The PNP has transferred at least 40%

[Karl]

Wha you was under a rock in the 1990s?

Numerous businesses it affected Jawge small and large.

Even your friend Godfrey Dyer lost his hotel. Let me ask you how do you pay back a business loan at 30 and 35%. People borrow money and before they know the dollar devalue from 5-1 to 50 to one, interest rate went sky high so instead of having to pay back the original amount with interest they were paying 5 and 10 times the amount they borrowed.

Something about this is not clear. You negotiate a loan...and your interest rate is one the borrower and the lender contracts for specific period. How then do you change the terms?

..and let us claim these astute businessmen borrowed U$ funds and had planned to effect repayments in J$? Why being astute they did not convert to new J$ loans when they MUST have been projecting devaluations of the J$ vis a vis U$?

Surely there should have been increased J$ earnings if their hotel businesses became flat or grew?

I worked with Grace Kennedy in '80s when the devaluations were swift and huge...yet GK was able to plan and execute its way through that period. Certainly in the division in which I operated...and at higher levels where policies were modified to a deal with the perceived devaluations on the horizon...regular meetings were held on projection made on devaluations...and then plans surrounding ways to move forward put in place. GK weathered the storm...quite well.

What happened to those astute businessmen in the hotel trade and elsewhere who claimed the devaluations and high interest rate destroyed them? How were others able to 'run' through those 'twin minefields'?

What of others say a Glen Christian who co-founded Cari-Med in 1985 whose and today turnsover approximately U$85,000,000.00? How was he able to with little funds prosper and grow during those 'terrible' years? How come the ISSA group and Butch' group operate and grow during those same terrible years?

...40% of the ...wah...???? Lost? Ruin of the which 'black business'? What is the size of 'the black business' today? What was the size of 'black businesses' then?

Surely if it is larger than that which held during 'Dyer's going under years' then improvements in size...growth in 'black business' occured?

Is it a fact that poorly operated businesses flounder every day as well operated businesses flourish -- in the same economic conditions?

...or was it only Dyer and others of his ilk that confronted the devaluations and high interest rate regime...and the successful businesses operating within the same period, in like industries...somehow were not affected by those 'twin evils' of devaluations and high interest rates?

I do not know why I have always thought that businesses must confront and surmount the obstacles of the day (market forces, government legislation, etc., etc.)..forecast possible scenarios, put in place contingency plans, continuously modify operations as necessary to take advantage of opportunities...all for benefit of self...to remain viable and profitable?

[Assasin]

If you had US dollars you had no problem. There dollar never devalued instead it appreciated so ISSA and Butch had no problem. If they owed 1000,00 Jamaican dollar and the dollar devalue it is actually easier for them to pay it off in full while if a local businessman owed it in Jamaican dollar with the devlauation coupled with the 35% interest rate it was much harder for them. Are you comparing a the devaluation from 3.50 and five dollar over about 4 years to 5.50 to one to 50 dollars over the same period?

[Karl]

Maybe you need to do some reading for yourself Jawge, there were too many for you not to know any.

Sass: Those who throw those statements around are they also throwing around detailed figures on to back up the statements?

For starters - I would love to be pointed to figures on size of 'black businesses' before the 'crash' and size of' black businesses' now? give us a feel and number then and now?

I would also like an indepth look at how the banks that operated then that failed then? With particular focus on renumeration to the principals, conflicts in business interests, size of loan portfolios, size of deposits? ...how were these banks capitalised? What interest rates were paid to depositors? Interest rates charged on loans? How were loans managed and serviced? Any idea how policy was set and decisions arrived at? ...etc., etc?
Let's have some indepth facts? Let us see exactly what was going on?

Aside: These particular entities - Workers Bank, Century National Bank & Paul Chen-Young's Eagle Group would be good entities to have indepth look at...along with Dyer's group of entities and I am sure you could name others...would prove interesting?

[Assasin]

The government of Jamaica under the PNP choose not to do any study on the 1990s crisis despite numerous calls for it, I wonder why?

Now the present government is doing an audit, because it maybe in their favor but this should have been done before.

