Interest Rates

[Q3210]

In Jamaica are hovering up at 26% to borrowers and 18% for investors in fixed deposits.
The governor of the bank of jamaica wants to diminish consumption hence the hike. Unlike progressive nations that offer minimal rates so as to encourage consumption and business.
We are still following the omar davies dinasouric tedency to stifle economic development.
Lattibeaudiere offers little in change to stimulate recovery.
Golding is yet to say no nor yea, but so far it seems the same old story

[Dr.Dudd]

Re: Interest Rates

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Q3210</div><div class="ubbcode-body">In Jamaica are hovering up at 26% to borrowers and 18% for investors in fixed deposits.
The governor of the bank of jamaica wants to diminish consumption hence the hike. Unlike progressive nations that offer minimal rates so as to encourage consumption and business.
We are still following the omar davies dinasouric tedency to stifle economic development.
Lattibeaudiere offers little in change to stimulate recovery.
Golding is yet to say no nor yea, but so far it seems the same old story </div></div>What is your suggested solution.
That is not to say i support what is being done,but ...

[Sinco01]

Re: Interest Rates

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Q3210</div><div class="ubbcode-body">In Jamaica are hovering up at 26% to borrowers and 18% for investors in fixed deposits.
The governor of the bank of jamaica wants to diminish consumption hence the hike. Unlike progressive nations that offer minimal rates so as to encourage consumption and business.
We are still following the omar davies dinasouric tedency to stifle economic development.
<span style="font-weight: bold">Lattibeaudiere offers little in change to stimulate recovery.</span>
Golding is yet to say no nor yea, but so far it seems the same old story </div></div>


he has been there a while ..
so i would trhink he would have a grasp on Jamaica finances ..
and what to do to create stability

[britisha]

Re: Interest Rates

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Q3210</div><div class="ubbcode-body">In Jamaica are hovering up at 26% to borrowers and 18% for investors in fixed deposits.
The governor of the bank of jamaica wants to diminish consumption hence the hike. Unlike progressive nations that offer minimal rates so as to encourage consumption and business.
We are still following the omar davies dinasouric tedency to stifle economic development.
Lattibeaudiere offers little in change to stimulate recovery.
Golding is yet to say no nor yea, but so far it seems the same old story </div></div>

From the sound of it, one could drop a couppla thousands and earn the interest while leaving the principal working...what else is there?

[Dr.Dudd]

Re: Interest Rates

<span style="font-size: 11pt"> The problem why he can't use the same strategy as is used in most countries is simple. In other countries when the economy is imploding like it is now,they bring back theis monies they invested abroad to theis country. In Jamaica the opposite happens. One of the reasons is that the major investors in the country lives abroad.
So they would be expected to bring back the money invested in Jamaica to where the are loving.
And the other us that although many of the other groups hold Jamaican passports,and live there, they really consider their bases as somewhere else Do in instances as these.
they also ship their moeues to those foreign jurisdictions.
So the strategy of raising interest rate is to make it more profitable to keep the money on Jamaica.

That is to avoid a run on the local foreign exchange reserves,and crash the economy, due to the lack of Foreign Xchange to pay for foreign goods and services.

One area where Jamaica is very weak is their deposit insurance. The level of coverage is so low that it does not act as the deterrent it is in other jurisdictions. It is too low to really do it's proper fynction.

But the Jamaican government does not seem to be aware of the appropriate use of tools used on many areas of government.

If they use a fraction of the foreign exchange to buy appropriate levels of coverage for the deposits.

The local currency will become so stable that interest rates could be lowered to much lower levels and still attract enough deposits to change the state of the economy 180 degrees.

The problem is that they don't seem to understand these simple points. Or they would have been using them long ago and we would be discussing something else today.
This is because they rely on accountancts to advise them on finance, and the only thing these people are good at is to <span style="font-weight: bold">count money that is already there </span>. </span>

[Dr.Dudd]

Re: Interest Rates

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: britisha</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Q3210</div><div class="ubbcode-body">In Jamaica are hovering up at 26% to borrowers and 18% for investors in fixed deposits.
The governor of the bank of jamaica wants to diminish consumption hence the hike. Unlike progressive nations that offer minimal rates so as to encourage consumption and business.
We are still following the omar davies dinasouric tedency to stifle economic development.
Lattibeaudiere offers little in change to stimulate recovery.
Golding is yet to say no nor yea, but so far it seems the same old story </div></div>

From the sound of it, one could drop a couppla thousands and earn the interest while leaving the principal working...what else is there? </div></div> <span style="font-size: 11pt"> The people who would do that, worry about the low JDIC(insured deposits) coverage.
If the bank go down how much you get back.
That is the problem.
If they use a fraction of what they use to pay as interest to buy insurance to raise the coverages on the deposit insurance.
they would attract so much deposits.

With that they could solve 4 problems.One is drastically reduce the interest rates and still attract enough deposit.

The next is to reverse the devaluation of the currency,due to the surplus foreign exchange that would be in the economy. and the third will be to reduce the cost of borrowing,which lead to a 4th benefit.

That would be to prime the economy and create employment.

Hey but what do I know/?</span>

[Wahalla]

Re: Interest Rates

Doc : The next is to reverse the devaluation of the currency,due to the surplus foreign exchange that would be in the economy.

are you saying there is surplus Forgien exchange in the Jamaican system ???? ( I ask because I am trying to follow what you are saying .. not to contradicit...)

