Should Jamaica adopt an international currency

[niceniss]

Re: Should Jamaica adopt an international currency

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actually I was much closer to it than the IMF...

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yuh was runnin one of the banks that went under due to high interest rates

[/ QUOTE ]was a teenager at the time but me always pay close attention to what a gwaan... a jus so me boring an tan [img]/forums/images/graemlins/smirk.gif[/img]

[niceniss]

Re: Should Jamaica adopt an international currency

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i don't agree that the high interest rates were the cause of the bank failure.

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what do u think the cause was?

[Morpheous]

Re: Should Jamaica adopt an international currency

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Hmmm [img]/forums/images/graemlins/70402-thinking.gif[/img] then it has to form a union with the entire caribbean. Then as a unified caribbean it has to have a single currency that it is able to print and issue in the Caribbean. Then it will be able to stable its currency more effectively against the other major players.

Of course a regulator would need to be in place along with a Caribbean Central Bank (CCB) that would issue currencies accordingly and facilitate the various banks within the caribbean union. It would be prudent to also have a Caribbean Investment Market(CIM) where caribbean islands including cuba could trade with each other (Caricom or whatever) and attract overseas investment. I could go on and on about how we as a Caribbean unit could do sooooo much to attain a higher and stable currency...

The sooner tiny Jamaica along with ALL the tiny islands in the caribbean recognise this the better it will be for all including Jamaica. Change isn't easy and often frowned upon but it's the way to expand and improve.

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how would you get countries like Trinidad, Barbados and the Bahamas who have stable currencies to go along with this?
what's in it for them? who would be the controlling country?

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That's a good question. Well the short answer is, those islands would prosper even better under such a union. The same arguements were used in europe "for and against" the countries in europe that were richer, better economies, more natural resources to offer than others and more military might than other smaller more fragile countries in europe but those poorer, weaker european countries were let in. One can't descriminate.

As for who would be in charge well... again like in the european union the same issues were raised; the solution is each year/term a new head of state (meaning prime minister/president) of a country within the european union is voted in by the other members as the president of the european union. It seems to work fine. last term it was the french president this term it is tony blaire that was voted in; next term it will be some one else and so on...

No one country is in charge regardless of how strong rich or large their country is and no one country dominate the other because of more natural resources. The methodology is to make europe collectively a stronger world poer economically and militarly. The single currency (euro) is used instead of the francs, marc, sterling pasatos etc. on the trade market. Iy means the euro can now hold it's own even stronger against the $US dollar even better than the £Sterling given the the British £sterling is worth more than the $US from the beginning and continues to do so!!!

Compared to Trinidad etc. these countries are giants yet they saw the need!!! Plus if trinidad etc. decided to stay out like britain did before because it thought it's currency was too good and strong to risk in the union. Trinidad like britain would quickly realise that as the union grows and it would be left out in the cold and with all it's oil it's economy would not progress as fast as the those within the union. hence britain is now a fully pledged member accepting the euro within britain as legal tender!!

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and yet Barbados which lies in the eastern caribbean didn't join Antigua, Dominica etc in using the EC$ (eastern caribbean $) Barbados has it's own currency..

if you really believe that Trini, Barbados & the Bahamas etc will link up with each other & ja in a single currency, and 'share' power - not in this lifetime

how exactly would the more prosperous countries benefit by putting themselves with poorer countries? by intervening in the poorer countries economy? buying up it's assets? would ja want to give up sovereignty?

are you aware that a major stumbling block with the proposed CARICOM CSME (caribbean single market & economy) is that well-off countries dont want free movement of labour provision implemented, they fear being swamped with cheap labour from the poorer countries, and you think such countries will sign off on a single currency?

maybe you should check further and research the proposed CSME provisions and the sticking points, so that you will see that a single currency proposal isn't feasible.

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I have a positive outlook and I say if europe can do it so can the caribbean. Timing is key, I still say it is possible. Political will is all it takes. Ofcourse if trinidad don't want in then dem can stay out .

