010- the second of its kind for the region.

The trip was attended by delegations from the Free National Movement, the governing party of the Bahamas and the loyal opposition, Progressive Liberal Party, in addition to the Bajan delegation, from the opposition Barbados Labor Party.

I went as a member of the delegation from the Progressive Liberal Party. Having done some policy work for the party on economic, international affairs and trade matters in the past, as well as my background on such issues, I was a suitable candidate to attend the study tour in order to gather the information for the benefit of us all.

The trip was more than a fantastic experience. One in which I am very thankful to have spent time with such wonderful people from China and Barbados and my colleagues from the Bahamas and to have been asked to attend, overall.

We had some time for leisure, but it was strictly business for the most part. Even the tour to the cultural sites, had a very structured, business feel to it. And when I did have time for leisure, it was done in a way for us to see the Chinese culture first hand, rather than it being about fun and frolic.

“Party to Party Relationship Building”, pretty much sums the main theme for the gathering, and I commend the Chinese government for using this format for discussions, as I see it as helpful for all sides.

Foremost, this format is an attempt by the Chinese government to "stabilize" the environment for their investments and strengthen their diplomatic relationships in a very healthy and open manner, for the long term.

For an aspiring leader, diplomat or someone with a foreign affairs interest, the mode, style and presentation, as well as the setting of the discussion environment, could not have been any better.

In all, we visited three cities: Beijing, Wuhan and Xiamen. They were three very distinctively different cities and all with different flavor and styles.

Beijing is the administrative centre of China and very much a concrete jungle to a large extent. No special frills and no special distinction, other than it being very much about business and administration.

There were some signs of social life in Beijing, especially from the point of the mega market- The Silk Factory- to which one of our colleagues had turned us on to. Almost everyone in the market that had a space, or booth, spoke English. To my surprise, they also spoke several other languages- from Arabic to German.

The city of Wuhan, on the other hand, is in a state of physical development. You can see it as soon as you hit the airport. Large cranes, buildings being erected, lots of road work and large equipment everywhere. It wasn’t until after my trip, when I conducted background research, I found out that French investment in Wuhan for industrial and international business was so heavy. Apparently, over one third of all French investment in mainland China is invested in Wuhan- more than any other province or city, along with the other foreign direct investment China receives from Western companies and countries.

The last city, Xiamen, is a tropical delight and very much a tourist destination. It reminded me of South Beach Miami, Florida, in so many ways. It has more restaurants than Beijing and Wuhan, as well as the people are more trendy as well as the shops very westernized and upscale.

Xiamen is also a strategic port city, directly opposite the island of Taiwan. Hence, they do allot business with Taiwanese companies, and the relationship is very lucrative.

Through all of the sightseeing, we had to attend seminars about a number of issues- most of which is the Taiwan/Straights issue and how important Taiwan is for the Chinese people and government, especially to the city of Xiamen.

Thus far, the import volume in China from Taiwan is $30 billion (USD) and the export volume from China to Taiwan is $9 billion (USD).

Industries most involved in the cross straights relationship are: chemicals, hospital services, low to high technological devices, technological information services, software, the construction of physical facilities and other construction related equipment as well as the cultivation and exportation of fruits, with Xiamen playing a very strategic role in the overall economic success, as well as an important role in the cultural and political changes in mainland China as a result.

The top Chinese officials we had dinner and meetings with, were all concerned with how The Bahamas was handling this economic recession. They also shared with us what tools and strategies they had employed and planned to employ during this downturn. For example, they have initiated a 4 trillion (YUAN) stimulus plan that they have directed towards capital related projects, or "shovel ready projects", and services related upgrades.

A chief Chinese economist made mention that more inward investment is what Chinese economic regulators are looking for and increasing wages and domestic investment, is critical to sustainability.

We saw evidence of this with the Dong-Feng car company. They operate solely in China and have had increases in profit, over the last 4 years, of an average of 12% per year, even during this economic crisis.

I was especially curious about the system the Chinese have in place to ensure continuity in the local market for SME’s, considering that China is a Socialist country. I was made aware by the same economist that Chinese SME's face no such problems; because Chinese culture dictates shared responsibility with their business practices and that practice is culturally understood as standard practice. So, if one person falls within any given company, the social collective comes together to fill the void, rather than having companies shut down unnecessarily- so, in a sense, SME’s are on their own in terms of the state assistance, but a built in social/community system kicks in automatically and provides support.

