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Slippery slope

As of yesterday the US Congress had not yet reached agreement on the proposed US$700 billion bailout of the US financial system; in fact, early yesterday morning it was reported that talks had stalled. Bad news for financial institutions some of which had obviously been hanging on by a mere thread, as evidenced by Thursday’s seizure and sale of Washington Mutual Bank, deemed the largest failure of a US bank so far. Predictions are that the bailout, if and when it is agreed to, will not be the cure-all of this global crisis. Financial markets will not bounce back immediately and the focus of those controlling the purse strings of the world will be the building back, which is bound to be slow.

This does not augur well for the economies of aid-dependent developing countries as this crisis, compounded by the global hike in the prices of food and fuel will likely translate into a rise in poverty levels. At the UN on Thursday, Secretary-General Ban Ki-moon, and British Prime Minister Gordon Brown, pushed for there to be no backsliding in the commitments made by rich donor countries to meeting the Millennium Development Goal of halving global poverty by 2015. However, there was no unanimity in this call as some donors, France in particular, are already preoccupied with overcoming the current crisis.

Countries like Guyana, which receive US and global aid, and whose economies are heavily bolstered by remittances, particularly from the US, are likely to feel the squeeze twice. Several ongoing projects and programmes would fail if, in a worst-case scenario, aid commitments could not be met. Several others, which have been planned, would not get off the ground.

If job loss and uncertainty continue, there will be an almost immediate dip in remittances in response. US-based Guyanese, Mexicans, Hondurans and natives of other countries in Latin America and the Caribbean will not be able to send money home at the rate at which they would have done previously, if they have lost their jobs or are unsure about whether they will be able to hang onto them.

Already, since the US mortgage crisis began earlier this year, Mexico’s Central Bank had reported a 2.9 per cent drop in remittances from the US for the first quarter of this year, when compared with the same period last year. No doubt, if other countries did similar studies the results would probably be the same. Perhaps, some might even find the decrease was higher than 2.9 per cent, which is not an insignificant figure. And given the fact that the crisis has worsened, the second quarter drop-off could possibly be much higher. Economists had warned, years ago when it never seemed likely that the US could find itself in such a position, that the reliance on remittances was not viable as an economic policy.

According to the IDB, which has been conducting an annual study of remittances from the US since 2000, remittances last year from the US to Guyana totalled US$424 million and were 43% of its gross domestic product (GDP). Haiti received US$1.8 billion, which was 35% of its GDP; Honduras, US$2.5 billion, 25% of GDP; El Salvador, US$3.6 billion, 18% of GDP; Jamaica, $1.9 billion, 18% of GDP; and Mexico $23.9 billion, about two to three per cent of its GDP. One needs neither a rocket scientist nor a crystal ball to see which countries would quicker find themselves on the slippery slope to economic morass if remittances fell significantly, as the signs seem to indicate they can.

Developing countries are caught between the proverbial rock and a hard place where they must wait out the current crisis with a lot of belt-tightening. But in the meantime, they must also look towards long-term plans for reducing dependency on the developed nations and for greater self-sufficiency. Guyana’s ‘grow more food’ campaign could be just the ticket were it not for the changing weather patterns already wreaking havoc with farmers’ lives.

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6 Responses to “Slippery slope”

Johan
on September 27th, 2008 8:26 am

‘Economists had warned…reliance on remittances was not viable as an economic policy.’

Are you kidding me? Did somebody actually believe this? I can understand taking advantage of remittances - like we do with the so called ‘parallel economy’ in Guyana - to get a few things in place here and there. But surely, this cannot be an ECONOMIC POLICY or even part of one!

You know, God help me, but I think this global econimic contraction might be actually GOOD for Guyana. As 9/11 forced the Caribbean to look inwards, creating such beauties as the CSME and others, so this fiasco might force Guyanese to look a little harder to their own country. If it can squeeze out some of our differences, force them to take a back seat, and foster a greater appreciation for each other, that would be a huge plus - maybe even give us the political will to force change for the better in our dear land.

I firmly believe we hold the keys to our own development.

[Reply to this]
Joe Coxall
on September 27th, 2008 9:15 am

It is indeed a slippery slope, but the solutions of Paulson- Americas self appointed Julius Caesar- of taking from the poor, to bail out the rich is treasonous at best.

Here is his demand on section 8: of his bailout act,
“Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency” ::::: Are you kidding me?