My personal saying "It is possible, much easier and more efficient to take up a coin off the floor using your five fingers than trying to do it with only one finger"!

In any case it is better for the poorer caribbean countries to unite as a union and compete better than remain divided. Even if it means competing with the likes of trinidad.

Developed countries like US would probably rather see poorer countries remain divided and struggling being "more" dependent on countries like the US rather than try to share/spread the costs and wealth = economy of scale. Still oil isn't everything, Jamaica has a few natural resources of its own and so do other islands so they won't be coming to the table empty handed.. which you "seem" to imply.

[Morpheous]

Re: Should Jamaica adopt an international currency

OK Rich and Doc...

I took my time but I am in demand in many places, anyway...
Rich you mentioned STABILITY quite often, now this is the key factor that Jamaica is placing her hopes on; the trouble is Jamaica don't control/dictate stability where the world in which it operates is concerned, it's the other way round. You have to remember what hits/affects america is a knock-on effect in europe, asia, caribbean and so on. So STABILITY in itself is FRAGILE - influenced by many external forces and events beyond its control.

Donnika raised some valid points too re: interest rates. I mentioned the effect of fiscal and monetary policies/events too earleir above; remembering too that inflation and deflation comes into play also.

Both of you want to know why I said there is a bigger picture. Now bear in mind that I already said quite clearly I understand where you are coming from but I still disagree on the broader implications, I have privided a few links for you to read.

Now please take your time and read it carefully. It has bits in it that support your stance and it also have bits that reveal what I mean by the bigger picture. With that said here are the links.

Link 1
Link 2
Link 3

[Morpheous]

Re: Should Jamaica adopt an international currency

I have decided to paste extracts from the links I provided above.

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The removal of exchange control regulations in 1991, without foreign exchange reserves to defend the rate of exchange, caused the Jamaican dollar to devalue from $13 to US$1 to $23 to US$1 in five months. The Bank of Jamaica, without any available reserves to intervene, helplessly watched the rate of exchange collapse.

The Opposition warned against premature liberalisation. History has now justified our stand, unpopular as it was then. Financial analysts have now recognised that the instability in the economy began at that point.

Following the premature liberalisation, the rate of exchange of the Jamaican dollar went through the floor, inflation and interest rates through the window and the national debt through the roof!

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followed by the stockpiling of foreign exchange by the BoJ, the foreign exchange market went through another traumatic period with the rate of exchange moving from $33 to $40 to US$1 in just seven months between August 1995 and April 1996. The end result was that the inflation rate in 1995 doubled the target set.

The interest rate, which had declined by 10 points in 1994, went in the wrong direction and actually increased by 10 points in 1995, to 50 per cent. The total debt jumped dramatically from $31 billion to $50 billion and the carefully nurtured fiscal surplus of 1994 returned to a deficit position in 1995.

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[RichD]

Re: Should Jamaica adopt an international currency

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i don't agree that the high interest rates were the cause of the bank failure.

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what do u think the cause was?

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improper controls...poor lending practices.
mostly on over valued real estate. hus when the realestate market corrected many borowwers were unable to service the loans ( the big insurace companies wer victims of this.) and the banks on reposetion of property were unable to realize their capital.
BNS who used much stricter lending rules was able to thrive during this trying period.

[RichD]

Re: Should Jamaica adopt an international currency

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I have decided to paste extracts from the links I provided above.

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The removal of exchange control regulations in 1991, without foreign exchange reserves to defend the rate of exchange, caused the Jamaican dollar to devalue from $13 to US$1 to $23 to US$1 in five months. The Bank of Jamaica, without any available reserves to intervene, helplessly watched the rate of exchange collapse.

The Opposition warned against premature liberalisation. History has now justified our stand, unpopular as it was then. Financial analysts have now recognised that the instability in the economy began at that point.

Following the premature liberalisation, the rate of exchange of the Jamaican dollar went through the floor, inflation and interest rates through the window and the national debt through the roof!

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followed by the stockpiling of foreign exchange by the BoJ, the foreign exchange market went through another traumatic period with the rate of exchange moving from $33 to $40 to US$1 in just seven months between August 1995 and April 1996. The end result was that the inflation rate in 1995 doubled the target set.

