Two articles caught my eye over the weekend before last. One was the possible purchase of shares in the Barbados National Bank (BNB) and the other was the printing of $600 billion to be saturated into the United States economy.
First of all, the sale of BNB shares. The argument of Republic Bank that the Stock Exchange guidelines should be followed is a bogus one. Republic Bank, if it acquires over 90 per cent of the shares, will own the bank outright, the other shareholders being forced to sell according to the Stock Exchange rules.
Therefore the persons negotiating for Barbados are not only negotiating for ICB, the National Insurance and the Government of Barbados alone, but for the small shareholders also. In any case, few investments today can pay a dividend of 17 cents.
When National Commercial Bank Jamaica Ltd, for which I was the general secretary of the Staff Association, bought Barclays Bank, a whole heap of accountants, lawyers, civil servants and politicians were the negotiators for the Government, and they failed miserably.
Ken Ball of Barclays Bank pitted his half-sheet of paper notes against the volume of information carried into the conference room and got the better of the Jamaican team to the tune of over $20 million in bad debts.
BNB shares should now be sold on the basis that Republic Bank is buying a bank, not shares. This should take into consideration such things as goodwill and future earnings and not the depressed Stock Exchange valuation.
But let us suppose for the sake of argument, as is quite possible, that Republic Bank (you know how Trini smart), has in mind that after it acquires 100 per cent ownership it will sell the bank. It could then make a “woogle” of net profit on the sale.
Suppose it sells it to somebody from Russia, or Iran, or Iraq, or Pakistan, or India or even a group of religious people in Trinidad! The only say we could have would lay with the Central Bank, whose approval of the buyer it
would need. But if the buyer is of international standing, “cat gnam yuh suppa”.
The US dollar is the standard to which many world currencies are tied, including the Barbados dollar. I would recommend reading From The Chair Of The Editor it the Monday, November 8 edition of the Barbados Business Authority.
The United States once boasted of being the world’s greatest economic power, but this is being challenged now by China. The Chinese currency, the yuan, is pegged very low against other world currencies, therefore Chinese goods are cheaper in comparison to goods from America.
This badly affects the United States world sales. Washington has been appealing for a long time for China to raise the value of its currency. The Chinese have said “no way”! Therefore the Americans, in addition to keeping the Feds interest rate low, now plan to issue more currency (printing money), thus depreciating it own currency so as to compete with China.
What has this got to do with Barbados? Same thing that toxic mortgages and AIG credit did to Barbados. While we are not doing much printing yet, we are tied to the US dollar and if it is devalued against other world currencies, then our dollar is devalued too. For example, against the pound sterling, or the Brazil real, or for that matter against the Chinese yuan. One saving grace is that European countries are on the back foot, but not those of India and Brazil.
I do not believe that it will work. China will probably buy a good deal of the $600 billion paper and the American debt will increase to “quadrillions” and we would be back to square one, only worse off in Barbados.
Our investments in dollars would be of less worth as against other hard currencies.
A foolish fellow once said “plus ça change, plus c’est la même chose”. I humbly agree, the more things change, the more they remain the same.
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