It was never going to be beautiful. That is to say using central banks as primary substitutes in fixing bankrupt western economies. Or fixing even micro-island economies like Barbados in particular in a sea of a geopolitical mess.
The people, not only major investors increasingly need to know what are the risks of central banks running out of ammunition and their diminishing impacts to fix the sluggish, credit addicted economies. Ones that are dying because the mantra of structural adjustment has been overblown, as well as a way to growth.
At the worst scenario, investors recognize that the offloading of government debt to their central banks as we see more prominent in United States and the European Central Bank will erode serious confidence in the related currencies especially on the longer run.
Despite all this flooding of money to commercial banks, regular bank clients in too many places are still too leveraged to make it easy to accelerate lending by the bankers. It certain,y does not offset austerity.
And besides, many bank clients do not want to borrow more because of fear of another 2008 debacle. It was so bad that it was called the Great Recession given how devastating it was. Barbados was chief in line of collateral damage by bad western banking and credit habits during that period. They still are.
That is why I suggest a more imaginative choice supported by articles in prestigious publications such as Foreign Affairs and top columnists of the top business newspaper, Financial Times of London. Interestingly, this idea is supported by the Head of Her Majesty’s Loyal Opposition in England.
In short, it is a people’s monetary easing of essentially giving money away by the central bank especially to the poor and middle class. It would be done in reasonable amounts including for special education and training vouchers.
It would be highly stimulative to consumption thereby reducing deflation fears, add to productivity and give the overly leveraged more confidence that they will not go bankrupt or be slaves to financiers by taking on more debt.
Many of the financiers who direct central banking policy and cannot fathom the need for such a policy sea change, eat the very best gourmet meals as they meet in Basel Switzerland at the Bank of International Settlements.
Yet, they are also eating away a sane financial order especially in developing countries and poor areas. As can be seen by the high unemployment in even places like Brussels, poverty is destructive.
I advice that western central bankers and those at the top of international financial institutions go into an Oistins Barbados supermarket where I shop with the average budgeted cash a regular Bajan has to spend and see how they make out. I think they would do poorly. I have been there counting my pennies.
Fortunately, a lot of local produce is fairly reasonable and without taxes. And the fish market across the road provides great fresh food but more at reasonable prices for tourists rather than locals.
But people’s monetary easing to ease living for many may never happen as traditional bankers are against it or lukewarm to it.
Such resistance probably includes those of the Royal Bank of Canada as well as the recent former head of it and my former classmate “buddy” – now on board of Wall Street leading hedge fund. They seem immune to the “wicked” monetary and austerity forces “crushing” the many struggling, real hard working Bajans.
They after all make 10 million a year – US dollars. These kinds do not have its easy in relating to the average citizen. Boo-Hoo to their complaints that people like me do not understand all the social good they are doing.
Some bankers though, far from all might feel they would lose opportunities in their mind to lend further and make more money with money printing for the people, not simply for the commercial banks.
However, this free money in needy hand given by the central bank directly could be seen as unhealthy competition to banks like the Royal. Or deleterious in their narrow view to the central bank’s balance sheets.
And if central banks give more money away, it will diminish to some extent banks’ private control of the economy. The key families that run them to a degree and in some instances significantly control central bank board appointees would have their powers diminished.
As an SOB, not what you are thinking, a son of a (small) banker, I understand traditional bankthink that could have come out of the 1984 George Orwell novel about big brother control.
All sorts of gobblygook economic terminology even these terms such as quantitative easing could more simply be replaced with words like “extra money printing”.
Breaking this conservative old style mindset in old economic theories over and above hiding under exclusive banker club terminology could be positive.
At the very least as Finland is planning, introducing people’s extra money printing could even be done through the vehicle of tax credits that would make negative interest rates unnecessary if done properly. This is becoming a recent real problem.
For if businesses are charged increasingly prohibitive interest rates on deposits to make up for the ineffectiveness of current monetary policy, then they will start doing poorer including thousands of small business. That would be horrendous for jobs and the economy.
Charging depositors interest on their bank accounts is being done in major countries as of now. They include Japan and Switzerland as of this date but the list could expand and affect Barbados.
Would not people money easing seem much better and easier to swallow than this horrid approach of further punishing those in distress?
In Barbados, the effect from the global spread of policy to charge depositors interest could lead to as in Switzerland to higher mortgage payments through higher interest rates.
Bajans certainly at this green shoot stage of possible decent growth recovery do not need to end up paying more for buying or maintaining a home. But that could result if central banks continue their ways.
Therefore, I am challenging the Central Bank governor to explain why he cannot support this idea well expressed by the those such as top eminent monetarists like Milton Friedman (“helicopter drop” of money to the people concept) British Labor Party policies on monetary easing to top business and foreign affairs columnists. I believe he has no escape velocity on this.
Time is up as too many Bajans cannot just go on with the current, slash and smash economic policies largely foisted on them by old boy school foreign bankers or their “puppet” followers.
Lack of overall funds and decent civil servants salaries, as well because of excess austerity is slowing down the machinery of bureaucracy in areas where private businesses are dependent.
This includes getting foreign exchange in a timely way to avoid having businesses’ and individuals’ credit ratings impacted as has been reported. Maybe even Dr.Johnson’s idea about Bitcoin should be considered.
He is an eminent scholar from MIT, now assigned to helping the central bank in Barbados. And certainly the bank needs help given the state in which the Barbados economy is. And the need to speed up the doing of more business, in attracting offshore investors and confidence to retain money domestically should not be forgotten.
Also, too many at central banks are worshiping at the alter of failed IMF policies some of which are not even supported that much by the current IMF director. She is trying to put to bed some of them such as those in Germany thinking the Greeks can pay back all their debts by mass austerity.
There are alternatives from the Barbados central bank and they should be implemented before it is too late for most who are just hanging on. It is time to end gourmet banking for the few and instead to support a rising monetary tide for the boats of the many. Time, indeed is running out.
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