My mind thinks on so many SME's in The Bahamas that fell due to the owner having passed on and not having a sound succession plan, or due to a failure in other cooperative measures, to keep business open. SME’s in The Bahamas and the region could learn well from what we learned about China and its growing SME sector.

So many other things we could have noted, but too little space in my column. If anything, I can safely say that I now have "people" in China.

Saturday, July 3, 2010

Nice article on Financial Reform....

The Economist.

Sets out some key areas on reform. Not too analytical, but it sums up what reforms are already in the pipeline for the USA. The key of it all is the reform on derivatives- no more back room dealing, but now derivatives will be traded on the open market.

Sounds good. It will force firms to trade deviates and derivative packages they know, and now because also it will be attached to their overall firm's performance.

The other key things are mostly administrative- new general council to oversee things (big government) and special powers through the FED to use tax payers money to save failing banks and stop them from spreading their problems through the system.

The last is mostly cosmetic, as it only will serve as a warning shot in the early stages to other firms who may look like a firm in distress, so they can get out of the activity they are engaged. Will not stop a panic from starting, but it will stop a panic from being so severe over a long period of time.

Monday, June 21, 2010

Not been here in a while...

Again. Been off. No real reason why...I guess I have "blog fatigue"...but, I'm still here.

I promised to chat about my China trip, aye? Well, China was excellent. Went to three cities- Beijing, Wuhan and Xiamen.

Was surprised that Xiamen was more like South Beach Miami, Fla. Very much a tropical place and tourist destination. Very trendy...lot's of bars and such. It is also a port city.

Beijing is stricly business. No frills and no fuzzy stuff. Straight up concrete for the most part. Yes, it has some sites to see- Tiananmen Square and Chairman Mao's body, etc...but, nothing really to report.

Wuhan is more like a rural linked city. Right in Central China. Went to a few housing bloc's and some agricultural was "ok".

All in all, a fantastic trip.

Monday, June 7, 2010

How the world turns...

Dang. The oil spill in The Gulf of Mexico is more serious than I thought. Apparently, British Petroleum, BP, does not have the technology to fix the oil leak from it's pipeline.

How could that be? You mean to tell me, you have the technology to drill baby drill, but not the technology to stop the leak? Totally unacceptable.

What is even more ironic, is the issue that BP is supposedly one of the more "eco-friendly" oil companies and it prides itself on its performance as it relates to changing its production model to one of a more new energy model. I guess this is all out of the window.

In the meantime, BP is being hit in the stock market as stocks plunged more than 45 percent.

Tony Hayward, BP's CEO, has been wavering in the media as he is, apparently, caught out in mis-statement after mis-statement.

It is not good for BP. As for The Bahamas, we are preparing for the worst. We have already reached out to officials from BP and the U.S. government as it relates to disaster management of the oil spill- BP has committed to pick up the tab of the clean up and the U.S. government will offer assistance as necessary.

Apparently, the oil spill, once it gets into the Gulf "slip-stream", can reach The Northern border of The Bahamas within another 30 days or so. Floridians are already bracing for the worse and persons in Louisiana and Alabama, are already seeing oil clumps washing up on shore.

Additionally, the marsh lands in The Gulf off of the Coast of L.A. and Ala., are already taking the toll as animals and wildlife are being found oil slathered and the marsh lands are drenched in crude oil.

Without a doubt it is a national disaster and an international incident.

Through all of this the fishermen in The Gulf Coast have been more than hit hard. They have not been able to earn a livelihood as a result of the disaster as fishing spots are now disaster areas. In addition, shipping lanes are being affected as ships going through the Gulf, are having to 1. take extra precautions to avoid the deepest part of the slick, as well as 2. having to clean off their tankers and ships, after every trip as a result of the heavy crude that is sticking to them.

I pray for the best, but the disaster shocked everyone and no one expected it to last this long. To me, this should have been resolved in a matter of days- the capping of the oil pipe-line, that is. Instead, BP showed a nasty side of business practice by showing that drilling, was more important than disaster management and safety.

Help and hope for the coast!

Thursday, May 27, 2010

Just got back from China..

Had a trip top China for about 10 days, during the month of May. Sorry if you guys missed me...hehhe....will be posting something for the news organisations more substantially in the near future.

All in all, the trip was fantastic. We went to three cities- Beijing, Wuhan and Xiamen. We were treated like royalty by the Chinese government and I thank them from the bottom of my heart.