The interest rate, which had declined by 10 points in 1994, went in the wrong direction and actually increased by 10 points in 1995, to 50 per cent. The total debt jumped dramatically from $31 billion to $50 billion and the carefully nurtured fiscal surplus of 1994 returned to a deficit position in 1995.

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none of that constadicts anything i have argued.



I will ask you also..what are the primary infaltionary presures in the jamaican economy?

[RichD]

Re: Should Jamaica adopt an international currency

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So STABILITY in itself is FRAGILE - influenced by many external forces and events beyond its control.
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how is little barbados able to maintain achive such a stable currency?

how come the EC dollar has been so stable?

[niceniss]

Re: Should Jamaica adopt an international currency

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i don't agree that the high interest rates were the cause of the bank failure.

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what do u think the cause was?

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improper controls...poor lending practices.
mostly on over valued real estate. hus when the realestate market corrected many borowwers were unable to service the loans ( the big insurace companies wer victims of this.) and the banks on reposetion of property were unable to realize their capital.
BNS who used much stricter lending rules was able to thrive during this trying period.

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improper controls in what sence?

yes, in a couple of instances there were banks that held real-estate(hotels) as part of their assets instead of focusing on their core businesses, which is why I mention poor management. however, if one or two banks went under during that time period then I would hold those banks soley responsible for their demise, but when practically all the local banks(BNS is canadian) went down then it is only logical to look at the common factor(s) that affected them.

repayment of loans would inevitably become a problem if someone borrowed 20 grand at a rate of 2.5 percent(just an example!)only to find that the increase in rates on his loan have gone up to more than 400% how is he to repay that? multiply that single guy by most of the bank's customers and tell me how a bank could sustain that.

[Morpheous]

Re: Should Jamaica adopt an international currency

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I have decided to paste extracts from the links I provided above.

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The removal of exchange control regulations in 1991, without foreign exchange reserves to defend the rate of exchange, caused the Jamaican dollar to devalue from $13 to US$1 to $23 to US$1 in five months. The Bank of Jamaica, without any available reserves to intervene, helplessly watched the rate of exchange collapse.

The Opposition warned against premature liberalisation. History has now justified our stand, unpopular as it was then. Financial analysts have now recognised that the instability in the economy began at that point.

Following the premature liberalisation, the rate of exchange of the Jamaican dollar went through the floor, inflation and interest rates through the window and the national debt through the roof!

[/ QUOTE ]

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followed by the stockpiling of foreign exchange by the BoJ, the foreign exchange market went through another traumatic period with the rate of exchange moving from $33 to $40 to US$1 in just seven months between August 1995 and April 1996. The end result was that the inflation rate in 1995 doubled the target set.

The interest rate, which had declined by 10 points in 1994, went in the wrong direction and actually increased by 10 points in 1995, to 50 per cent. The total debt jumped dramatically from $31 billion to $50 billion and the carefully nurtured fiscal surplus of 1994 returned to a deficit position in 1995.

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none of that constadicts anything i have argued.

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So you don't see in the second quoted paragraph that exchange rate of the Jamaican currency (devalue), resulted in a deficit and higher debts. The knock-on effect would be more expensive imports; foreign goods (eg. car parts) would be more expensive too. The money to pay the higher price of such goods have to come from somewhere. Not to mention the fact that a gov. that has a deficit must borrow to finance it. Whether that be via Public Sector Net Borrowing (PSNB) or Public Sector Net Cash Requirement (PSNCR). We all know the gov. also has heavy overseas borrowings to fill any gaps left over by PSNB and PSNCR. What is vital is that Jamaica borrow ONLY to invest and NOT to fund current spending.

Yes I can see investment as one avenue but, that would be at the mercy of foreigners with stronger currency able to have a free run. Jamaica corporations/businesses or individuals home grown would not be able to compete with a devalued currency. They would quickly be outbid in any buyouts etc. not to mention that they won't be in a position to invest abroad in more lucritive markets and bring those profits back home to Jamaica.