[Karl]

If you had US dollars you had no problem. There dollar never devalued instead it appreciated so ISSA and Butch had no problem. If they owed 1000,00 Jamaican dollar and the dollar devalue it is actually easier for them to pay it off in full while if a local businessman owed it in Jamaican dollar with the devlauation coupled with the 35% interest rate it was much harder for them. Are you comparing a the devaluation from 3.50 and five dollar over about 4 years to 5.50 to one to 50 dollars over the same period?

Are you considering that if loans were already being serviced even the locals with J$ loans would be better able to service same...as rates would have been locked in previous to each succeeding devaluation and interest rate increase? ...and if the funds were borrowed in U$ then switching to $J dollars would effect savings...or at the least stem the bleeding?

Borrow say U$100.00 @ a J$5.00 exchange rate to $1.00 at whatever rate (reasonable rate)...and on seeing/forecasting for devalutions it would be best to roll it over into a J$ loan at the prevailing fixed rate ASAP to hedge against other coming devaluations and interest rate hikes? ..or do you just throw that...like Dyer and some others...through the window?

...and seeing you are talking tourism only...would each U$1.00 earned have that increasing J$ equivalent inflow as a result of each successive devaluation?

..if say you had to service a loan with J$100.00 per month...but you are earning in U$...would that loan not become easier and easier to service as devaluations occur? ...so would it not be wise to roll over U$ loans into J$ loans as swiftly as possible?
Just wondering?

[Assasin]

The fact is most of this fund was borrowed in Jamaican dollars. How many Jamaican institution you know lend in US dollars?

The fact is nobody, not even the government of the day anticipated such a rapid devaluation. That is what created the shock.

[Karl]

The fact is most of this fund was borrowed in Jamaican dollars. How many Jamaican institution you know lend in US dollars?

I was not aware that any of the major banks and financial institutions did not?

The fact is nobody, not even the government of the day anticipated such a rapid devaluation. That is what created the shock.

I can tell you of at least one company that made contingency plans for each successive devaluation.

Grace Kennedy! Grace planned for the size and scope of those devaluations and interest rate hikes and then some!

I would think that most of us who were in on discussions at GK on such thinking also used it in our personal lives...as I am always claiming that in JA we are separated by "one degree of separation" I would think GK's thinking was known by others...and the 'thought process' could either be embraced or dismissed.

btw - Where there not constant radio commentary (...there were also print media discourse) on devaluations, interest rates and the economy...that the entire island followed?

...borrowing was in J$...for previously existing loans...would/should/could all other things being equal not servicing be easier for the borrowers as devaluations and interest rate hikes occured around them?

I know that many things occured, example...persons who bought homes found that along with values improving...prices around them escalated...salaries improved...and servicing mortgages became easier and easier...

....sure inflation was around and traders...other providers of goods and services 'went to town' on mark-ups...and profit margins... a very many made out like bandits...

Anyway let me stop pointing out some of 'the other side of the coin'...and ask you again for 'hard facts and figures'!

[Assasin]

Karl Grace Kennedy could prepare as they had huge foriegn reserves and market on hand just as Butch and Issa did. Now people who did not or people who invested in big real estate ventures are the ones who sufferred the most.

If so many made out how comes 10 years later finsac still own and closing on many people's property? Are you suggesting that there was no economic effect or that the benefit was greater than the losses suffered?

[Karl]

.


Here are some areas of disagreement. CNB was crushed for political purposes. I know Don C. and I laugh at all the lies I hear spread about him. To me he is the epitome of the emergent black entrepreneur. He built that bank based on sheer force of personality...exactly what we want for black people in Jam...to be rewarded for their applied talents and hard work. Do people even remember what was Girod Bank? The political sacrifice of DC has done much to set back the cause. Confidence has been eroded and a message sent that it is better to use political connections than to play straight and use you innate talents.

This is my opinion, and I am not trying to tell anyone what to think. I dont expect ever to be convinced otherwise.

As I tied to point out to Sass above...it is examples similar to this one I have a problem with. Where, for example, are the facts on how CNB was created and managed?