Friday, May 7, 2010

Why didn't anyone see this economic crisis coming?

I had tuned in to one of the local talk shows in The Bahamas, and the host was on about the economic crisis and why hadn't anyone seen it coming- particularly the economists and business persons. It wasn't the main focus of the show that day- from what I heard- but it was a side remark, to the main point of why persons can still start up their businesses, even in these challenging times.

I would like to work with the first assertion and state that, yes; persons did see the crisis coming. The question to be asked rather than why didn't anyone see it coming; is why did folks not listen to the people who had something to say on the matter?

I can remember about four years back, sitting in a discussion seminar with my very distinguished professor at the time, Dr. Jonathan Hopkin. We were discussing the global economy and how he was in the process of selling his house, after we had reviewed literature two days in advance on economic and welfare regulation. During that same period, I was reviewing Central Bank policy in conjunction with financial deregulation- in particular regard to U.S. Federal Reserve rate policy and The Securities Exchange Commission's financial deregulation policies in the mid 1990's - for another distinguished professor of mine, Dr. David Woodruff- and then it all clicked!

The global economy was out of whack and in disarray. I knew then that the financial services sector was way more advanced an out of control than anyone without the training had anticipated. It was that awesome. While creating money out of thin air was bad enough- abusing the money multiplier theory, by loose lending policies with adjustable rates (e.g., housing market adjustable rates)- and the expansion of sophisticated financial products that weren't ever attached to the products of services that financial peddlers promoted them as. In addition to the loss of structural employment, due to advanced technologies making the worker obsolete and a shift in production to Asia and to some extent Latin America, all of this signified that North American and Western-European economies were on non-productive, welfare spend to consumption foundations that were bound to collapse.

My eyes were opened, so to speak. I never saw the economy or the world the same way I had before that epiphany, ever again. I went on every rooftop, to every kitten and Rastafarian and every website that dared to broach the topic about the state of the economy, proclaiming; "repent, for the end is near!"

So too were other, more notable and respected voices asking for structural economic reform in the domestic and global economy, for example, Nobel Laureates Paul Krugman and Joseph Stiglitz as well as Dr. Nouriel Roubini, a.k.a "Dr. Doom", for his incessant ranting on the collapse that nobody saw coming.

Nobody listened. Nobody wanted to listen. Persons were labelled as out of the loop, trouble makers and/or smart lipped, naysayers that always fussed allot about nothing. It was all bad news, you see?

In addition, the money created during the boom was lucrative- even after the crisis, to hear of Investment Bank CEO's spending 15K on a wall sconces and 10k on waste paper basket's, a piece, to adorn their multi-million dollar offices, is enough to make you think of the type of money that bought influence and the thinking behind the persons who were spending that money.

I admit one thing: I didn't see the crisis' contagion being so severe. The subsequent ripple effect around the globe in non-financial services sectors, yes. But, the ironic circumstance was having the leader of free-market capitalism, The United States of America, having their credit markets frozen due to the fear of risk of exposure to complex financial products, is something no one could have predicted- who would have thought it could happen?

Another thing was that not only were Investment Banks in North America and Europe using the same financial products, but they were also globalising them- e.g., the sale and re-sale of credit default swaps and derivatives from North America to Russia, from Russia to Spain, etc.

More importantly, as the crisis got bigger, credit dried up because no one- post Lehman Brother's collapse- was willing to risk exposure to persons and institutions that were involved in risky trading. Then market went into a panic- exacerbated by the U.S. political cycle- and wealthy consumers in North America and Western Europe, started spending less because they held back consumption and the home equity market began to collapse (good move Dr. Hopkin), coupled with larger losses in employment, which caused manufacturing in Asia and Latin America to decline, causing more job losses in the other respective regions.

In light of all of this, the good news is that this certainly is a time for planning and for innovative, strategic thinking for new and existing businesses as the rebound happens. The morning after, is always the best and brightest time for a fresh, new start. Busts are followed by booms spurred by innovation, imagination and creativity. While money is still hard to come by, thinking about what you can do when things get better, isn't.

However, while some would sell you a pipe dream on the idea that a recession does not have to mean a recession for you, reality states that the odds that the recession would not be for you is very slim.

Moving forward, after we have made note that some aren't prepared to listen to persons who have a penchant for being right too soon, I still would encourage persons to consider all factors on the table, because lives are depending on it. Lives have been lost already, and in my humble submission, lost unnecessarily and neglectfully so.

