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It is time to become proactive and not just reactive
Lloyd B Smith
Tuesday, February 03, 2009
"Is it not odd that while other countries are reducing interest rates, Jamaica is not? Is it not odd that while other countries are seeking economic expansion to grow their way out of the recession, Jamaica is contracting its economy? Something is wrong. The policy mix needs urgent review." So said former prime minister, Edward Seaga while giving the keynote address at the Jamaica Stock Exchange's Investment and Capital Market Conference at Rose Hall Resort and Country Club, Montego Bay, on January 27.
Lloyd B Smith
There is a Jamaican saying that "if fish come from river bottom and say there is shark down there, then believe 'im". Edward Phillip George Seaga, like it or not, has been one of Jamaica's great minds when it comes to matters financial.
Yes, he may have forgotten about one of his loans, as some of his detractors are quick to quip, and during his tenure as prime minister or as minister of finance and planning, his policies might not always have worked, but as an institution builder and one who has had a full grasp of the Jamaican economic landscape, he stands head and shoulders above most of those who make their mark in that field.
And what makes his recent utterances even more timely and instructive is that he was speaking in the presence of the current minister of finance Audley Shaw as well as his immediate predecessor, Dr Omar Davies. I was at that function and I observed with some amount of interest and amusement the body language of both men as Mr Seaga delved into his presentation entitled, "The paralysis of high interest rates." Both men appeared to be far from being at ease. Dr Davies often looked up into the ceiling of the ballroom as if saying to himself, "Here we go again," while Mr Shaw, for the most part, bowed his head as if in prayer (for deliverance, perhaps?)
Those sitting near to me revelled in the fact that here was a former leader of the Jamaica Labour Party taking pot shots at a JLP administration. But what is wrong with that, I asked.
Patriot first, partisan second. In this vein, Mr Seaga must be commended for his candour, insight and no-holes-barred intervention.
Said he inter alia: "This strategy to compress the economy by driving up interest rates has several negative consequences:
SEAGA... has been one of Jamaica's great minds
. The cost of debt will increase
. So will consumer and other prices
. Higher interest rates will attract investment away from the stock market reducing investment on the exchange
. Economic growth, which is already marginal, will falter and slide.
As simple as ABC?
Is Mr Seaga revealing something that the rest of us do not know? Most certainly not. Just about everyone who is into some kind of business and who has to borrow from a bank knows and appreciates what the erudite former politician is expatiating about. So why does the Bank of Jamaica with the apparent blessing of the Bruce Golding administration continue to cause interest rates to go up in order, it insists, to mop up liquidity which, if not done, will see the Jamaican dollar being seriously marginalised by its United States counterpart? Who or what really benefits from this seemingly ludicrous and impractical policy?
Help, Ralston Hyman, John Jackson, et al. You are the gurus out there. Explain to us lesser mortals what the hell is happening to us, please!
And what about our indefatigable and ever so vocal minister of finance? What is his response to this statement from Mr Seaga. "It is easy to blame the banks but government persists in issuing debt instruments at extraordinarily high rates which set the bar for the banking industry.
"It is time to come to grips with this dilemma by thorough study and effective action. I believe lower interest rates will attract more customer response and could compensate for the reduced margins of the banks. An empirical study is needed to determine what steps could be taken."
So Maas Eddie has thrown down the gauntlet, but will he and the rest of us who are already pilloried by this high interest rate regime and a falling dollar get any meaningful, positive responses from officialdom or the captains of industry? Will his observations be dismissed as just the rantings and ravings of an old man who has been there, done that? Or will his recommendations be taken on with a sense of urgency?
What is most disconcerting to me is that this JLP administration, with all its criticisms of the previous PNP regime, seems hell-bent on sticking to the same old, tired, non-productive policies of the 70s, 80s and 90s. One would have thought that given the current world recession, the full effects of which have not yet come to our shores, the Shaw-Wehby-Nelson team (popularly known as "One Third") would be seeking to sing a different tune.
To begin with, government needs to do everything in its power to grow the economy, not contract it. And those of us who form part of the productive sector are most disappointed that to date all we are getting a lot of is talk, talk, talk; promises, promises, promises. It is time to become proactive and not just reactive - a classic case of trying to catch the horse after it has bolted through the gate and sped away!
If Mr Seaga is right, then let the debate begin and let us go back to the drawing table as a nation and come up with a mix of policies that will take us on the road to economic independence. We as a people are tired of seeing our prime ministers and ministers of finance being international mendicants; we are tired of watching successive governments pursuing policies that lead to stagnation rather than growth.
If Mr Seaga is wrong, then let those who have the right answers come forth and be heard loud and clear in the corridors. In these adverse times, many opportunities abound but government must inspire, provide the necessary incentives and create the appropriate environment in which dreams will not just come to die, but to flourish. An icon of the Jamaican socio-political landscape has spoken. Will he be yet one more John the Baptist crying out in the wilderness of despair and hopelessness?
