Can Craw-fishermen learn from OPEC?

Agriculture in the Bahamas, as a percentage, is roughly 2% of GDP. Within the agricultural sector, the fisheries sub-sector has been playing a particularly dynamic role, consistently accounting for more than 75% of total agricultural output and with the craw fish industry, yielding anywhere from $60 to $100 million dollars (USD) per year- or on average of about 85% of the value of all fisheries output. For a country with less than 400 thousand people and for a sector that employs less than 10 thousand, country wide, that's a considerable amount of wealth for persons in the fisheries sector.

To show you how important this industry is, the Economic Partnership Agreement (EPA) with the African-Caribbean and Pacific (ACP) countries and the European Union (EU), with regard to the base importance for the Bahamas, was focused on protecting the crawfish industry, among other issues.

Fish-houses and major exporters wanted an EPA for the express purpose of greater market access into the EU. Hence, they lobbied vigorously for the provisions that the EPA provided with regard market access. Pretty academic stuff, when we factor in that if the Bahamas didn't, they would be hit with import tariffs into the EU and our competition, would not. The actual benefit, overall, of the EPA is another discussion that can take up another page and one that will be argued at a later date.

Who generates the most wealth from the fishies sector however, is another story. You can make a pretty fair assumption that the processors and exporters make the most profit, as is the general rule with any agricultural production chain- the producers sell low and the processors and exporters, sell high.

But, regardless, fisher-folk can and should make a healthy, or, perhaps, make a mint, if they choose work together to combat the issues surrounding the current world economy and distortions surrounding their market.

Through speaking with local fisher-folk, they have indicated to me that they were receiving up to $14 per pound in 2006-2007 for crawfish. In 2008, they got, if possible, just about $7 per pound and this year, they started off at just about $6 per pound. That's a huge drop. With considerably high living standards in the Bahamas, fisher-folk have to now adopt and maintain practices they employ in the off season to ease their burden like; construction related work, various service related jobs that have no relation to the fisheries sector; i.e., clerking, transportation and leisure services... etc.

The best and most relative thing that could happen within the fisheries sector, with regard to the individual crawfisher folk, is for them to adopt a policy used by the cartel of oil producing countries, OPEC, and that is cut the supply of crawfish to artificially raise the price.

While this may sound weird to some, if we take into consideration the success of OPEC with controlling output, it may not sound so far fetched.

For one reason to cut prodcution, why would anyone go out to harvest the same amounts, with the same work load, with relatively high fuel prices and last year's equipment, to get less for their share of the work? Also, can you sustain the same harvest levels you had in 2006 today, in any event? So, if they were to harvest less and alternatively spend time perfecting the services they did in the off season, it would have an un-intended consequence of a stronger cross-training of fisher folk.

Secondly, when you cut the supply of any commodity- like oil or crawfish- the price automatically rises, if demand stays constant, because there is less to go around for a larger market. Even at current demand, if we were to cut the supply, for the same amount of people, all tastes considered, you can make a larger profit per catch and manpower. To be fair, crawfish will not go out of style and there will, by all intents and purposes, be a market for food, especially delicacies like lobster/crawfish.

To go even further, if an individual fisherman was harvesting over 150 lbs of craw-fish, at $14 per lb in 2006, and now he is harvesting the same amount for $6 per lb in 2009, then if he was to cut the supply to about $50 per lb, in a successful attempt to raise the price of his catch to $8 per lb, he still wins because the profit margin per lb has increased for less effort. Considering the fact that he uses less fuel and manpower to harvest and considering the effect of less crawfish to go around, he would have made a larger profit rather than going all out on expenses to get less for his effort.

Of course, this depends on crawfisher folk, coming together to agree on a base price. In fact, depends on crawfisher folk coming together, nation wide, all together. This also means that if they were to come together, the likelihood of someone circumventing the effort by going out to sell his catch for less than the agreed upon price, is bound to occur.

For the former, if a meeting of all fisher-folk were to be held to address this, then you have a case and a base to work from on some of the common challenges, like the decrease in value of crawfish per lb.

Also, for the latter, if an individual fisherman, were to go out of his way to circumvent the groups agreed upon price, it is solely up to him to want a lower price for more work. But, yet still, that one individual would not be in a position to affect the overall market price, if all of the other producers are in agreement on a set price and a set harvest and shared storage mechanism.

In addition, the relevant fisheries stake-holders should look into expanding their market base. Take for example the effect China and India has on global demand for energy. Since the emergence, of at least China, oil prices have risen and will stay beyond $40 per barrel just to adjust, permanently, to China's growing energy demand.

