Cabinet pores over report on preliminary IMF talks

[Dr.Dudd]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tuff Gong</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Dr.Dudd</div><div class="ubbcode-body"> <span style="color: #FF6666"> How will purchasing power will be higher, when the price of every item will increase withe exchange rates??
Even bread will increase, fertilizer and chicken feed will increase,because Jamaica imports all the raw materials to produce everything they sell. How will the prices be lower?
</span></div></div>

It unlikely that the price will rise in direct proportion to the devaluation since the imported content is just a percentage of the finished product. Not only that there will be a resistance beyond a certain point and providers will start subsidizing out of profit or reduce expenses further.

Again if you are trying to refute the fact that Devaluations have not and will not benefit Jamaica you a doing a better job than I am.
</div></div> I don't know if you experienced the last devaluation in Jamaica, but let me tell you what influences price rise in a devaluation. The cost of money and the need to factor in the next devaluation. So when a merchant is selling his goods he has to make sure that what he gets for it will be able to but th esame quantity, after the next devaluation. As a result prices are raised much higher than the present rates. Then the interest rates. And you believe that prices will not float with the exchange rates? Will, you are very wrong on that. Prices will be much higher than rates of devaluation. That is how it goes.
That is how economics work in a capitalist economy.

[evanovitch]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

Doc, expand on the 'reevaluation' of Ja's currency please

[Tuff Gong]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Dr.Dudd</div><div class="ubbcode-body">On the other hand since we use so much foreign imports,revaluation of the Jamaican currency would be more advantageous. Yes you saw it here first.</div></div>

Don't know what you are talking about the last decade have been spent revaluing the Jamaican Dollar using the borrowed NIR. That is going to end soon and will never take place again. There will not be enough borrowed money to prop up the currency of a failed economy.

The only hopes of revaluing the Jamaican Dollar is unless the Jamaican economy improves on the basis of manufacturing for export with significantly less percentage of imported content and cost. Even if that miracle should come about in our lifetimes it is more likely that the clamor would be about keeping it low so as to make our exports affordable than to revalue and take us out of competition.

[Tuff Gong]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Dr.Dudd</div><div class="ubbcode-body">And you believe that prices will not float with the exchange rates? Will, you are very wrong on that. Prices will be much higher than rates of devaluation. That is how it goes.
That is how economics work in a capitalist economy. </div></div>

My friend please speak to <span style="font-family: 'Arial Black'">what I wrote and not what you imagine I wrote</span>.

[Amberal37]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

Sounds like another diagram is called for...

example 1: today's exchnge rate US$1 = JA$76
Bread = JA$25, hotel room=JA$4000 (US$52.63)
1000 visitors
1000 X bread = JA$25,000
1000 x Hotel rooms = hotel room=JA$4,000,000

With devaluation - MUST be combined with increase in service sales taxes, by - say 5%, and costs of imports on items that Ja produces (this could also subsidise a reduction on <span style="font-weight: bold">necessary </span>imports - such as machinery.

<span style="text-decoration: underline"><span style="font-weight: bold">example 2</span></span>: devaluation, and no increase in visitors...
exchnge rate US$1 = JA$90
Bread = JA$25, hotel room=JA$4000 (cost to visitor...US$44.44)
1000 visitors
1000 X bread = JA$25,000, imported JA$29,605
1000 x Hotel rooms = hotel room=JA$4,000,000
Hotels COULD continue to spend more on imported bread - but if there is a cheaper alternative, they will switch to it.

Hotels COULD also increase room rates to cover costs of their imports, but they will NOT price themselves out of the market, The government will also generate more sales tax income.
Thirdly, the hotels COULD also cut labour costs, but they risk lowering their service standards.