The concern here should not be "as long as the man on the street have money in him pocket" everything alright. In essence he/she would be a sheep/slave to the foreign businesses who make their money and take it out the country.

The concern should be as long as the economy is thriving and successful with a reasonably valued currency then everything is alright.

It would appear that you are in favour of microeconomics as oppose to macroeconomics. The next question would be what policy are you more in favour of, a monetary policy or fiscal policy (yes they influence each other). Think about this a devalued currency could increase exports and generate revenue for Jamaica and reduce unemployment. More man on the street have money in him pocket to afford goods and services. BUT reducing umemployment would mean (when unemployment was high - resulting in lower taxations and lower interest rates), will boost demands and inflation would rise. At the same time people would buy more imports and the balance of payments suffer; though the economy could probably grow.

I do agree however that getting rid of inflating ALTOGETHER is not a good idea because it would result in high unemployment and consecuently pushing the Jamaican economy into a recession. I already said many times I understand where you are coming from but the devalue of the currency does affect the Jamaican economy and consecuently employment and increased wages in line with inflation and interest rates. Unemployment in turn determines the likelhood of a recession which in turn affects Jamaicas GDP.

BTW mi notice Zebby never returned to give his/her view on the thread subject matter he/she started. [img]/forums/images/graemlins/confused.gif[/img] Still it's a good topic and one worth discussing.

[Tuff Gong]

Re: Should Jamaica adopt an international currency

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i don't agree that the high interest rates were the cause of the bank failure.

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what do u think the cause was?

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improper controls...poor lending practices.
mostly on over valued real estate. hus when the realestate market corrected many borowwers were unable to service the loans ( the big insurace companies wer victims of this.) and the banks on reposetion of property were unable to realize their capital.
BNS who used much stricter lending rules was able to thrive during this trying period.

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No the failure of the Financial and business sector was mostly caused by the printing of money for one Election, the High Interests Regime rates to sop up so-called liquidity. The poor regulations in the Banking Industry again encouraged by PNP led Government whose ministers used to bombard the airwaves complaining about the Banks unwillingness to fund Jamaican businesses, so got directly involved in agriculture, real estate and other risky ventures.

Dr. Davies in his first policy speech when he was became Finance Minister said he would keep interests rates as high as possible for as long as possible till something give...or words to that effect, I don't have the exact quote now.

[niceniss]

Re: Should Jamaica adopt an international currency

you are right about the failure of the economy starting at the premature liberalization of the dollar. I seem to remember a lot of local economists giving them kudos on the move while the opposition warned against it.
It was less than a year that the dollar jumped from 5-1 to 13-1... 1991 I seem to remember... [img]/forums/images/graemlins/70402-thinking.gif[/img]

[wolmersboy]

Re: Should Jamaica adopt an international currency

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Hmmm [img]/forums/images/graemlins/70402-thinking.gif[/img] then it has to form a union with the entire caribbean. Then as a unified caribbean it has to have a single currency that it is able to print and issue in the Caribbean. Then it will be able to stable its currency more effectively against the other major players.

Of course a regulator would need to be in place along with a Caribbean Central Bank (CCB) that would issue currencies accordingly and facilitate the various banks within the caribbean union. It would be prudent to also have a Caribbean Investment Market(CIM) where caribbean islands including cuba could trade with each other (Caricom or whatever) and attract overseas investment. I could go on and on about how we as a Caribbean unit could do sooooo much to attain a higher and stable currency...

The sooner tiny Jamaica along with ALL the tiny islands in the caribbean recognise this the better it will be for all including Jamaica. Change isn't easy and often frowned upon but it's the way to expand and improve.

[/ QUOTE ]

how would you get countries like Trinidad, Barbados and the Bahamas who have stable currencies to go along with this?
what's in it for them? who would be the controlling country?

[/ QUOTE ]

That's a good question. Well the short answer is, those islands would prosper even better under such a union. The same arguements were used in europe "for and against" the countries in europe that were richer, better economies, more natural resources to offer than others and more military might than other smaller more fragile countries in europe but those poorer, weaker european countries were let in. One can't descriminate.