Tuffy made the point a long time ago that made sense to me.. the majority of debt is held locally.. is this not simply a case of goverment simply trying to attract more moneys to the bank so thye can borrow it locally ???? Is this not the identical policy that Omar was using ????? I recall a program with Thwaites on Power 106 where he questioned a NCB banker about the huge profits that the banks made from funding the goverment while less than 10% in real terms was made to bizness enterprises...which would be for genuwine development.

it strikes me the Jamaican goverment ahs the identical relationship with the comercial baks that the US goverment has with China as to their debt finincing!...

[Dr.Dudd]

Re: Interest Rates

It is not a matter that the loans are held by people who hold Jamaican passports.
It is all about where they chose to keep it. And that place is not in the Jamaican banking system,where it can be available to the economy.

Because the Jamaican government has a history of accepting foreign advisers,without realizing that the foreign advisers,do not necessarily have the interest of Jamaica at heart.

They already knows that they Jamaican government are fools to the reality of national finance.
So they sell them 6 for 9 every time.
Every government borrows. And it should be better if the loans are held by locals. That us if the locals keep the money in the local banking system.
This is not the case with Jamaica. Also the Jamaican way of lending to government differs from the Chinese way of lending to the US.
this is because the Chinese does not call their loans, They turn it over for years.
While the Jamaicans call there loans when due.

So the Jamaican case is short term. While the Chinese is long term.
very different, but look alike from afar.

[Wahalla]

Re: Interest Rates

is there a forgien exchange surplus ? ... I follow the rest of your post...Will hold onto the idea in it.

[Dr.Dudd]

Re: Interest Rates

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Wahalla</div><div class="ubbcode-body">is there a forgien exchange surplus ? ... I follow the rest of your post...Will hold onto the idea in it. </div></div> Jamaica dors have a surplus, which waver around the amiynt it would take to pay for about 6 months of imports.

[Wahalla]

Re: Interest Rates

Sorry Doc But by supply and demand if we have an excess of forgien capital should the Ja Dollar not be stronger against the yanki dollar ????? I Mean 6 months that is a long term...,.Are our forgien debts that large to debase the value of such a large reserve ????

[Dr.Dudd]

Re: Interest Rates

<span style="font-size: 11pt"> The foreign reserve does not really relate to the exchange rate other than when it is used to support the Jamaican dollar.

Even so it is not large enough to really stop the devaluation. This is because there is [b]an excess of foreign capital[/b ]in the economy.
An excess of foreign capital only benefits the country if it create more wealth there than it takes out.

In the case of Jamaica,it does not. the Jamaican economy was designed since slavery to repatriate every dollar of profit earned there without reinvesting it in the economy.

nothing has been changed about that since. So since the foreign investors cannot send away Jamaican the dollar most of them earn, they they have to exchange those earnings into foreign money.
That is where their demand for foreign exchange is greater than the amount available. That is where the devaluation pressure comes on the Jamaican dollar.

They are willing to give as much as they can to get the foreign money they need. </span>

[Q3210]

Re: Interest Rates

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Dr.Dudd</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Q3210</div><div class="ubbcode-body">In Jamaica are hovering up at 26% to borrowers and 18% for investors in fixed deposits.
The governor of the bank of jamaica wants to diminish consumption hence the hike. Unlike progressive nations that offer minimal rates so as to encourage consumption and business.
We are still following the omar davies dinasouric tedency to stifle economic development.
Lattibeaudiere offers little in change to stimulate recovery.
Golding is yet to say no nor yea, but so far it seems the same old story </div></div>What is your suggested solution.
That is not to say i support what is being done,but ... </div></div>

REDUCE interest rates even if it doesn`t stop devaluation but it encourages PRODUCTION

[evanovitch]

Re: Interest Rates

wat production Q and by whom? it neva seem to have done much bak in di days...

[Dr.Dudd]

Re: Interest Rates

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Q3210</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Dr.Dudd</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Q3210</div><div class="ubbcode-body">In Jamaica are hovering up at 26% to borrowers and 18% for investors in fixed deposits.
The governor of the bank of jamaica wants to diminish consumption hence the hike. Unlike progressive nations that offer minimal rates so as to encourage consumption and business.
We are still following the omar davies dinasouric tedency to stifle economic development.
Lattibeaudiere offers little in change to stimulate recovery.
Golding is yet to say no nor yea, but so far it seems the same old story </div></div>What is your suggested solution.
That is not to say i support what is being done,but ... </div></div>

REDUCE interest rates even if it doesn`t stop devaluation but it encourages PRODUCTION </div></div> <span style="font-size: 11pt"> If they reduce interest rate it will cause the reduction of deposits. And without deposits to lend. There will be no money in the banks to lend. what will happen as a result. It Will cause a growth industry in black market USURY services. Which will be bring the interest rate much higher than it is today.
The only solution is to purchase insurance to cover deposits up to US$50-100,000.
This will cost about 1/2% and it will result in such an increase in foreign deposits. That they could reduce interest rates drastically and still have the pill needed.

there are many ways to do everything, but there is only one <span style="font-weight: bold"> best </span>way.
</span>