<span style="text-decoration: underline"><span style="font-weight: bold">example 3</span></span>: devaluation, and increase in visitors...
exchnge rate US$1 = JA$90
Bread = JA$25, hotel room=JA$4000 (cost to visitor...US$44.44)
1500 visitors
1500 X bread = JA$37,500,
1500 x Hotel rooms = hotel room=JA$6,000,000
Government gains more sales tax, and with increase in visitors, hotels will hopefully employ more people to deal with demand
(yes I know there prob. wouldn't be a 50% jump, but just keeping the figures simple)


Tourism make up about 63% of Jamaica's GDP, so this is a sizeable chunk. Using it (the taxes) to subsidise food production will bring double benefits - that is what any business does when they have a USP.
Apart from the hotels, there is also the supporting industries which are more, similar rules apply, but the government needs to bring them into regulation in order to control their market (price) impact.
There is also the outside perception of Jamaica to consider, but not sure if that will have an overall negative impact than 1-the current crime, and 2-the thought that tourists money and remittances can go further.

The above are veeery simple models aimed only at improving understanding of devaluation concept.

[Wahalla]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<span style="font-weight: bold">example 1: today's exchnge rate US$1 = JA$76
Bread = JA$25, hotel room=JA$4000 (US$52.63)
1000 visitors
1000 X bread = JA$25,000
1000 x Hotel rooms = hotel room=JA$4,000,000
</span>

the flour and yeast are imported so is the oil that cooks it ..... if labour costs remains fixed fine.. however the importers will add their markup as a percentage so the price of bread will rise as a result and higher than the rate of the devaluation.. We have beem there done that and have the result..

.... in addition on the devaluation the price of bread will imidiately rise in order for the retail to pay for the price hike when he / she buys the bread from the bakery...

as for proof the period of the highest growth since 72 was 80-88 0-1 %.. this was the period with the relative stablest currency...

[Dr.Dudd]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: amberal37</div><div class="ubbcode-body">Sounds like another diagram is called for...

example 1: today's exchnge rate US$1 = JA$76
Bread = JA$25, hotel room=JA$4000 (US$52.63)
1000 visitors
1000 X bread = JA$25,000
1000 x Hotel rooms = hotel room=JA$4,000,000

With devaluation - MUST be combined with increase in service sales taxes, by - say 5%, and costs of imports on items that Ja produces (this could also subsidise a reduction on <span style="font-weight: bold">necessary </span>imports - such as machinery.

<span style="text-decoration: underline"><span style="font-weight: bold">example 2</span></span>: devaluation, and no increase in visitors...
exchnge rate US$1 = JA$90
Bread = JA$25, hotel room=JA$4000 (cost to visitor...US$44.44)
1000 visitors
1000 X bread = JA$25,000, imported JA$29,605
1000 x Hotel rooms = hotel room=JA$4,000,000
Hotels COULD continue to spend more on imported bread - but if there is a cheaper alternative, they will switch to it.

Hotels COULD also increase room rates to cover costs of their imports, but they will NOT price themselves out of the market, The government will also generate more sales tax income.
Thirdly, the hotels COULD also cut labour costs, but they risk lowering their service standards.

<span style="text-decoration: underline"><span style="font-weight: bold">example 3</span></span>: devaluation, and increase in visitors...
exchnge rate US$1 = JA$90
Bread = JA$25, hotel room=JA$4000 (cost to visitor...US$44.44)
1500 visitors
1500 X bread = JA$37,500,
1500 x Hotel rooms = hotel room=JA$6,000,000
Government gains more sales tax, and with increase in visitors, hotels will hopefully employ more people to deal with demand
(yes I know there prob. wouldn't be a 50% jump, but just keeping the figures simple)


Tourism make up about 63% of Jamaica's GDP, so this is a sizeable chunk. Using it (the taxes) to subsidise food production will bring double benefits - that is what any business does when they have a USP.
Apart from the hotels, there is also the supporting industries which are more, similar rules apply, but the government needs to bring them into regulation in order to control their market (price) impact.
There is also the outside perception of Jamaica to consider, but not sure if that will have an overall negative impact than 1-the current crime, and 2-the thought that tourists money and remittances can go further.

The above are very simple models aimed only at improving understanding of devaluation concept. </div></div>

<span style="font-size: 11pt"> This is not a class room with kids.
this is real world with real economists you dealing with. What You presented does not in ant way relate to real life economics.
As I stated in a post before, you could not present that in any of my classes.That is after you have attended the relevant lectures.

