Who agrees with Seaga that the JA dollar should be pegged?

[Mosiah]

It seems only Lazie, Muadib and Assasin believe pegging the dollar would be a good economic move. Over the last few days, there have been numerous interviews with economists/financial analysts in Jamaica and not one of them agree with the Financial Wizard. Not Dennis Chung, Ralston Hyman, Colin Bullock...you name them! Is suh di whole a dem fool and Seaga one have sense?!!?

Pointless To Peg
Published: Thursday | October 11, 2012 24 Comments

Former Central Bank Governor Derick Latibeaudiere.
Daraine Luton, Senior Staff Reporter

Latibeaudiere says 'simplistic solution' won't help Jamaica's economic situation

FORMER BANK of Jamaica Governor Derick Latibeaudiere is contending that a change in the exchange-rate policy will reap little or no dividends to the country.

Speaking with The Gleaner yesterday, in reaction to a special presentation by former Prime Minister Edward Seaga to a joint sitting of the Houses of Parliament a day earlier, Latibeaudiere declared there was nothing wrong with the system on which the exchange rate is built.

"I want us to stop looking at systems and look more on the fundamentals. If the fundamentals are right, you don't have to think about which system you are going to use. The exchange rate would remain relatively stable if the fundamentals are right," Latibeaudiere argued.

Seaga, who also held the finance portfolio during his tenure as prime minister, had on Tuesday reiterated his long-held belief that a pegged exchange rate could open the door for potentially massive inflows of low-interest foreign exchange for mortgage financing and investment since the risk of devaluation or depreciation of the dollar would no longer exist.

"This would be revolutionary for attracting low-cost funds for agriculture, education, infrastructure and low-cost housing, creating thousands of new jobs," Seaga had said.

He also argued that "it would restore the economic growth which has been stagnant for two decades because the increased prices which follow devaluation would cease, ensuring that none of the substance of growth would be extracted from the GDP (gross domestic product) to pay the higher prices of devaluations".

ADDRESS UNDERLYING DYNAMICS

However, Latibeaudiere yesterday told The Gleaner that "it is just a simplistic solution".

"If the exchange rate moves, it is not a fault of the mechanism that you have. It is a fault of the underlying dynamics," Latibeaudiere said, while contending that it was the market that should determine the exchange rate.

"People go around and they blame systems. Jamaica is replete with examples of trying things. We go and we take a bit from here … . We (say that we) need to be like Cayman and we need to be like the Turks and Caicos, and we need to be this and that. At the end of the day, a system can't deliver for you what the fundamentals, that are out of whack, can deliver," Latibeaudiere said.

He added: "If the fundamentals are not correct, it is pointless you talk about systems. The fact of the matter is that demand and supply is in disequilibrium in the foreign-exchange market. I am not saying that it is easy to fix. The fact of the matter is that we are not earning as much foreign exchange as we want to spend and no amount of juggling is going to fix that."

SEAGA WANTS STUDY

In the meantime, Seaga yesterday told The Gleaner that he was not headstrong that the answer to Jamaica's foreign-exchange problem lies in pegging the exchange rate.

"I have never advocated a fixed, as a matter of fact, I am not even advocating the pegged. What I am saying is that these are the benefits that we can have from the peg. Now let us have a study of it and be certain," Seaga told The Gleaner.

He added: "I would like an urgent high-level academic study done on the pegging of the exchange rate."

Seaga said Jamaica's history was replete with examples of policy errors "because reality checks tell you it wasn't right".

"In other words, no studies were ever done on Federation and none were done on the incentives and tax relief that were given in the 1960s ... . Which businessman in his right sense would take a mighty jump, a hell of a leap without determining whether he can cover the ground?" he contended.

Seaga argued that with a pegged exchange rate, the authorities would determine the rate of exchange for the currency.

"We are already tied to the exchange rate, that is the rate of exchange that we measure the values of each currency. What the peg does is that the rate does not move. It is fixed, but you don't call it fixed because there are more rigid ways of fixing," he contended.

The former prime minister said he pegged the rate from 1987 to 1989, "and that is how we grew at that time".

daraine.luton@gleanerjm.com

[Gamma]

Well it has worked for Panama ......

[Historian]

Maybe You Found the Answer!

It seems only Lazie, Muadib and Assasin believe pegging the dollar would be a good economic move. Over the last few days, there have been numerous interviews with economists/financial analysts in Jamaica and not one of them agree with the Financial Wizard. Not Dennis Chung, Ralston Hyman, Colin Bullock...you name them! Is suh di whole a dem fool and Seaga one have sense?!!?

I have no personal views on the matter.

However, I’m posting this comment as a response to your last sentence above (which I’ve highlighted). Have you ever considered that you may have hit the nail squarely on the head?

A casual glance at Jamaica’s economic performance from 1990 until now-- during a period when all these financial advisers you mentioned lived and worked in Jamaica and had connections with the various governments -- will no doubt support my view here.