Before the emergence of these two emerging economies, oil could have very easily remained at $40 or less per barrel.

If fisher folk were to expand their markets, with perhaps the assistance of the exporters- which may not happen, but it is worth mentioning- they can decrease their supply by adding to the list, two to possibly, three, new customers, aside from the EU and the USA.

There are other issues, not based on reflections on the oil markets, fisher folk in the Bahamas and Caribbean wide can glean examples from. But, coming together to make better this terrible economic situation, is the first step. Meaningful dialogue to induce positive action on the bottom line for their families, is the other.

Who knows, perhaps there can be a Caribbean wide crawfish association, started right out of the Bahamas? One can only imagine!

Now that I’ve done my part, the next fisherman who reads this page, can contact me to pick up my kit of fish for my troubles.

Europe is so predictable!

The BOE and the ECB kept its rates steady today. Most likely in sync with inflationary expectations held by Bernanke over at the US Fed. This seems like coordinated international cooperation, indeed. Perhaps the only form we will see at this time...well, maybe the only type we really need or want, considering how competitive these three jurisdictions are.

The BOE is also expanding their Asset Purchase program, from 50 billion pounds to 175 billion pounds. I would like to see under what premise are they expanding this program and still have the nerve to keep rates as they are. They have added a provisional note to their notice, but this note only explains how they are going to do what they are doing and not enough of what is the reason behind it?

Well, the reason given is that bank's balance sheets still need repairing and they want to take off as many bad debt as they can from private banks, so that they can lend again. I am wondering however, if this is just for mortgage backed securities or has the BOE made a general sweep on what would be determined bad debt and given banks a free pass to clear their sheets--with an ongoing economic crisis, where not on mortgage related debt's are delinquent, but even regular consumer loans as well?

We need more clarification. The ECB is another issue and I am not quite sure what their policy is directed to. They have a bigger market and, perhaps, they are shotting in the dark. We will only have to wait and see.

The economy in the UK and the Euro-zone is in still a pretty sad state. The rates are pretty low at 1.5% for the BOE and 1% for the ECB. There has been no sign of uncontrollable inflation or inflation at all....housing is still weak and the construction sector, is still hampered by a lower than usual commercial real estate market.

Internet is down people...

Hi all,

I have been down for the last three days, due to technical difficulties. I'm on a remote PC, so still not up at home yet.

Just thought I would put up a FYI....

Read the archives.

Best,

Youri

I so hate this.....

UK regulator summons oil market players. FT article!

The UK regulator (FSA- Financial Services Authority) has consistently maintained that the surge in oil prices to record levels close to $150 a barrel last year was due to fundamental supply and demand factors and not to speculative flows.

It pains me to even listen to this be broken down into a dog and pony show.

Why would we listen to the FSA, the financial services watchdog--the watchdog that allowed the collapse in the first place with respect to the credit crunch and the economic meltdown spurred by Wall St. and London City-- to tell us that they don't feel that there is a problem with the speculation causing all of the fluctuations in the oil market?

What do you expect them to say? Say that they were not doing a good enough job?

Listen, the fear of the economic fundamentals collapsing from political and commercial intangibles, which spurred speculators to spot the price of oil on those broad assumptions.

Don't tell me either than speculation had nothing to do with it at all. Yes, I do agree, fundamentals played a role but a bit role. But, economic fundamentals did not and do not set the price. The speculators do in the futures market.

They price according to WHAT THEY FEEL is the right price. And, they further price on the premise of what production would be in the future and to how much people would be willing to pay.

Quit all of the God dammned lies.

I need pictures!

I was just added by a guy called Scott, who has a blog about politics...
POLITICS: By Scott/... and I noticed he had a picture up with every blog.

I need an upgrade with the colour as well. The colour is a little too dark. That and pics, should have folks reading.

The content is good. But, presentation, can go allot further.

Ease the tension!

How do you put toothpaste back into its tube? Ask Chairman of the United States Federal Reserve, Ben Bernanke. He has a plan to tame inflation, after the U.S. banking system and the economy, on the whole, received massive dollops of capital heaped onto it. Good luck, Uncle Ben!

But, what tools does he have, truly, if any, to tame inflation in the short term and long term? In order to answer that question, we don't have to look back at the beginning of the credit crisis, but only at the response and its intended impact.

The first and foremost thing should be to undo what you did, if there really is a huge concern. But, things have changed since the state intervention. Least of which, is that a few banks and credit institutions, went out of business. Also, more importantly, producers and businesses also have scaled back production or have gone out of business as well. In addition, no one is quite sure-- well some of us are sure-- which way the U.S. stimulus package would create a bubble, or if whether or not international markets, for particularly oil and gold, would create a situation where trying to tamp inflation would be ineffective, coupled with the idea that it may, at this time, do more damage to growth.