OK so what is used to produce the bread? and since when does Jamaica produce in ingredients of bread?
The same goes for ingredients that constitute every other aspect of the Jamaican economy.
What percentage of that bread includes inputs bought with foreign exchange?
As for the increase taxes, Why wouldn't the businesses pass It onto the market in the form of higher rates?

And I would not even give the fallacy that state that <span style="font-style: italic">Tourism make up about 63% of Jamaica's GDP, so this is a sizable chunk.</span> ant valuable energy. May be that is how it is now that the incomes from mining and income inflows from Jamaicans abroad. has reduced. the former drastically. The latter minimally.

What about minimally transformed imported raw materials you don't understand?
I think you love economics, so I won't discourage you, but you are using <span style="font-weight: bold">statistics</span> to solve a problem that requires economics.
I told you that what is taught in most instances as economics is not already.

Why would so many economists get their predictions wrong? Why would it be reffered to as an art, instead of the science that it really are?
You miss the whole target by a mile Amber, but it is not your fault. It is the fault of your teachers.

They have no interest in seeing you as an economist. Otherwise you will show them up for what they really are.

They are pirates only they are using a different tool to rip off the people of the world. They are being successful at it though.</span>

[Dr.Dudd]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Wahalla</div><div class="ubbcode-body"> <span style="font-weight: bold">example 1: today's exchnge rate US$1 = JA$76
Bread = JA$25, hotel room=JA$4000 (US$52.63)
1000 visitors
1000 X bread = JA$25,000
1000 x Hotel rooms = hotel room=JA$4,000,000
</span>

the flour and yeast are imported so is the oil that cooks it ..... if labour costs remains fixed fine.. however the importers will add their markup as a percentage so the price of bread will rise as a result and higher than the rate of the devaluation.. We have beem there done that and have the result..

.... in addition on the devaluation the price of bread will imidiately rise in order for the retail to pay for the price hike when he / she buys the bread from the bakery...

as for proof the period of the highest growth since 72 was 80-88 0-1 %.. this was the period with the relative stablest currency... </div></div>
Wahallah, how many times have we discussed this principle as it relates to the Jamaican economy??

Kind of boring eh??
To be repeating it so many times..

[britisha]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tuff Gong</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Dr.Dudd</div><div class="ubbcode-body">And you believe that prices will not float with the exchange rates? Will, you are very wrong on that. Prices will be much higher than rates of devaluation. That is how it goes.
That is how economics work in a capitalist economy. </div></div>

My friend please speak to <span style="font-family: 'Arial Black'">what I wrote and not what you imagine I wrote</span>. </div></div>

**chukkling**

[Dr.Dudd]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: evanovitch</div><div class="ubbcode-body">Doc, expand on the 'reevaluation' of Ja's currency please </div></div> <span style="font-size: 11pt">
Do you remember when Jamaica had 2 different foreign exchange rates?
This was during the IMF program, in which the government had an exchange rate that was lower than the regular market rate. In that case the exchange rates were moving, regularly but not unregulated. Well what the government need to do is to allow the unregulated wonder exchange rate, but introduce a fixed rate for government which should be traded at a rate that allows it to be able to afford the infrastructure development that is necessary to maintain nation building, acquire capital upgrade in the repayment of loans.
This will allow the government to be able to afford the foreign exchange to maintain and develop the infrastructure of the country and foreign exchange loans.This more favourable rate could also be use to develop infrastructure to <span style="font-weight: bold">produce </span> production facilities to manufacture alternative energy products. As the benefits of the rapid introduction of alternative energy affect the demand for energy that is the greatest downward pressure on the local currency the rate of the exchange rate on the wider market will also pull back to a more favourable rate. This will happen due to the increase productivity and reduced cost cost of production that the rapid introduction of alternative energy produces. The creation of a national irrigation system that is carbon neutral (uses alternative energy ),that is also affordable and available to at least 75% of the arable lands as opposed to the 5% that now benefits from irrigation will be the change maker .
All of this will still be amounted to zero if the population is not allowed to protect themselves with legal and appropriate means.
Dudd</span>

[RichD]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

eh doc..yuh remember all the discussion here many years ago on dollarization?


what do you think the prospect is now?