It is 'nice' to claim 'this' or 'that' created the problem or led to the problem...but where is the rational argument/facts and figures setting out the case?

Finally, I think you overstate the case for the US. Much has changed in recent times. The sins and excesses of the past have caught up with the US. The USD is now BELOW the Swiss Franc! It is in near free-fall. The US economy for the last 20+ years has been badly managed and chickens are coming home. The scale of the US trade deficit and national debt is mind-boggling. There will come a time when new financing is impossible, as the rate of US debt accumulation exceeds the rate of capital formation in the rest of the world. In other words, the capital wont even BE there to keep the party going. The whole reserve currency deal is unravelling as we speak and in any case, the entire global financial situation is perilous. UBS has gotten shaken to the core. No one knows the extent of contagion possible with the whole sub-prime debacle, which was entirely predictable and was fostered by the current Bush administration.

Let me join you in giving opinion - Somehow I think the US will take care of itself...

...and let us hope the rest of the world will be able to withstand the current fall-out?

[Don1]

Don, I agree with many of your views, but may areas of non-convergence.

The genesis of the whole thing started with Manley in 1990. How quickly everyone forgets! He got samfied by the Americans. USAID, I think, promised us a US$400 reduction in debt (forgiveness) in exchange for liberalizing the economy, chief thrust of which was floating the JAD. He rushed headlong into this (with Seaga squealing) and all the chaos of the 90s and beyond can be traced back to this. First we had the stock market bubble of 1991-92, the crash of 1993, etc. In the end, the Americans only forgave $278m of the promised $400m.

Now, I agree with the GOJ incompetence and the overarching greed of of our local business people. Indeed, the greed spread all the way throughout the Caribbean, as I had clients coming from Barbados and TNT, trying to cash in on the Jakan money machine.

The JAD eventually collapsed, interest rates skyrocketed and inflation was a serious problem. Our monetar management was chaotic.

Here are some areas of disagreement. CNB was crushed for political purposes. I know Don C. and I laugh at all the lies I hear spread about him. To me he is the epitome of the emergent black entrepreneur. He built that bank based on sheer force of personality...exactly what we want for black people in Jam...to be rewarded for their applied talents and hard work. Do people even remember what was Girod Bank? The political sacrifice of DC has done much to set back the cause. Confidence has been eroded and a message sent that it is better to use political connections than to play straight and use you innate talents.

This is my opinion, and I am not trying to tell anyone what to think. I dont expect ever to be convinced otherwise.

Finally, I think you overstate the case for the US. Much has changed in recent times. The sins and excesses of the past have caught up with the US. The USD is now BELOW the Swiss Franc! It is in near free-fall. The US economy for the last 20+ years has been badly managed and chickens are coming home. The scale of the US trade deficit and national debt is mind-boggling. There will come a time when new financing is impossible, as the rate of US debt accumulation exceeds the rate of capital formation in the rest of the world. In other words, the capital wont even BE there to keep the party going. The whole reserve currency deal is unravelling as we speak and in any case, the entire global financial situation is perilous. UBS has gotten shaken to the core. No one knows the extent of contagion possible with the whole sub-prime debacle, which was entirely predictable and was fostered by the current Bush administration.

Thanks for the great insights.

I think we can all agree that the reasons for our debacle are complex, wide ranging and inter-related. We can differ in emphasis based on our personal experiences and level of knowledge of individual situations.

I've heard of the Crawford political vendetta angle but can't say I have any intimate knowledge of that - you do so one has to defer to your overstanding.
A question - why would he be singled out? It could not be merely because of political leaning I assume - your answer may not be appropriate for this forum however.
One side says political vendetta the opposing side says greed and incompetence.
My experience tells me the truth is somewhere in the middle - exactly where I don't know.

As to the US - I am totally aware of the systemic problems of their economy. As I stated here a couple of weeks ago we are witnessing the absolute end of the post World War 2 Bretton Woods financial system engineered by the US and designed for their and their allies benefit- when last did anyone hear of the IMF or World Bank that so dominated our economic discussions in the 70s and 80s? They're absolutely irrelevant today.
Wrenching economic and political changes are underway and the long term prospects of the US look bleaker by the day. War may even be on the horizon as as the world order is realigned.

