“Wild Coot, you see what they did in Cyprus? Those fellows have testicular fortitude, although they should have stuck to the original plan and included everybody.
One wonders how Cyprus got into that state when a few years ago its finances and banks were so in order that the Russians and Greeks were flocking to them. Their misfortune spawns a potpourri of remedies.
Now the whole world has a flagship. You know how Bajans like to copy. Most times they copy wrong except when our Prime Minister made one of his most admired statements: “There shall be no same sex marriage in Barbados”. However, if we were to copy Cyprus, that would be like caviar to Barbados. With six billion dollars in deposits, the debt, local and foreign, would be a walk in the park. You agree Wild Coot?”
Well… That is true, but we do not know yet what is the downside of this measure for which the Cypriots now have the blueprint. This measure is too enticing for other countries anxious for a solution to their debt problems, not to sit up and take notice. Perhaps, the argument that the debt was incurred on behalf of the people is valid. Also valid is to make them shoulder the burden.
The taste in the mouth of depositors now is not too sweet. People always felt it safe to keep their money in a bank.
Imagine if you were a Cypriot with 200 000 euros on which you depended for a living – a haircut of 60 per cent. Bad scene. From now on I would be keeping my assets in property, and any dealings with the bank would be in overdrafts and loans. Confidence built up over centuries destroyed.
Do not panic fellow Barbadians and our Trinidadian compatriots. We do not do it so in Barbados. Instead of directly depriving the citizenry by grabbing the savings in the banks – savings that do not belong to the government – we increase the Value Added Tax that everybody has to pay on food, electricity, gas, telephone, health services, legal charges, etc. Like a cow in the slaughterhouse being hit with an electrical charge instead of cutting its throat. This is more humane.
I only hope that they in Cyprus took the appropriate measures. When a fellow said to me recently, ‘If I had a loan with the bank, backed by a fixed deposit. Say that my fixed deposit got 40 per cent cut, my loan must appropriately enjoy a similar cut’.
Failure to cut the loan portfolio will leave the bank one-sided, something like a man who has had a stroke. Its capital would have to fill the void left by the decreasing savings and not useless valueless ‘shares’.
So my friend who called me, have nothing to fear from the Cyprus example. Our policy makers are much too ‘clever’ to fall for such a sleigh de main, we have others.People always misquote that money is the root of all evil – although this is 90 per cent true, but the love of money makes us look for safe places to put it.
After the haircut in Cyprus, people will develop a wariness of banks. Besides banks have been at the conception and baptism of this worldwide crisis and this Cypriot leger de main adds another questionable negative dimension to the reliability of banks. Banks are now caught up in cheating on interest rates, on providing funds to help groups considered enemies of the state and more. The crisis has up to now affected one side of the balance sheet, now the other side is challenged.
Mr Peter Boos has been for a long time questioning the way our National Insurance funds have been mishandled especially over the last few years. A perceptive old lady, 97 next birthday, whispered the answers to me:
“The Central Bank recently published a paper on the manipulation of Treasury Bill rates using the US Treasury Bill as a guide. It makes perfect sense only to the directors of the NIS, not to the banks. Maybe 80 per cent investment of National Insurance money in Treasury Bills keeps civil servants employed and avoids a run on the NIS funds for unemployment benefits.”
• Harry Russell is a banker. Email [email protected]