[Dr.Dudd]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: RichD</div><div class="ubbcode-body">eh doc..yuh remember all the discussion here many years ago on dollarization?


what do you think the prospect is now? </div></div> I don't understand the question. Or may me I thought you understood the reason why it could not be an option

Why is it that all the colonies of Britain does not use the British pound?? How is it that Jamaica did not use the British pound while it was a colony,but should now use the American dollar as an independent country?
What has changed other than the members of the administration of the country?
So the country is a little poorer,does that make the use of some foreign controlled currency as local tender, be more appropriate today then it would have been then?
How does polarization compare to what I proposed in my earlier post?

[Tuff Gong]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<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: evanovitch</div><div class="ubbcode-body">Doc, expand on the 'reevaluation' of Ja's currency please </div></div> <span style="font-size: 11pt">
Do you remember when Jamaica had 2 different foreign exchange rates?
This was during the IMF program, in which the government had an exchange rate that was lower than the regular market rate. In that case the exchange rates were moving, regularly but not unregulated. Well what the government need to do is to allow the unregulated wonder exchange rate, but introduce a fixed rate for government which should be traded at a rate that allows it to be able to afford the infrastructure development that is necessary to maintain nation building, acquire capital upgrade in the repayment of loans.
Dudd</span> </div></div>

The Government of Jamaica via the Bank of Jamaica fixes the exchange rate daily and is failing badly in the face of the depletion of the #1 tool the NIR.
There are absolutely zero scenarios under which the Government of Jamaica can fix or introduce a hard-line ForEx rate, it is impossible.

To set the exchange rate you would have to be able to control the trades and more importantly have the resources to defend the currency from higher or lower offers...The state is in no position to do that at this time.

[Dr.Dudd]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tuff Gong</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: evanovitch</div><div class="ubbcode-body">Doc, expand on the 'reevaluation' of Ja's currency please </div></div> <span style="font-size: 11pt">
Do you remember when Jamaica had 2 different foreign exchange rates?
This was during the IMF program, in which the government had an exchange rate that was lower than the regular market rate. In that case the exchange rates were moving, regularly but not unregulated. Well what the government need to do is to allow the unregulated wonder exchange rate, but introduce a fixed rate for government which should be traded at a rate that allows it to be able to afford the infrastructure development that is necessary to maintain nation building, acquire capital upgrade in the repayment of loans.
Dudd</span> </div></div>

The Government of Jamaica via the Bank of Jamaica fixes the exchange rate daily and is failing badly in the face of the depletion of the #1 tool the NIR.
There are absolutely zero scenarios under which the Government of Jamaica can fix or introduce a hard-line ForEx rate, it is impossible.

To set the exchange rate you would have to be able to control the trades and more importantly have the resources to defend the currency from higher or lower offers...The state is in no position to do that at this time. </div></div> <span style="font-size: 11pt"> Why don't you go and read up something on the use if international reserves?
Any high school student of elementary economics should have known that <span style="font-weight: bold">every country use their international reserves to prop up their currency</span>.
So why are you harping on it as of it is not the usual practice?
That is a part of capitalist economy. It is not extraordinary. Even if tour GURU on the radio think it is. He does not know anything about economics and finance.

On The Subject of whether government can control trade.

have you ever heard of the Trade board??
ever tried to take a vehicle back to the country?? Well sir that is an example of trade control. The Jamaican government under the JLP had controlled trade for a long time. YOU had to get a license to import just about anything then. The reason why they can't do it no is because they sign up treaty with the WTO no to do so.

On a side note...
Tour Guru Mr mutty, does he still have the farm around junction road??
I remember when he had the farm around junction road.
He got 2 enormous power generators from the US embassy.
Any one of them was powerful enough to light up a small city.
the problem was the farm could not afford to run neither of them. They were simply too expensive to operate on a farm.
I know he still have what is left of them because nobody would buy them off him.
</span>

[Tuff Gong]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Dr.Dudd</div><div class="ubbcode-body"> <span style="font-size: 11pt"> Why don't you go and read up something on the use if international reserves?</span> </div></div>

Why don't <span style="font-family: 'Arial Black'">you</span>?