Sunday, April 21, 2024

Parade or charade


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REDUCING INTEREST RATES to zero is total nonsense and prevents growth. It is not in the interest of profitability for the banks – their raison d’être. Banks are central to the monetary distribution in a country. Here in Barbados, fiddling with rates is now responsible for their dipsy-doodling with balance sheets. Perhaps it is a good thing that we do not now have a National Commercial Bank – somebody would be looking for holes or toadying.
Just check the remarks of the chief economist of the International Monetary Fund, Olivier Blanchard: “When interest rates lose their power to stimulate the economy, additional government spending can help generate real growth.”
Or, “In this world, financial bubbles matter, capital flows are of dubious merit, low interest rates fail to stimulate growth, and Government spending becomes the only tool with real traction to spur economic activity.” – May 13 BARBADOS BUSINESS AUTHORITY report.
Look how banks are cautious. For example, they give low mortgage interest rates only for a short period of time. If interest rates go up, you may need to reassess your mortgage payments.
The dipsy-doodling of banks is happening and our Central Bank seems powerless to deal with it as it blindly supports the Government’s failing fiscal strategy.
A lady called me and said: “Wild Coot, what you were saying about the interest rates is true. The low interest rates screw up the banks. That is why credit unions are banking with the finance houses as the finance houses offer better rates, hence the credit unions can attract customer savings with higher rates.
“But the Central Bank hinted recently that when dealing with the worsening position of loans in the banks as a reflection of the deteriorating economic situation, the credit unions are in a slightly worse condition. They inspect the credit unions and the finance houses.
“For the Financial Services Commission to get into the mix at this particular time shows a lack of appreciation of what problems the low interest rates are causing together with the general lack of direction in the country.
“Their ostensible reliance on the law is a red herring. The Financial Services Commission may be behaving like a bull in a china shop and is only going to worsen the situation. Perhaps it is only trying to show that it is doing something.”
A fellow who “does” vote for the DLP called me and identified himself.
“Wild Coot, the Central Bank is not going to answer you about the billion-dollar question. Yuh mout does fly like Hannah sick nigga . . . so they cannot give you sensitive information. In this country, such information is confined to the few, although I am sure that you know the answers already.”
Although criticized of late, Bajans are among the best educated in these parts, and they can read what the Financial Times and Moody have to say about Barbados. The Wild Coot has had to deal with the matter of confidence throughout his spell in the system. Banks in Barbados today are sending a message to the powers that be: “We will not be privy to your charade!”
As June approaches, therefore, let us go down to the East Coast and genuflect and make libations – and love, praying not only for the hurricane season to be eventless but for a capsizing of the earth to heave us high and dry as a continent above water, full of the riches of the sea and power to be a player on the world scene in everything and not only cricket.
Perhaps the private sector will welcome the billion dollars put into the system.
But as the Jamaicans would say, “What sweeten ram goat mout’ gine bu’n ’im tail.”
“Wild Coot,” said the nice lady, “why you always sound so vex?”
• Harry Russell is a banker. Email


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