[Islandman]

But haven't we been there before in JA and had a thriving black market when the rate was fixed?

It has it's advantages and disadvantages butI don think it really fixes anything and i dont think this govt is capable o managing he transition with any degree of competence.

If we don't ean foreign exchange dollars will be short and the rate, whether official or unofficial, will slide whatever the system. THAT is ultimately our problem.

Panama has a lot more going for them than a fixed exchange rate. Me hear say dem a get ready fe build subway train from the hills to downtown Panama to rhatid. When will we get to even dreaming about that?

[Skeng DX]

Ignore Seaga's Advice; Boost Production

By Ramesh Sujanani, Contributor

I was very pleased to hear that Edward Seaga had come to the House to meet his familiar friends, and to offer advice.

There are many matters that, as a manufacturer in the 1980s, I could mention, such as the removal of export financing and insurance, the structural adjustment programme that pushed us slowly out of business, the support given to banks to charge usurious interest rates.

That, now, is all water under the bridge. Suffice to say, at the end of the 1980s, there were few small manufacturers of all the various products made in Jamaica.

But that is no quibble at this time, just the advice that we must now peg the Jamaican dollar to a fixed exchange rate, as was done in the 1980s. Then, it brought tremendous problems to the manufacturing business, especially those who exported, because they were not getting a fair price for their product. The US dollar was being converted at the rate of $5.50 until the Labour Party left, and immediately thereafter when the People's National Party came, it shot right up to J$13-J$14 for one USD, and exports, that we would weep for today, were frustrated.

And the same advice, without rationale, is being offered to the existing Government by Mr Seaga - of a pegged or fixed exchange rate. I suggest we ignore that advice and press on to find the correct solutions, which, frankly, lie in the volume of goods and services we can export, or which we can substitute with local products.

SEAGA'S UNENDING DREAM

You would think by now that we would all realise that there is no quick solution to economics and nation-building. But we never like to give up our dreaming, and Seaga is great at keeping it alive. Every so often, when times are hard, we need to hear a fairy tale that makes us feel good for a few moments before trudging back to the reality that hard, smart work; education; low crime rates; and strong families with high morals, combined with business risk-taking, are needed to move us forward.

The factors which affect currency rates are: interest rates; inflation rates; gross domestic product; unemployment and employment rates; government spending and expenses; balance of trade; political and social environment; speculation; private banks and corporations; world market trends.

I can safely say that at least seven of the above factors are experiencing negative growth or having a negative impact on the Jamaican economy. The strength of any economy directly impacts the strength of its dollar. So if the economy is disintegrating, the dollar will follow.

Then why are we surprised that the dollar has been falling for more than two decades? A bankrupt country cannot have a strong currency, and in times of financial instability, that currency must depreciate. Granted, the rate of decline has steepened recently, but so have the currencies of major countries with economies far stronger than Jamaica's. The Russian ruble has devalued, and economists are wondering why. The same applies in Jamaica: We are not producing sufficiently and efficiently.

If Jamaica's GDP stagnates or the variables of production fall, the currency will fall, especially if traders and speculators take advantage. It is only the symptom of our weakened economy and not necessarily a cause. We should try to address the root causes of failure, rather than be influenced by symptoms.

At this time, the US dollar is the only reserve currency in the world, and in times of financial instability, the USD will appreciate, as it does all over the world because of the confidence that it inspires. Economies and investors have seen the USD as the only safe haven against a myriad other currencies.

The Jamaican dollar will falter in the current situation, and there is little that the Bank of Jamaica or the Government of Jamaica can do, but to put our house in order by strengthening the tools of production.

Ramesh Sujanani is a businessman. Email feedback to columns@gleanerjm.com and rsujanani78@gmail.com.

[Bricktop]

Who cares what an 82 year old retired politician has to say? What does Portia and the current PNP administration have to say...that is what is important...spin like gig time in 3...2...1 :crickets:

[Lazie]

It seems only Lazie, Muadib and Assasin believe pegging the dollar would be a good economic move. Over the last few days, there have been numerous interviews with economists/financial analysts in Jamaica and not one of them agree with the Financial Wizard. Not Dennis Chung, Ralston Hyman, Colin Bullock...you name them! Is suh di whole a dem fool and Seaga one have sense?!!?

Pointless To Peg
Published: Thursday | October 11, 2012 24 Comments

Former Central Bank Governor Derick Latibeaudiere.
Daraine Luton, Senior Staff Reporter

Latibeaudiere says 'simplistic solution' won't help Jamaica's economic situation

FORMER BANK of Jamaica Governor Derick Latibeaudiere is contending that a change in the exchange-rate policy will reap little or no dividends to the country.

Speaking with The Gleaner yesterday, in reaction to a special presentation by former Prime Minister Edward Seaga to a joint sitting of the Houses of Parliament a day earlier, Latibeaudiere declared there was nothing wrong with the system on which the exchange rate is built.