Forget about your inflation target range and, perhaps, put on your output gap caps! The U.S is in for the third phase of this crisis. The first being the actual credit squeeze, the other in combating deflationary pressure and the other, now, managing inflationary expectations.

Due to the reality of 2008, with regard to blocked credit markets, the Federal Reserve, with the acceptance of the U.S. Treasury under both president's Bush and Obama, implemented two plans: The Target Asset Relief Program (TARP) and a strategic monetary tool, Quantitative Easing (QE).

TARP was supposed to, by all intents and purposes, inject credit back into the market, through the Fed. purchasing troubled assets that, under then present circumstances, could not have been sold. In addition, this was also supposed to induce banks to lend to businesses and home owners again, once the risk of writing down or the loss of those troubled assets, mostly home securities and collateralised debt obligations (CDO's), were removed from balance sheets.

The critical issue of contention are the warrants- stock options- the US government took in companies that sold their troubled assets to the government. These warrants are essentially equity the US government bought into banks in exchange for expunging the current market value of the troubled asset from the bank sheets.

The premise for this policy, with regard to spurring banking activity while creating stability and security within the market, with the aid of a sub-program, the public private investment program (P-PIP), was for the government to be able to make a profit on these assets, when the market gets back to normal as well as for the private investors, who participated in the program.

Herein lay the major issue. Banks don't want to buy back those troubled assets, or, in other terms, recoup their warrants from the Fed.. They are more than willing to allow the government to own these assets, and resume banking activity under a new slate- even though the US government, in essence of those warrants, owns stakes in those companies. So, the Fed is stuck with these assets for a time, which it will have to sell at below what ever the future the market value is, even though they should make a profit with all things considered, but at the same time rewarding the banks that failed by absolving their losses.

This may be a good thing. For one, the US government does not have to inject as much credit, at a time that is of their choosing if they wish to do so, and over-inflate the US economy. The second issue is that, through this mechanism, the government can control the price of those assets and ease them back into the market, while still making a considerable profit for the tax payers, for it to go back into useful public projects. The only concern is if traditional investors hold out for a lower than fair market price for the assets and create a bottom market, only to over-heat on the real market when the government winds up TARP.

The second policy response, as said, has been with QE.

QE, quite simply, allows central banks to increase the amount of credit into an economy, by purchasing government bonds in the open markets, and in effect, increasing liquidity to private banks.

The U.S. Fed, in this case, created money to purchase these government securities held by private banks, in order to free up credit markets after traditional policy responses, interest rate cuts, were proven ineffective.

Princeton University Professor, Paul Krugman, suggests that the U.S. is in a liquidity trap of sorts, where it does not matter if whether or not QE or the interest rate remain at or cut below 0%. His premise rests on the then obvious fact that the rate cuts didn't work and, hence, QE was made an additional tool. But, while that may be true and while confidence has crept back into the markets, the issue now; is if whether or not it worked too well for the private sector?

I say this, under the premise that the Fed. bought these government bonds at a time when the market was looking for credit, and the Fed. bought their securities at a nearly rock bottom market price and interest rate. The plan would be to, now, implement a reverse repurchase agreement with the banks that sold government bonds to the Fed., which may or may not be bought back by banks at a relatively high rate. Leaving the Fed. with assets on its own balance sheet, which it may find difficult to sell at a higher price, which would absolutely sop credit out of the market if welcomed by the banks, while at the same time, leaving banks with the capital the Fed. injected, with no guarantee, unless we were to have lending restrictions through the U.S. Treasury- which may be counter-productive to the recovery effort- in order to stave off inflation.

The good and bad thing about the amount of liquidity through QE, is that the U.S. dollar is weak compared to other currencies. This may encourage, seeing that the worst is over, international investors to buy the dollar in hopes of making an appreciable profit. This would mean dollars would exit the U.S. market, to, let's say, China.

While no plan is fool proof and having no plan at all, can, in some cases, be better than a bad plan. Any plan for inflation however, should take into consideration some of the things that have been done to increase inflation as aforementioned in this article. Don't assume that the interventions are 180 degree undoable either.

What type of Economic system does the Bahamas have?

I normally don't comment on Bahamian concerns as a matter for focus, or, for that matter, want to convey the idea that I'm a dues ex-machina of sorts, drifting down from the rafters with solutions to any of today’s problems. However, my bias to my country has gotten the better of me on this lap. While it will be from an external and totally unprejudiced concept, the issues can be related to that of the system we have today and I must ask the reader, to allow me to find the range, so to speak, to deliver a message that isn’t path breaking by any means, but needs to be reiterated in any event.