As for who would be in charge well... again like in the european union the same issues were raised; the solution is each year/term a new head of state (meaning prime minister/president) of a country within the european union is voted in by the other members as the president of the european union. It seems to work fine. last term it was the french president this term it is tony blaire that was voted in; next term it will be some one else and so on...

No one country is in charge regardless of how strong rich or large their country is and no one country dominate the other because of more natural resources. The methodology is to make europe collectively a stronger world poer economically and militarly. The single currency (euro) is used instead of the francs, marc, sterling pasatos etc. on the trade market. Iy means the euro can now hold it's own even stronger against the $US dollar even better than the £Sterling given the the British £sterling is worth more than the $US from the beginning and continues to do so!!!

Compared to Trinidad etc. these countries are giants yet they saw the need!!! Plus if trinidad etc. decided to stay out like britain did before because it thought it's currency was too good and strong to risk in the union. Trinidad like britain would quickly realise that as the union grows and it would be left out in the cold and with all it's oil it's economy would not progress as fast as the those within the union. hence britain is now a fully pledged member accepting the euro within britain as legal tender!!

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and yet Barbados which lies in the eastern caribbean didn't join Antigua, Dominica etc in using the EC$ (eastern caribbean $) Barbados has it's own currency..

if you really believe that Trini, Barbados & the Bahamas etc will link up with each other & ja in a single currency, and 'share' power - not in this lifetime

how exactly would the more prosperous countries benefit by putting themselves with poorer countries? by intervening in the poorer countries economy? buying up it's assets? would ja want to give up sovereignty?

are you aware that a major stumbling block with the proposed CARICOM CSME (caribbean single market & economy) is that well-off countries dont want free movement of labour provision implemented, they fear being swamped with cheap labour from the poorer countries, and you think such countries will sign off on a single currency?

maybe you should check further and research the proposed CSME provisions and the sticking points, so that you will see that a single currency proposal isn't feasible.

[/ QUOTE ]
I have a positive outlook and I say if europe can do it so can the caribbean. Timing is key, I still say it is possible. Political will is all it takes. Ofcourse if trinidad don't want in then dem can stay out .

My personal saying "It is possible, much easier and more efficient to take up a coin off the floor using your five fingers than trying to do it with only one finger"!

In any case it is better for the poorer caribbean countries to unite as a union and compete better than remain divided. Even if it means competing with the likes of trinidad.

Developed countries like US would probably rather see poorer countries remain divided and struggling being "more" dependent on countries like the US rather than try to share/spread the costs and wealth = economy of scale. Still oil isn't everything, Jamaica has a few natural resources of its own and so do other islands so they won't be coming to the table empty handed.. which you "seem" to imply.

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Great debate! Here's my two cents...I don't think there will be a Caribbean Union in the same sense as the European Union (common currency and united economic policy).
Why?
Distance and transportation. In Europe, countries share common borders thus it is cheap and easy to transport goods and labor across large distances. Not so for the islands back home. I think that will be a major stumbling block. Air travel is too expensive and ships are relatively slow in this day and age.
One must also not forget that it has taken a loooong time for the Europeans to get where they are now--and the strongest economy, Great Britain, still does not want to convert to the Euro.
Not saying that there should not be moves in the direction of regional hegemony. I just don't think that we can expect the same type of unity with regards to economic policy as the Europeans have.
So for now, I think JA should concentrate on it's own economic fundamentals (political and monetary stability, training of the workforce and opening up new sources of investment)and not worry about converting to another currency-whether dollars, pounds or some Carribbean currency.

[RichD]

Re: Should Jamaica adopt an international currency

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The concern should be as long as the economy is thriving and successful with a reasonably valued currency then everything is alright.


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so what is a resonably valued currency for jamaica?
give me a number an explain how you arrive at that.

[niceniss]

Re: Should Jamaica adopt an international currency

so u still blame the banks for their demise?