When we speak in terms of The Caribbean with lobbying for a risk sharing mechanism for foreign reserves in order to smooth government revenue in the event a crisis happens again, it's serious. When we speak of a plan to contain and fight inflation, based on U.S. dollar interest rate movements and the impact it has on oil and other minerals, it's serious. When we speak of flexible, coordinated and responsive Central Bank policy throughout the region, it's serious.

In terms of The Bahamas, when we speak of tax reform as a way to create sustainable, supplemental industries that would make The Bahamas less dependent on American consumers that are themselves dependent on a falsely inflated economy, in addition to tax and other reforms that fortifies the middle class, gives support to small and medium sized businesses while strengthening employment, it's serious.

So, here we have it again, people- of even a small voice like this humble author- are speaking for identifying reform and change. Will the people who have the power to do something act in a meaningful way?

I pray to God that they consider even the most marginal scenarios and set personalities aside, for the common good.

Thursday, May 6, 2010

British elections are on...

Almost all polls expect the Tories to win the current British general elections. They lead almost every poll by 7 to 10 percent. Most news outlets support them and only one, out of the 20 odd newspaper outlets, support Labour- with The Lib-Dems garnering support with at least three major newspapers.

Does not look good for Gordon Brown, British PM and leader of the Labour Party.

The Labour Party had a good run.... but, all things must come to an end.

Tuesday, April 27, 2010

The oncoming financial reform...

It appears evident that the The United States will undergo some form of financial reform.

It's about time for reform, as well. However, some US congressmen, particularly Ben Nelson of Nebraska, don't want to broach the issue and have voted no for reform- ending the possibility of bringing the debate to the floor for a vote, by subsequently ending cloture.

It will happen. Forget about health care for just a second. The issue is financial you can see, even health care was impacted by the financial services sector vis a vis the insurance companies.

Until the insurance companies were bought out and they were assured to not lose market share, they went along with the deal and their lobbying subsided.

Without a doubt, the complex, exotic, derivatives and over the counter trades will have to come under more supervision. The murky asset pricing strategies must come under scrutiny as well.

What will not have a chance of being assessed, is the ratings agencies and how they assess the market and assets. This is too much of an art form- asset pricing- more than it is a cause from the basis of malfeasance.

Let the buyer be ware....

The countdown is on...

...for the British elections. Nick Clegg has made some progress. Will Britain be ready for a third party winning the government? We will have to see.

If the Lib-Dems can, then it would be a great achievement for third party elections across the Commonwealth.

Cameron looks strong as well. It seems as if Brown's goose is cooked. But, I have learned, to never count out the electorate or a governing party.

Cameron and Clegg don't understand how the levers of the electoral process works, because they have been on the outside for so long.

Wednesday, April 14, 2010

The Bahamas needs tax and spending reform!

I was listening to the news just recently, where Prime Minister Hubert Ingraham, who also is the Minister of Finance, said something to the effect that he would not lean against anyone broaching the issue of taxing the illegal numbers racket in The Bahamas, by virtue of taxing the Internet Cafe's that are reportedly "front's" for internet gambling businesses.

However, I'm not quite sure how easy it is to tax the numbers racket through Internet Cafe's in The Bahamas? For starters, you have to have them recognize that they are, in fact, running illegal gambling out of Internet Cafe's- considering that the authorities have not been able to produce solid evidence in order to prosecute anyone allegedly gambling in these establishments.

Secondly, what about the Internet Cafe's that are legitimate Internet Cafe's? Can't tax them...can you?!? Lastly, if I am running an illegal gambling racket through an Internet Cafe; then why would I want to pay taxes to the government for something I have been getting away with for so long?

Even if you put the work out for companies to bid on a national lottery, you still would be left at square one with the Internet Cafe's that run the numbers racket and their subsequent prosecution.

It is no easy task and good luck to the persons tasked with sorting it out.

More importantly, however, if we have come to a point where we are speaking in open forum about taxing the numbers racket, seriously, it signifies that the government feels that The Bahamas is at a juncture where it needs meaningful tax reform for government revenue; the government, clearly, is not generating enough internal revenue in order to meet its obligations now; and that the prospects of meeting the debt service, is very bleak with the current system of taxation.

To be very blunt: the government has to tax. However, the term "tax reform” isn't necessarily supposed to have a negative connotation or stand for a pejorative slight of hand.