The last Imperial Emperor that confronted a group of senators with that kind of attitude was told to “Beware of the ides of March”

This alone tells you that any agreement by congress to this Act, is in itself an act of treason on the American people.

The printing press is now running non stop to fulfill this obligation, but the government treasury cannot just give those freshly printed notes to the bank and say ok, crisis is now over.

No, they must first, hand the money over to the private corporation known as the Federal Reserve, and which is owned by the very same banks that are being bailed out, so that they can demand bonds and securities in return, (bonds and securities are IOU pieces of paper, that says, that the government now agrees to repay this money to the Federal Reserve, including interest), it thus becomes taxpayer expense by this simple, slight of hand magic money trick.

The Fereral Reserve is the only private corporation in America that is not required to pay any taxes on any windfall profits in terms of interest that make by this means.

Paulson. Bernanke, Alan Greenspan and all the other heads of the banks should be seeking bail instead of bailout.

Remittances:::now why do you believe that the IDB have such an accurate, measure of how much US dollars, filter out to the poor countries, Believe it or not, the remittance system is intentional, since the money is based on a system of fractional,fiat money laundering, it had to be dispersed from America’s shores to hold off inflation, and hense a rapid devaluation of the worlds reserve currency.

It also gives the IDB and other such lending agencies accurate information of how much US dollars are floating around in any one country at any one time, they use this information among other factors, to calculate how much money can be lent to the country, since they now know how much potential interest payment reserves are available at any one time.

But notice also, that they have no idea where all the money on Wall Street disappeared to, all they are saying is that “Those subprime borrowers caused it”
end of story. No Siree, they stole all of it, and get to blame the losers at the bottom round of the ladder. Show me a subprime borrower whose pocket is stuffed full with all this loot.

It is an international con game my friends, they have created complex concentric circles of monetary systems, with little funnels where profits disappear and flow right back to them.

They make all of these systems seem seperate, and that Americas problem,is an isolated one. No, it is the same as every other country,in which they are allowed to loot dry. The only problem with America, is that it was assumed to be a host that was too big to fold over and die,

So the fleas kept on feeding on the the old dog, and any symptoms, that showed up on the dog was diagnosed as those illegal immigrants, those terrorists, those poor ass, subprime borrowers.

Now Georgie Boy, who still remains as dumb as a do-do, had no clue of how empty the farm was, until Paulson declared that it is 5 trades away from total meltdown.

700 billon, is just for starters, experts agree that it will take 5.3 Thrillion.

The solution:::Remove and arrest all members of the Federal Reserve. Nationalise all banks, then bail them out with money, coming straight from the treasury and not thru the Federal Reserve.

Remove the trade impediment of a worlds reserve currency.

Permit, countries like Guyana to print their own money in enough quantities, to carry out their own local development.

Cancel all third world debt, instead of bailing out the banks.

Joe.

[Reply to this]
Joe Coxall
on September 27th, 2008 11:15 am

Here is an article I found on the net, my friends, hope it helps in understanding what this bailout , and world funding by the international banks, is all about.

Joe.

America’s founders were rightfully skeptical of granting too much power to bankers. Thomas Jefferson said, “If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered.”

Jefferson also believed that “banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”

Daniel Webster warned, “Of all the contrivances for cheating the laboring classes of mankind, none has been more effectual than that which deludes them with paper money.”

Webster also said, “We are in danger of being overwhelmed with irredeemable paper, mere paper, representing not gold nor silver; no, Sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors, and a ruined people.”

Our first and greatest President George Washington said, “Paper money has had the effect in your State [Rhode Island] that it ever will have, to ruin commerce–oppress the honest, and open the door to every species of fraud and injustice.”

If George W. Bush, John McCain, or Barack Obama had any honesty and integrity, they would approach the current banking malady in much the same way that President Andrew Jackson did. In discussing the Bank Renewal bill with a delegation of bankers in 1832, Jackson said, “Gentlemen, I have had men watching you for a long time, and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out.”

What President Andrew Jackson said to the bankers in 1832 is exactly what an American President should say to these criminal international bankers today. But what George Bush, John McCain, and Barack Obama want to do is provide amnesty for the international bankers, just as they want to provide amnesty for illegal aliens. I say, No amnesty for Wall Street, and no amnesty for illegal aliens, either. Instead of sending these banksters on extended vacations to the Bahamas with millions of taxpayer dollars in their pockets, we should be sending them straight to jail!

