AN OLD SCHOOLMATE met me at the bus stop. We were trying to get to town where the supermarket prices are cheaper.
“Wild Coot, you remember the time when students staged the play Macbeth in school. You remember the line said by Macbeth about the fellow who “struts and frets his hour upon the stage”? Did not the recent declaration by the unions have a familiar ring? Is there a threat? I heard you ask once if our unions were neutered. Seems that they have now found a voice.
“Should not the unions have been concerned all along that story will come to bump with the printing of money and why there was printing? Why did they not make a noise in support when the governor said “I done”? Can they now raise a prolonged strike as the implied threat suggests? How will they pay the strikers? Where would the Government get 25 per cent increase for settlement when even now that the governor is gone, they are still using a fountain pen?”
I said: “Let us catch the bus.” Having been at the forefront of the action throughout the 1970s in Jamaica, I can see the same picture emerging. On the bus I continued to engage my friend. He said: “You know, we are now paying more US dollars since downgrading to service our foreign loans, than we would pay if were to get a foreign investor to give us a loan at a reasonably low rate. All that we need is an iron-clad agreement, a proper sinking fund for the duration of the loan and no funny business.
“Wild Coot, if we pay off the people and businesses that were encouraged to invest in those high interest bonds and pay the refunds from the borrowed money, what would the people and businesses do with the money. Invest in more bonds? Then would we not be continuing to spend $50 million a month for public servants and the statutory corporations?
“That is why I say that the problem is deeper than just paying off the debt. There is need for structural reform. Look, the Auditor General has identified almost $2.7 billion of possible collectible money that the Government should be able to collect in some form or the other. For the reluctance of a mechanism for dealing with his findings, there is no body that will enforce going after these concerns. As a result, all kind of contortions are presented in our estimates to fill a deficit. Our Government is reluctant to bite the bullet as elections draw nigh.
“If our Central Bank did not have its hands tied it could take a heavier hand in dealing with the commercial banks, but it now faces an uphill task in creating a fair playing field between depositors and the profitability of banks. Indeed, if interest rates were to increase for savers there will have to be growth in the country that will allow the banks to dispose of some of the accumulated savings.
“In that case the Central Bank may be able to have a say in the inordinate fees and credit cards. Our economy is out of balance and perhaps we need to sit down with the IMF and, according to one lady, choose our poison.
“But Wild Coot, that would not necessarily solve the heavy public sector obligation.”
“No, but it will ease the social pressure of refunds, National Insurance strictures, the gun that the banks hold to the head of the Central Bank and the pressure on our social services. It would also open the gates to borrowing from international institutions and allow us to deal with the interest factor.”
“Wild Coot, tell me about this gun that the commercial banks are holding to the head of the Central Bank.”
“It is an AK47. Banks are ‘perlixing’ that we do not have a national bank. They say that we are unable now to establish one so that we can compete. Thus their only concern now is increasing profit for their shareholders. This is an unfair situation.
“The liabilities side of a bank’s balance sheet comprises mainly two elements – shareholders who subscribe capital and depositors who supply working capital. Why should only the shareholders benefit from the operation? Today commercial bank depositors get shafted while the concern is only for increasing profit for the shareholders. The model is broken.”
“But Wild Coot, how come you now thinking that way?”
“Well fellow, I went to the street called Straight in Damascus, and I advise the Central Bank to go there as well.”
• Harry Russell is a banker. Email: quijote70@gmail.com