The word "tax", does evoke personal sentiments for obvious reasons and the word "reform"- especially used by politicians- is a code word of sorts for the refocusing of entitlements and simultaneously as a buzz word for business persons, which signifies more and unnecessary regulation. Which to business persons, means more time away from their business and more time dealing with a governmental agency with mentally challenged employees.

To be fair, government employee's aren't mentally challenged- although some who look like they shouldn't be makes one wonder- and everyone doesn't understand what reform signifies- either which way- and no one wants to pay more taxes.

The truth is however, The Bahamas government is in debt to over 40 percent of GDP- with a widening deficit. Another clear fact is that the Bahamas doesn't have any streams of government revenue, other than from import taxes (where it gets over 50% of its revenue), National Insurance contributions, revenue from public corporations and government agencies and also through forms of public service charges and real estate; i.e., vehicle registration and real property tax.

Conversely, the Bahamas's tax to GDP ratio is about 18 percent. Which isn't that bad, considering Barbados, Jamaica and Trinidad is at 32, 27 and 38 percent respectively. But, The Bahamas isn't just like any other Caribbean country- we do things a little different.

Firstly, we don't produce many agricultural products for mass consumption in The Bahamas, neither do we have a large export sector in terms of persons involved in exportation, away from the concentrated profits some firms make.

Another concern that compounds the lack of efficient and beneficial dynamism in the market place as it relates to an optimal and targeted tax mix is the reliance of import tariffs for government revenue.

While The Bahamas does not produce over 80% of what it consumes, and with the tax system as basic as it is, it has to tax imports heavily. As a consequence, this puts consumers and more importantly, low income consumer, at a disadvantage as the tax burden is disproportionate to what they spend on taxes in relation to what larger corporations and high income earners pay. For example, a 50 percent flat tax on all consumer goods means more to someone who makes 20k per year than someone who makes 100k per year and a flat rate for business licenses, means more to the small business person than it does for a large corporation.

Moreover, large industries such as banking and shipping, are virtually untouched as it relates to taxation- no capital gains or corporate tax. Even the exportation of fisheries products is untouched as they relate to export taxes.

Some may argue that these low taxes are the reason why these industries are so dynamic and successful. However, there is more to a successful enterprise than just low taxation- location, barriers to entry and diversification, comparative and competitive advantages, come first and foremost for a successful enterprise.

More importantly, inequitable or no taxation, can be more destructive than high taxation. For political reasons, the need to keep such high-end entitlements incentivises corruption. Also, with regard to adequate funding for social programmes, persons wishing to engage in such specialised enterprises, face high entry costs that the consumer and subsequently the state ultimately must pay for.

Those additional barriers, decreases the tax base as persons begin to spend more of their disposable income in an effort to obtain the training and skills necessary to compete in and for what the marketplace offers, in addition to the high cost of private investment into such specialised enterprises.

What makes it worse is if the perception of risk through sacrifice made by individuals does not facilitate for the full cycle completion on endeavours. Or, the high cost for entry is private market based (cost for capital investment and cost for private education), where the government does not have a progressive, optimal tax mix and that tax mix model, is not synergised to assist with the equitable development of the industry at all levels.

When such market failures occur, the government must spend on socio-economic policies that develop infrastructure and human capital.

Through all of this, I must state that the issues are more complex than just taxation. We need more bang for the buck and a re-engineering of our socio-economic programmes, in addition to doing more with respect to meaningful tax and spend policies that encourages economic growth, as well as lowering the private and public entry barriers to enterprise and skills training.

Before we begin the discussions on what forms of taxation we should have- VAT, excise taxes, etc...- or what types of spending we must endeavour, we must begin to frame the mind of citizens and add to the conversation of what the economic importance of tax and spending reform is and what that means to us all, as I hoped this article addressed.

Monday, March 29, 2010

Ban Ki-moon on Haiti...

Here is a good article in the Washington Post from Ban Ki-moon U.N. Secretary General about rebuilding Haiti.

This is just where every hope lies.

In partnership with the international community, Haiti's leaders are committing to a new social contract with their people. That means fully democratic government, grounded in sound economic and social policies that address extreme poverty and deep-rooted disparities of wealth. It also means fair and free elections, conducted with U.N. help, preferably by the end of this year.

This social contract must empower women -- as heads of households providing for their families, as entrepreneurs developing businesses, as advocates for the vulnerable, with full rights as decision makers in evolving democratic institutions and civic action organizations. It must offer new opportunities for economic advancement -- above all, jobs. The U.N. cash-for-work program should be a model. At the end of the day, only Haitians can build Haiti back better.

