Hunker down, financial storm ahead – Lattibeaudiere

[Lazie]

Jamaicans have no choice but to hunker down and ride out the wave of economic gloom facing the country this year said Derrick Lattibeaudiere, Governor of the Bank of Jamaica (BoJ) on Wednesday.
Mr. Lattibeaudiere who is predicting that there will be no growth in 2009, was speaking at his quarterly briefing.

In a somber presentation, the Central Bank's Governor said, given prevailing conditions globally, Jamaicans can do no more than just hunker down and weather the financial storm.
"What we need to understand like everybody else across the world is that we need to define the fact that the economy will not grow in 2009/10 full stop ... and I've been saying this for at least two quarters, now, we need to find a way to survive through the rest of this time," said Mr. Lattibeaudiere.

He said the economy declined in the December quarter, continuing a trend which began in the June quarter of 2008.
He noted that the decline was external and domestic demand resulted in a contraction of the tradable and non-tradable sectors in the period under review.

Though inflation for the December 2008 was 0%, the BoJ is forecasting that inflation will be in the range of 1.5 to 2.5%.
The Central Bank Governor also noted that the economy will continue to experience negative growth in the March quarter based on the continued recession of the global economy into the middle of this year.
As a result, he projected that Gross Domestic Product growth for the fiscal year could decline by as much 2%.

In light of the current conditions, Mr. Lattibeaudiere conceded that it was difficult to identify a turning point.
He however noted that the BoJ is doing its part to limit the impacts of the crisis and called on stakeholders to contribute to building a foundation for sustainable recovery.

http://www.radiojamaica.com/content/view/15684/52/

[Lazie]

He said nothing about the interest rates? He needs to lower the interest rates.

[Islandman]

And send the dollar flying past 100 to 1?

[Lazie]

And send the dollar flying past 100 to 1?

Remember, even after the rates were increased, the $ continued on its upward path.

[Historian]

Oh?

Jamaicans have no choice but to hunker down and ride out the wave of economic gloom facing the country this year said Derrick Lattibeaudiere, Governor of the Bank of Jamaica (BoJ) on Wednesday.
Mr. Lattibeaudiere who is predicting that there will be no growth in 2009, was speaking at his quarterly briefing.

So, what the hell is new? (This six-sentence query is certainly not meant for you, Lazie.)

This post of Central Bank Governor in Jamaica must be one clothed in perpetuity, or else this guy Lattibeaudiere has to be the greatest financial “thing” that ever happened to our island! He’s been around for so, so long!

Oh, and yes, I am aware of the responsibilities of the Finance Minister and his ministry versus the CEO of Jamaica’s Central Bank! But back to Mr. Lattibeaudiere.... I was just wondering….

[Islandman]

I hope you don't conclude from that observation that lowering them would have no impact either?

[Hortical]

Disclaimer: I have no knowledge of economics & microeconomics.

Tell me which third world country has been able to break free from those money hogs at the IMF? If it is the policy of the IMF to maintain high interest rates, then that is to the detriment of third world countries like Jamaica.

Explain in layman's terms why it is good for Jamaica to maintain high interest rates that hurt businesses and everyday purchasers of cars & homes etc.

[Lazie]

I hope you don't conclude from that observation that lowering them would have no impact either?

No I don't! But since it didn't have the expected impact, how about trying something different? Steps need to be taken to encourage production, and the high interest rate seems as if its not the way to go.

[Lazie]

BoJ defends high interest rate regime Thursday, 19 February 2009 The Bank of Jamaica is defending its high interest rate regime.

While recognising the negative effects high interest rates have on the economy, the Central Bank says there is little option available to the authorities at this time but to keep rates at current levels.

BoJ Governor Derrick Latibeaudiere says any reduction in interest rates at this time will be disastrous for Jamaica.

"The fact that it is difficult to borrow sets a floor for what domestic interest rates because at the end of the day the investor is who determines what interest rates are,"

"So if the Central Bank went out on its own and dropped interest rates and nobody comes to the party we would have an unmitigated disaster,"

"If nobody picks up the instrument at the new interest rate then government itself may not be able to pay any salaries or carry out any activity," he said.

http://www.radiojamaica.com/content/view/15704/52/

[Islandman]

Well here is my own disclaimer first: I am not formerly trained in economics but I consider myself an eternal learner of the subject, particularly macroeconomic policy. So take what I say with that in mind.

First of all let me say that I am not a big fan of the international lenders myself but I think in some respects they are used as a convenient enemy by third world politicans. Take this quote from PJ Patterson in 2002:

"They said that they would build 6,000 houses but because of the IMF they were put under heavy manners and couldn't build any. We were able to rid ourselves from the IMF.... and we were able to build 70,000 houses," Patterson told cheering supporters.