The US is a giant - with feet of clay. Their biggest adversary - China is also their biggest creditor! That's both on their current (trade) account and their fiscal (budget) account - remarkable!
So much for the "only global superpower" propaganda we heard just a few short years ago when the USSR imploded.

My point however in addressing the US economy in response to Assassin was not to glorify their economy but to point out the fallacy of comparing US responses to financial crisis to Jamaica's - I don't think a comparison is particularly useful because we are polar opposites.

One caveat though - with the world so interdependent no one can afford a precipitous collapse in their currency or the wider economy - least of all China which I believe holds over US$1 trillion in US treasuries - but is now looking to diversify their holdings because of the depreciation in the dollar.... but long term the US is well on the way to being just one of 2 or 3 world powers.

respek

[Don1]

While you are right in many areas I don't put any confidence in most businessmen, I see them as a useful tool but the greed is always there hense Cash Plus again. It would be good if they behave rational. You are right about the fact that too many of those banks stole people idea and try to over reach.

Many of the overseas company could survive as they either had extra capital, got loans abroad or convert there US dollar to Jamaican $$$ which gave them more capital in terms of Jamaican $$$ so was easy for them.

An example of this is, I had 10,000 dollars in a Jamaican back in 1990, after the devaluation from 5.50 -1 to $50.00, and interest I had 11,000 but value was no longer the same. If I had 1 thousand US dollar then it would have been value 50,000 Jamaican dollar instead so the devaluation wouldn't matter much to me. That is how I think many of the overseas companies survived.

Greed displayed by businessmen is expected and even may be OK.
Incompetence is not.

Those firms that survived the crisis - local and foreign - had a few things in common - some combination of:

1. Good planning and risk control systems
2. Operating within their means and avoiding speculative, uneconomic or trophy investments- i.e. they stayed within their core competencies
3. Avoiding excessive debt financing -in Jamaica that's often bank overdrafts at usurious rates.

[Assasin]

everything you said is true execpt "they stayed within their core competencies" some did not but survived.

You were the one who mention the greed so I am just stating that is normal for any entrepreneur but government legislation can curb that.

Many that survived had overseas capital sources that they could draw down from.

[Don1]

everything you said is true execpt "they stayed within their core competencies" some did not but survived.

You were the one who mention the greed so I am just stating that is normal for any entrepreneur but government legislation can curb that.

Many that survived had overseas capital sources that they could draw down from.

I did say "some combination" of the factors I listed - not just any one factor.

Also one can draw on overseas capital but - your business model has to be sound to access capital anywhere.

Additionally, in the case of foreign-owned financial institutions at that time - I have never seen any mention that they had to be "bailed out" or received substantial capital infusions from their parent companies.

If you have knowledge of these capital infusions please let us know.

[Assasin]

why would they need bail out if they didn't have loans in the local banks? There was no credit crunch for them as they could get funds from elsewhere.

If you remember even certain Jamaican entrepreneur pilot was caught flying a plane full a US dollars out a Ja(your good friend).

[Willi]

Don,

The CNB thing could be taken offline if you really wish.


Regarding the US fate, I agree the ROW is intricately tied to it. See the impact in Europe already from the sub-prime fallout (aka USA cash-Plus, LoL).

China was CREATED to be the US adversary and it was US firms and politicians (like Clinton selling them missile technology) that boosted up up to poster size in a very short time. In the 70s these people were lining up half a day for toilet paper and look at them now! This is deliberate global craft and the end game can be easily intuited from your last post. Everybody going down several notches. We going back to feudal times...maybe to the Dark ages.

How many airlines folded in the last 2 weeks? With fuel costs soaring, just what you think airfare will be in 2 years? Is like only millionaires will be able to travel to rhatid.

Its either we all regress or them scramble to have a new Bretton Woods and recast this colted game. Neither option will be painless, but the former would be exceedingly painful.