Lloyd B Smith
Tuesday, February 03, 2009
"Is it not odd that while other countries are reducing interest rates, Jamaica is not? Is it not odd that while other countries are seeking economic expansion to grow their way out of the recession, Jamaica is contracting its economy? Something is wrong. The policy mix needs urgent review." So said former prime minister, Edward Seaga while giving the keynote address at the Jamaica Stock Exchange's Investment and Capital Market Conference at Rose Hall Resort and Country Club, Montego Bay, on January 27.
Lloyd B Smith
There is a Jamaican saying that "if fish come from river bottom and say there is shark down there, then believe 'im". Edward Phillip George Seaga, like it or not, has been one of Jamaica's great minds when it comes to matters financial.
Yes, he may have forgotten about one of his loans, as some of his detractors are quick to quip, and during his tenure as prime minister or as minister of finance and planning, his policies might not always have worked, but as an institution builder and one who has had a full grasp of the Jamaican economic landscape, he stands head and shoulders above most of those who make their mark in that field.
And what makes his recent utterances even more timely and instructive is that he was speaking in the presence of the current minister of finance Audley Shaw as well as his immediate predecessor, Dr Omar Davies. I was at that function and I observed with some amount of interest and amusement the body language of both men as Mr Seaga delved into his presentation entitled, "The paralysis of high interest rates." Both men appeared to be far from being at ease. Dr Davies often looked up into the ceiling of the ballroom as if saying to himself, "Here we go again," while Mr Shaw, for the most part, bowed his head as if in prayer (for deliverance, perhaps?)
Those sitting near to me revelled in the fact that here was a former leader of the Jamaica Labour Party taking pot shots at a JLP administration. But what is wrong with that, I asked.
Patriot first, partisan second. In this vein, Mr Seaga must be commended for his candour, insight and no-holes-barred intervention.
Said he inter alia: "This strategy to compress the economy by driving up interest rates has several negative consequences:
SEAGA... has been one of Jamaica's great minds
. The cost of debt will increase
. So will consumer and other prices
. Higher interest rates will attract investment away from the stock market reducing investment on the exchange
. Economic growth, which is already marginal, will falter and slide.
As simple as ABC?
Is Mr Seaga revealing something that the rest of us do not know? Most certainly not. Just about everyone who is into some kind of business and who has to borrow from a bank knows and appreciates what the erudite former politician is expatiating about. So why does the Bank of Jamaica with the apparent blessing of the Bruce Golding administration continue to cause interest rates to go up in order, it insists, to mop up liquidity which, if not done, will see the Jamaican dollar being seriously marginalised by its United States counterpart? Who or what really benefits from this seemingly ludicrous and impractical policy?
Help, Ralston Hyman, John Jackson, et al. You are the gurus out there. Explain to us lesser mortals what the hell is happening to us, please!
And what about our indefatigable and ever so vocal minister of finance? What is his response to this statement from Mr Seaga. "It is easy to blame the banks but government persists in issuing debt instruments at extraordinarily high rates which set the bar for the banking industry.
"It is time to come to grips with this dilemma by thorough study and effective action. I believe lower interest rates will attract more customer response and could compensate for the reduced margins of the banks. An empirical study is needed to determine what steps could be taken."
So Maas Eddie has thrown down the gauntlet, but will he and the rest of us who are already pilloried by this high interest rate regime and a falling dollar get any meaningful, positive responses from officialdom or the captains of industry? Will his observations be dismissed as just the rantings and ravings of an old man who has been there, done that? Or will his recommendations be taken on with a sense of urgency?
What is most disconcerting to me is that this JLP administration, with all its criticisms of the previous PNP regime, seems hell-bent on sticking to the same old, tired, non-productive policies of the 70s, 80s and 90s. One would have thought that given the current world recession, the full effects of which have not yet come to our shores, the Shaw-Wehby-Nelson team (popularly known as "One Third") would be seeking to sing a different tune.
To begin with, government needs to do everything in its power to grow the economy, not contract it. And those of us who form part of the productive sector are most disappointed that to date all we are getting a lot of is talk, talk, talk; promises, promises, promises. It is time to become proactive and not just reactive - a classic case of trying to catch the horse after it has bolted through the gate and sped away!
If Mr Seaga is right, then let the debate begin and let us go back to the drawing table as a nation and come up with a mix of policies that will take us on the road to economic independence. We as a people are tired of seeing our prime ministers and ministers of finance being international mendicants; we are tired of watching successive governments pursuing policies that lead to stagnation rather than growth.
If Mr Seaga is wrong, then let those who have the right answers come forth and be heard loud and clear in the corridors. In these adverse times, many opportunities abound but government must inspire, provide the necessary incentives and create the appropriate environment in which dreams will not just come to die, but to flourish. An icon of the Jamaican socio-political landscape has spoken. Will he be yet one more John the Baptist crying out in the wilderness of despair and hopelessness?
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