A country is free to choose to deal or not deal with the IMF and World Bank. That is an issue in itself worthy of debate.

Interest rate policy though, is not tied to the IMF or World bank. It is astandard economic weapon for fighting inflation and devaluation, but it has severe side-effects. The role of govt is to determine if the side effects are more or less harmful than the original ailment. This will depend on the nature of the economy being dealt with and the effectiveness of the govt in implementing the policy.

As an example, The PNP govt of the early nineties lowered interest rates for a while and the result was almost triple digit inflation, massive increases in imports and servere devaluation WITHOUT any notable increase in productivity except for creating our own local financial bubble where banks started speculating in everything from real estate to running hotels. Then Omar Davis came in and implemented a high interest rate policy and was able to get inflation under control, but the price was a popping of the financial bubble and eventually FINSAC.

I am not trying to defend or criticise high interest rates, just making the point that these are VERY difficult problems and the solutions are only found by trying different permutations and combinations in policy. Some will work, some will fail miserably. What works for one economy will not necessarily work for another.

They call economics the dismal science for a reason. Truth be told it is not a science at all since it is all but impossible have a definate proof of a theory since conditions are constantly changing.

Take the current debate in the US about economic stimulus, are tax cuts or outright government overspending the better solution? Throughout history there have been credible economists that have directly opposing views and it seems there is no absolute answer because in the past government spending to stimulate the economy has worked (late 30s-40s) and then not worked (70s) and tax cuts have worked (1980s) and then not worked (currently) so what do you do? Obamas team seems to have decided to not be caught up in the ideological debate and implemented both in a 60/40 split. Many see this as prescribing half of the correct dosage (which is correct depends on what your ideology is) so I guess if it fails he will be blamed by both sides.

Sorry for the long post but I hope that helps explain how I see it.

[Don1]

Well here is my own disclaimer first: I am not formerly trained in economics but I consider myself an eternal learner of the subject, particularly macroeconomic policy. So take what I say with that in mind.

First of all let me say that I am not a big fan of the international lenders myself but I think in some respects they are used as a convenient enemy by third world politicans. Take this quote from PJ Patterson in 2002:

"They said that they would build 6,000 houses but because of the IMF they were put under heavy manners and couldn't build any. We were able to rid ourselves from the IMF.... and we were able to build 70,000 houses," Patterson told cheering supporters.

A country is free to choose to deal or not deal with the IMF and World Bank. That is an issue in itself worthy of debate.

Interest rate policy though, is not tied to the IMF or World bank. It is astandard economic weapon for fighting inflation and devaluation, but it has severe side-effects. The role of govt is to determine if the side effects are more or less harmful than the original ailment. This will depend on the nature of the economy being dealt with and the effectiveness of the govt in implementing the policy.

As an example, The PNP govt of the early nineties lowered interest rates for a while and the result was almost triple digit inflation, massive increases in imports and servere devaluation WITHOUT any notable increase in productivity except for creating our own local financial bubble where banks started speculating in everything from real estate to running hotels. Then Omar Davis came in and implemented a high interest rate policy and was able to get inflation under control, but the price was a popping of the financial bubble and eventually FINSAC.

I am not trying to defend or criticise high interest rates, just making the point that these are VERY difficult problems and the solutions are only found by trying different permutations and combinations in policy. Some will work, some will fail miserably. What works for one economy will not necessarily work for another.

They call economics the dismal science for a reason. Truth be told it is not a science at all since it is all but impossible have a definate proof of a theory since conditions are constantly changing.

Take the current debate in the US about economic stimulus, are tax cuts or outright government overspending the better solution? Throughout history there have been credible economists that have directly opposing views and it seems there is no absolute answer because in the past government spending to stimulate the economy has worked (late 30s-40s) and then not worked (70s) and tax cuts have worked (1980s) and then not worked (currently) so what do you do? Obamas team seems to have decided to not be caught up in the ideological debate and implemented both in a 60/40 split. Many see this as prescribing half of the correct dosage (which is correct depends on what your ideology is) so I guess if it fails he will be blamed by both sides.

Sorry for the long post but I hope that helps explain how I see it.

Good job... especially for someone not formerly trained in macroeconomics.



critique inspired by Historian the Wise

[Islandman]

Heh heh. My high school English teachers would cringe at that one.

And that damn edit button has expired.

[Mosiah]

Lazie, why can't the govt. come clean about the financial outlook for Jamaica?

[Lazie]

Lazie, why can't the govt. come clean about the financial outlook for Jamaica?

I'm not certain what yuh looking for. Various Ministers have spoken about it, exactly what yuh want dem tuh say? The OM announced a "stimulus package" a few months back ... why did he do it? Shaw obtained loans to help businesses who are having problems with credit .... why?