Sunday, March 28, 2010

Two Cheers, One Jeer for ObamaCare!

There was a single frame political cartoon I saw in one of the dailies, just after The United States Government passed The Patient Protection and Affordable Care Act, 2010. It showed a caricature of House Speaker Nancy Pelosi in a doctor's uniform holding a newborn baby in a towel, with the word "Health Care Bill" written on it, standing next to a donkey dressed in nurse's outfit, looking over at the patients waiting bench with a human skeleton adorned in a workman’s outfit, with the donkey saying; “next patient”.

The economic giant that is The United States of America, was put to a standstill due to the issue of Health Care reform. The cartoon displayed this most humorously. The economic growth persons in the economic forecasting and analysis field were expecting by the end of 2009 was less than modest. In fact, it was spotty- at best- with no clear sign of anything to be thankful for other than to be one of the few people still left alive, if only half dead.

Hopefully, the recent U.S. health care bill, at its fruitful best, can prove as a model for other countries wishing to introduce a form of universal health care, or be basis on what to reform or what not to reform with an existing universal health care package- it's best we can gain from this process, for having to wait for economic deliverance from The USA.

The only country in The Caribbean that has a universal health care system is Trinidad and Tobago. This is on the basis that every person is afforded health care within the public system, even though the system has a private option.

Trinidad’s universal health care system isn't an insurance centric model, but rather one on the provision and availability of care, along with a prescription drug plan for chronic illness.

The Health Care bill just passed in The United States, was, primarily, centred on providing insurance options and insurance regulations for the benefit and protection of consumers. The biggest achievement to date was the fact that the bill actually passed, with moderate taxes to be levied along with additional reforms- such as the elimination of insurance discrimination on persons with pre-existing conditions.

This aspect makes the bill a little odd on one end, due to the extent that it actually mandates persons to purchase health insurance by making it illegal to not have any insurance, pre-existing condition or not. This, in effect, increases the amount of payments to insurance companies. While on the other end, it sets caps on premiums for certain circumstances.

Whether or not these premium caps cancel out the increased payments through the increase of persons paying into the insurance system (creating losses at the firm level), is something the insurance agencies must track and assess for themselves based on their new competitive environment.

The bill also provides for the expansion in government subsidies to persons earning between 30K and 45K a year, of up to 75% of the premium. However, the cuts in Medicare -the government sponsored senior citizen health care option- via the elimination in the Medicare Improvement Fund, would, more than likely, go towards only half of the subsidy coverage I dare estimate- taking into consideration the expected amount of increased persons into the system (over 30 million), additionally coupled with the wide range of persons that are un-insured currently who fall under the 45K per year income bracket.

Through all of this, the second biggest achievement is that the bill synergises subsidy payments for persons, to then be paid into the private insurance market (no public option), along with excise taxes on the insurance companies with higher premiums, for that to be paid back to the government (no clear mandate on if these payments are earmarked to go back into the system). While this "evens out" the market providers, it also does not crowd out private insurers with a government option- while at the same time providing coverage to persons who may not have been able to afford the premium, along with not widening the deficit and increasing the public debt to fund universal coverage.

While acknowledging that prime synergy- which I felt quieted the private insurers- the bill defeats itself on the core matter of taxes to be levied on medical devices, which in effect makes new technology for medical practices more costly and effectively raises the price for medical services. This should raise concerns over the quality of care to individuals.

Additionally, the bill does not provide for a targeted expansion of the amount medical service providers, in a way that would ease the burden of the increased amount of persons that will be seeking medical aid under the scheme.

Facilitating an increase in quality services seems like a "no-brainer". The fact that the health care systems in Canada and The United Kingdom, are strained because their universal health care system is undermanned and facilities under invested- even when factoring in the huge tax burden in both countries, which sets aside funding for health care and to which the US is implementing excise taxes on items such as medical devices.

While it could have been equally as bad to have within the next 5 years an increase in service providers- as pointed out earlier that the bill does not provide for- coupled with the excise taxes on medical devices, causing an effect of cutting into the market share of the existing service providers and squeezing their margins and consequentially pushing their prices up, it is clear that this bill doesn't factor in provisions for adequate and timely ran facilities and services for the expected increase in patients.

While we have to praise the political and subsequent insurance achievements of ObamaCare, the possibilities of inadequacies in future health care quality needs certain attention.