"I want us to stop looking at systems and look more on the fundamentals. If the fundamentals are right, you don't have to think about which system you are going to use. The exchange rate would remain relatively stable if the fundamentals are right," Latibeaudiere argued.

Seaga, who also held the finance portfolio during his tenure as prime minister, had on Tuesday reiterated his long-held belief that a pegged exchange rate could open the door for potentially massive inflows of low-interest foreign exchange for mortgage financing and investment since the risk of devaluation or depreciation of the dollar would no longer exist.

"This would be revolutionary for attracting low-cost funds for agriculture, education, infrastructure and low-cost housing, creating thousands of new jobs," Seaga had said.

He also argued that "it would restore the economic growth which has been stagnant for two decades because the increased prices which follow devaluation would cease, ensuring that none of the substance of growth would be extracted from the GDP (gross domestic product) to pay the higher prices of devaluations".

ADDRESS UNDERLYING DYNAMICS

However, Latibeaudiere yesterday told The Gleaner that "it is just a simplistic solution".

"If the exchange rate moves, it is not a fault of the mechanism that you have. It is a fault of the underlying dynamics," Latibeaudiere said, while contending that it was the market that should determine the exchange rate.

"People go around and they blame systems. Jamaica is replete with examples of trying things. We go and we take a bit from here … . We (say that we) need to be like Cayman and we need to be like the Turks and Caicos, and we need to be this and that. At the end of the day, a system can't deliver for you what the fundamentals, that are out of whack, can deliver," Latibeaudiere said.

He added: "If the fundamentals are not correct, it is pointless you talk about systems. The fact of the matter is that demand and supply is in disequilibrium in the foreign-exchange market. I am not saying that it is easy to fix. The fact of the matter is that we are not earning as much foreign exchange as we want to spend and no amount of juggling is going to fix that."

SEAGA WANTS STUDY

In the meantime, Seaga yesterday told The Gleaner that he was not headstrong that the answer to Jamaica's foreign-exchange problem lies in pegging the exchange rate.

"I have never advocated a fixed, as a matter of fact, I am not even advocating the pegged. What I am saying is that these are the benefits that we can have from the peg. Now let us have a study of it and be certain," Seaga told The Gleaner.

He added: "I would like an urgent high-level academic study done on the pegging of the exchange rate."

Seaga said Jamaica's history was replete with examples of policy errors "because reality checks tell you it wasn't right".

"In other words, no studies were ever done on Federation and none were done on the incentives and tax relief that were given in the 1960s ... . Which businessman in his right sense would take a mighty jump, a hell of a leap without determining whether he can cover the ground?" he contended.

Seaga argued that with a pegged exchange rate, the authorities would determine the rate of exchange for the currency.

"We are already tied to the exchange rate, that is the rate of exchange that we measure the values of each currency. What the peg does is that the rate does not move. It is fixed, but you don't call it fixed because there are more rigid ways of fixing," he contended.

The former prime minister said he pegged the rate from 1987 to 1989, "and that is how we grew at that time".

daraine.luton@gleanerjm.com

Have you ever heard me express my view on the matter? I know my name easy fi type ... but be honest for a change nuh comrade?

[Islandman]

I didnt read Seagas original statement to determine if he backtracked a bit but I have to say that what he is quoted as saying in this article does make sense. He is saying some more analysis needs to be done on the different systems to get some idea on which works better for JA , given the many fundamental problems.

[Gamma]

re: subway ... yes that is because of SUSTAINED stability.

panama has significantly rebuit its economy post the noriega incursion. yes they have the canal, but it was not always handled efficiently.

i was thinking more of "dollarising". the cost of living in panama is also a big factor too. they have maximised there free zone, we frittered ours away through bad management and pilfering!

we need to move away from this model THAT HAS NOT WORKED FOR US but this must be complemented with efficient implementation of the anti corruption processes.

[Islandman]

Can't disagree with that.

[Assasin]

"It seems only Lazie, Muadib and Assasin believe pegging the dollar would be a good economic move"

Can you find one instance that I said it should be done? Mosiah stop talking for me and ask the question PLEASE.

I don't believe pegging the dollar will help in the long term. It may stop devalulation in the short term but in the long term it all comes down to PRODUCTIVITY, PRODUCTION, EXPORT AND IMPORTING LESS AND SENSIBLE GOVERNMENT.

PLEASE DON'T TALK FOR ME IF YOU CAN'T QUOTE ME.

[Muadib]

Based on the evidence in hand.. the simple answer is YES !

[Muadib]

who ??

ah wheh di ?

lol !

[Assasin]

thanks Gamma. Panama stabilized their economy and enjoyed good growth.

Many of these people on here fail to realise the importance of growth.

The think growth come secondary to sharing wealth. Growth is the primary. When you have growth then you can share, but without growth you are fooling yourself. If you even share you have to demand productivity, something we have failed to do so far.

[Jawge]

Sass do some research before you speak. Panama? Who really controls Panama? How much US has invested there?