A notice Peter Phillips

[Assasin]

The fact is high interest rate policy was never a short term thing under the PNP it was long term which say it was a party of their policies. The fact is they defended it on every occassion publicly except lastnight and there lies the problem.

[Islandman]

It was a part of thier policy to break the inflation rate which was running close to triple digits in the early 90s after deregulation. Let us not forget that part, it was not just high interest rates for the sake of it.

Omar was probably influenced by the success of Paul Volker who broke the back of inflation in the US in the early 80s using high interest rates. Didn't work out so well for JA , but there lies the complexities of macro-economics.

[Assasin]

The problem was there was no effort to bring it back down, it stayed high up to 10 years later and the effort was put into people investing in government bonds at high rates rather than making any effort to lower it.

Not saying it shouldn't be used short term but effort should be made to bring it lower. It would have been forgotten if is was a 6 months or 1 year thing.

[Islandman]

Yes but its not quite that simple.

What you are trying to do with high interest rates is change peoples mindset of constant devaluation and high inflation and there is no way to determine in advance how long that will take.

If you do it for 6 months stop and that mindset has not changed and people still hoarding dollars then you have wasted the effort. High interest rate is one approach but as we have seen over a long period of time it does more harm that good.

Brazil in the 90s did something totally different, they introduced a new currency and pegged it to the dollar. And it WORKED. Would it have worked in JA? Who knows. I guess it depends on the implementors and the level of confidence the public has in the leaders at the time.

[Assasin]

Well I-man, that is what we elect officals to do, find solutions. Anybody could tell Omar that long term that is not the way to grow an economy. Instead of finding solution, they took the easy way out and turn around and became sellers of that policy.

Even a few weeks ago I heard Lattibeaudierre defending it.

[Sickko]

I heard that too..he said there was no high interest rate policy by the government

[Don1]

thanks for breaking it down for the uninitiated

[Peter R]

If you had money in a high interest rate environment, as long as the gap between inflation and interest was "reasonable" why do anything else than bank the money? and if you were in the diaspora (or foreigner) where inflation didn't affect you, and the exchange rate fluctuation didn't scare you, parking money in JA at 20% or whatever it was in those heady days, was an attractive option.

The diaspora benefited financially especially those who could have gotten a local locked in mortgage and service it from foreign with a weakening JA dollar... all a we (who deh a farrin) shudda did buy property from the late 80s.... mi miss out!

If you were an ordinary working stiff in JA with no "patient" funds and needed to service overdraft and run a business etc. yu wuz unda pressha... anyway you slice it...

[Assasin]

Yes the 20% was good to park money that is what people do. However image the cost it put on mortgages and loan for the ordinary Jamaicans. Imagine business trying to compete against other regional companies that borrowed at a fair 10%, add that to our energy cost and other cost that affect production and you will see why we keep on producing less.

There are many people who choose not to part take because of FINSAC as once bitten, twice shy. As you state the high interest rate wasn't good for production at all. It is not real wealth, just like our American inflated real estate wasn't real wealth.