Initiatives I would have ideally fought for are 1. Subsidizing and expanding “mandatory” employee insurance and full medical coverage, to and for all persons who worked over three years for the rest of their life along with their children, but only up to a certain age (with tax and subsidy mixes for special brackets); 2. Mandatory government provisions for persons with disabilities along with their children up to a certain age; 3. Zero tariffs on certain prescription drugs; 4. Increased scholarship and training within the health care field; and 5. Tax reform and increased income and excise taxes in certain sectors- but not on medical care providers or devices for the funding of this programme.

The start of KempCare...some shudder to think!

Wednesday, March 24, 2010

I guess some people still think its pretty bad...

FT article from Robert Reich.

My guess is that now, America, can focus on its economy and not health care...its over, for now.

The debate has to shift to the economy now, after the Obama presidency and the congress, held America hostage with the health care debate.

What will be the way forward? As Reich suggests, it has to be with credit to small businesses.

Blaming banks for not lending, is not a good solution. We have to find a secure way. Government crowding out private banks, is not a good solution either- you risk diluting the private entrepreneurship spirit, as well as closing the market on smaller banks. Also, you run the risk of lowering services, especially to the small businesses you wish to help.

A simple idea is for government to simply keep on supporting private banks. And, to be honest, wait it out....sad, but true!

Saturday, March 20, 2010

The changes and changes that remain constant!

We are at a stalemate. Nothing is being done, faster than ever. Especially in the USA, President Obama is quickly getting much done about nothing.

I guess this is the black man's curse- trying to accomplish things that don't get done. Health Care, War in Iraq and Afghanistan and all and sundry- least of which is the economy.

Where will we go? Sadly, Europe is just as bad. In fact, they are at a stalemate with everything.

Financial regulation in Europe is a non-starter, regardless of Sarkozy's demand for swift reform. And, countries like Greece, Italy and Spain, become worse.

I guess this is the price you pay for democracy.

No new news, is bad news!

Sunday, March 14, 2010

The Caribbean needs a strategy for fighting inflation!

Trinidad and Jamaica have been plagued by the persistent scourge of high inflation and, subsequently, the high price of goods and sevices.

Less pronounced is the creeping inflation in The Bahamas- this is the steady and consistent rise in prices between 1 and 6 percent, to which there hasn’t been a deflationary session, to bring prices back under the point from where they began their incline.

Inflation matters, for all the right reasons. Governments through macroeconomic policy and central banks through prudentially active monetary policy should continually be cognizant of inflation. In fact, one should not just monitor inflation- you should fight it.

Inflation has two direct causes- demand pull and cost push. The former is caused as a result of increased demand, with shrinking, or, weak supply- law of supply and demand, lower supply raises the price and vice versa, in "most" cases. The latter, is as a result of the rise in cost of the factors that produce goods and services- for example, the rise in the price of crude oil, due to the machine parts that are used to drill crude, or, the rise in education costs, which affects the price of service related jobs.

Let's examine the price levels in the three countries mentioned- Jamaica, Trinidad and The Bahamas. Here is the IMF's statistics on average and average end of period consumer prices between 2003 and 2011- projected from 2009 and beyond:

Jamaica- the country with the highest inflation- has a considerable challenge with managing inflation and currency value, even before the inflationary spike between 2007 and 2008.

Throughout the 80's and 90's, the Jamaican Central Bank has been, unfairly, commented on as being a printing press, rather than a place were monetary policy complements economic growth through the stabilizing prices. But instead, the trade off has been towards creating employment and financing public sector projects.

Even more so, higher wage demands have been a consequence along with the need for higher salaried job creation in the public sector- which is part of the failing of macroeconomic policy on one side, coupled with a lack of assertiveness of monetary policy makers, on the other.

Trinidad has been on a high inflationary course, since their oil boom. Trinidad has also been reluctant in revaluing the Trinidadian dollar. This is as a result of the need for the Trinidadian government to assist with expanding their export potential in oil and other light manufacturing.

This causes higher than needed inflation in Trinidad, by having, on the one hand, a need for increasing money supply to fund employment and higher, nominal wage levels. On the other hand, Trinidad’s need to keep export industry prices low, in order to maintain production and keep relative prices for export competing goods, competitive, also influences policy decisions.

The Bahamas in slight contrast, as with the case for Jamaica, Trinidad and most other Caribbean countries, has an ongoing problem with positively sustaining the effects of external supply shocks.