What type of economic system does the Bahamas have? To quote a statement made recently about the Bahamian society in general; we have a "buck-up" society [economic system]. To attempt to put it more diplomatically, we have an open economic system, which is not entirely economically focused on efficiency. While that sounds laissez faire at its utmost, the idea that we have more law than we need is also relevant.

For the benefit of the general public, there are several systems and many different ideologies that back that system up with intellectual arguments. The most popular of these are either or, two main types- the market economic system and the command system. The former is a system based on supply and demand and the latter, is, quite directly, a communist style system where the government has control over production.

To be fair, no single economy is or was either of the extreme. For example, many developed countries have a system where the supply and demand for, let's say, energy, is set by obvious supply and demand forces. You need energy, so you have to buy oil or oil bi-products, at least. So, an economy supplies the public with oil for energy to consume. But, with regard to the capital market structure and those ever pesky derivatives placed on commodities, the price may not be set by simple supply and demand. But, placed on whether or not the price of a good may be more or less expensive in the future. So, you are paying for the future price, which may not be set by the current demand for oil.

That is not supply and demand in the purest sense. But, this is the price of the supply being commanded by what forecasters think a good is worth in the future.

On the other hand, the former Soviet Union was a command economy in almost the strictest sense. But, the misconception of the former SU was that the government controlled, wholly and solely, the means of production. This wasn’t quite the case before Perestroika in the 1980's and certainly not after. The truth lay in the fact that the former Soviet Union, had government control, but the means of production was set between powerful oligarchs that controlled the means of production on behalf of the state. The government, in turn, had the power to- as does every country through the strictest form of eminent domain- "own" the entity, but not in control of the forces that made the goods produced valuable or needed. I guess you can imagine the corruption at the highest level.


The logic of the matter however, is that a state or entity, can only, or, will only, be able to produce the goods that people need or want. Aside from necessities like food and water, if the entity owns the means of production, there is no guarantee, unless the consumer is forced to pay for something unwanted, that anyone at anytime would purchase anything.


This leaves the case open for the second misconception about the SU; the issue that it did not have any competing industries in the same sector. The fact of the matter is, particularly with oil and gas, the SU had several competing government agencies responsible for the market share. The notion that, yes, the government owned the entities was true. However, the same entities were not operating without competition.

With both extremes, market economies and command economies, the Bahamas lies in between neither. For example, we have wholly owned state entities. They are not subject to competition, which is true. The state does not own everything, however.

The Bahamas, from all verbal intent and crude attempt, seems to be patterned after the Anglo-Saxon (AS) economic model. This is a model which proposes the capitalist version of the market economic system, which is then tethered by the Westminster System of governance from the position of parliamentary democracy from the fasciations of ethnic sameness and religion.

This is evident in the predominance of the religious cultural state of being in the Bahamas, with the back drop of US and British influence, the latter having least of which, the political system and the former, with the premium placed on the USA's free market, capitalist ideology.

This isn't to say that this is the best for the Bahamas. Or, for that matter, that we have the capacity to follow this fluid economic model to a tee. In fact, many have supported the idea of drastic measures- most important of which is the defenestration of the AS model and all institutions that subscribe to it. However, the argument that it speaks directly to our cultural experience, from premise that it relates to the origin on our Commonwealth's existence and that of its indigenous people, is something that is obviously incongruent to what the experience is on the ground.

One large fact is that the common law protection for property rights, which underpins the AS model, when we are now in the era of increasing formality of a purposefully pervasive opaque legal structure, on top of the issue that less and less Bahamians have access to real property due to sky-rocketing prices triple to what they were 20 years ago under this current ideological system--in addition to the exposure to what the complexities of intellectual property-which global economy has placed a significant premium- means to Bahamian entrepreneurial ideas and the weak institutional protection for those ideas, signifies to this author, as I assume that it does for allot of Bahamian people, that this system is way beyond inefficient. In fact, it is, perhaps, regressive and at worst, oppressive.

One important point I wish to impart in the idea of fairness, is that the AS model is fluid. But, it has not been maximized by former colonies. For what ever reason, changes still rests on the progenitor and their acknowledgement of what changes former colonies wish to work within that geographical framework. From this aspect, the salience of what is deemed as important macro-economic principles are very strong.

The AS model isn't the only working game or variant in town. While my preference for a Coordinated Market Economy (CME) style is up for another discussion, the extent to which reality of economic adjustment will be continuous, planned or not, whether it is led by a new social order, a new political pecking order or the new economic order, itself, is not.