Take for example the impact that oil has on the global market. The current price makers for crude oil are all denominated in US dollars- which can be described loosely as the “petrodollar”. The two major oil bourses are the New York Mercantile Exchange (NYMEX) in New York City and the IntercontinentalExchange (ICE) in London & Atlanta, which are housed between the USA and the U.K.

This means that as the US cuts interest rates, oil is affected in a substantial way: an increase in US dollars in the market to trade, will increase oil speculation. In addition, the TARP programme administered by the American government to support financial institutions, both commercial and investment, have sustained both short term lending and trading activity and added fuel to the fire- so to speak.

These financial firms ran away from mortgage related lending and trading, and instead found havens in the oil and metals markets and, that speculation, elevated price levels artificially as the activity, was as a response to investor/institution appetite to sustain returns, even during the current economic crisis.

In fact, the huge spike in crude oil prices at the end of 2007 through 2008 can be directly correlated to the lowering of the rates on the US dollar, coupled with the investment in large financials in the US through TARP.

When we examine both the fluctuations of interest rate reductions and crude oil price levels, we see a strong correlation and a co-movement of both variables and further relationships with three variables, when we factor in the weighted roll out of the TARP funding schema as an additional variable.

In light of this, I feel that it is clear that the region needs a committed and coordinated plan to contain and fight inflation. The cost to businesses and households, demands that a comprehensive strategy be put in place to mitigate some of the more harmful effects of external supply shocks on regional inflationary pressure.

One thing can be too simultaneously revalue currencies up by 10% of the band, especially in the case for Trinidad and The Bahamas, while, perhaps, cutting the rates by25 bps at the very least. This would strengthen purchasing power, while at the same time increasing the money supply in order for it to compete for goods, relatively, with other regions.

The only issues would be with regard to fixed exchange rate ineffectiveness, in addition to causing a run on foreign reserves. However, it would ease domestic inflation by creating money supply and spurring activity while strengthening purchasing power, during this still yet current crisis.

To go even further, tariffs on consumer goods should be relaxed in order to allow for businesses to take advantage of import competing goods at a relative cheaper rate. In addition, this will attract currency traders by creating speculation and spurring demand for the dollar as well as attract foreign direct investment, by increasing the capacity to develop without high inflationary costs -if conventional wisdom on currency revaluation dictates otherwise.

A longer term external supply shock plan must be put into the regional discussion as a way to combat inflation uncertainty in the long term. A plan that involves increasing capacity in food security, oil reserve maintenance and coordinated Central Bank policy that entails- where appropriate- a pegged exchange rate version of inflation targeting, foreign reserve and petrodollar risk sharing and management in addition to maintaining upward stability when US interest rates rise.

Did you set your clocks forward?

Daylight savings time was today...set your clocks one hour forward. Forgot all about it. Does not make much sense to me, but I guess it serves a purpose.

Monday, March 8, 2010

Nice article..

Robert J. Samuelson, posted a good article on the Washington Post's website....

Its about the Millennials and how the baby boomer generation, in particular, has up not only their opportunities, but the opportunities for Generation X and even for the baby boomer generation themselves.

There is no way, on holy ground, could they expect to get the type of social benefits throughout the rest of their twilight. If they secure it for themselves before the make a true exit, it would be probably worked out to less than what they put aside for themselves.

That's not being cruel, but it is, well, being economically efficient- you can't subsidize, or support something that is putting in no equal value in return.

These are rough times. And, baby boomers, caused it all....

Monday, March 1, 2010

Will Cameron be the next British PM?

FT linky!

I like him (Cameron). But, I also appreciate Gordon Brown. Brown has showed tremendous leadership during this crisis and took over a Britain, behind a Tony Blair, who was one of the more stellar global statesmen that we had ever seen- more charismatic than Thatcher. To follow a path like that, like John Major tried, would have been foolhardy!

To be frank- Gordon Brown hasn't done me or any Brit, anything aside from preside over an economic crisis that no one knew would or could happen.

Also, Cameron, is a little weak on his platform- his attacks on Brown are spectacular, however. But, attacks, with a very intelligent British electorate, does not get you very far.

Cameron will be PM one day. Maybe in May- a refreshing change is needed in the British parliament. Hopefully, he will get in before Brown hands the reigns over to David Milliband- another well like, well spoken, attractive leader within the Labour ranks!

Time will tell.