[Reply to this]
Sarkar
on September 27th, 2008 1:18 pm

If these figures from IDB are accurate then this really reflects how financially and morally bankrupt a country really is. Where is Guyanese pride? Face facts, when REMITTANCES, as we say in Guyana ‘hand-outs’ is 43% of a country’s GDP then this tells me that most Guyanese cannot live on what they earn alone. Is IDB saying here that the Haitians earnings go a longer way to sustaining their livelyhood? Is Haiti in better shape than Guyana? Will I see Guyanese leaving to take up residence in Haiti? The bottom line in any economy is ‘How far will your dollar take you?’ (Remittances to Haiti is 35% of its GDP).

I would hate to think that Guyanese just ‘throwback’ and wait for a ‘raise’. Hold on here, take a closer look at our Newspapers and you will see “No Jobs”, you will see UG churns out 1400 graduates but the government does not see the need to attract investments that will create jobs IN Guyana and not in China or other developed countries (exporting logs.. how many jobs did this create?), you will see 400 acres planted instead of 10,000, before government stooges jump up and shout ‘weather’ think twice, it’s not about government, it’s about GUYANA. (Will the rest of CARICOM take a stand and support Guyana’s agriculture and not Europe’s or North America’s? Do Guyanese politicians and diplomats have the ’spungs’ to make Guyana shine in CARICOM?). You will see astronomical water and electricity bills. You will see your elected leaders sitting in cushy chairs doing almost nothing to improve infrastructure, nothing to bring cheaper electricity, nothing to bring cleaner and cheaper water, nothing to create jobs and worst of all NOTHING to keep jobs that are here!!!

Let’s face reality, who will want to invest in a country with no electricity, no decent roads, a capital city with a foul and decaying odour, no water through the taps, no stable politics, no control over crime and a politicised judicial, police and security force that are all almost non-functional. The way I see it, politicians in Guyana do not understand that progressive planning is for the betterment of Guyana and not “WE will not prepare a nice solid foundation for ANOTHER political party to benefit if we lose the next election”. GUYANA will benefit, not it’s next group of leaders!!! GUYANA MUST COME FIRST…. PERIOD!!!!!!!!

[Reply to this]
cochore
In reply to the above comment on September 27th, 2008 8:46 pm:
Sarkar, the conclusion in your last paragraph said it all.

However, let me add this known fact about politics in Guyana. The Jagdeo administration have no clue about job creation, national growth and profit.

No gov’t ministry or agency has ever produced any product, not even a match stick be it manufactored or imported, yet their monetary policies suffocate and penalize the enterprising genus of the private sector, the only engine for real national growth and profit.

[Reply to this]
michael tannassee
on September 27th, 2008 1:57 pm

GUYANA ,, because of it’s geographical location ,,and the fact that it is west of the Amazon river,, which on a daily flow to the atlantic ocean ,, deposits approximately 3 million tons of silt and debris,,— this may have increased ,, due to the increasing activity of the brazilians on the banks of the Amazon and it’s nearly 1100 tributaries — ,, which is then dispersed from the mouth of the Amazon by the “GUYANA current ” or the more common “east /west flow” aided by the north east tradewinds ,, which is a major contributary factor to the rainflall experienced by the countries that comprise the “guiana shield”,, the silt that is moving west from the mouth of the Amazon ,, finds itself accumulating at the mouths of all the rivers west of the Amazon all the way to the WAINI river and to the eastern banks of the orinoco ,, the orinoco ,, being so massive that it’s flow ,, into the atlantic ,, does not allow and sediment buildup to create any problems !

but back to the problems of rain,, as it relates to GY ,, is the fact that we live on the very edges of the atlantic ocean ,, and the 3 elements ,, required to make rain is overwhelminly prevalent since we are part of the Amazon basin — albeit just 1 % — we are still adversely affected since we contribute to the making of rain by the socio- economic endeavours ,, for sustainablity ,, by the sugar ,, mining,, and logging industries,, the dust particles of the three activites added to the salt air that drifts off of the atlantic ,, inland rises to higher elevations,, which then becomes frozen ,, from the peaks of the Andes ,,— which is the longest and most extensive mountain range on the planet —,, and when frozen becomes heavy ,, and resists further updraft ,, which then comes back down in the form of rain !…. increased activity ,, by industrialised nations of which Brazil,, india and,, china,, have embarked is also a contributary factor when we consider that the globe is in perpetual motion ,, and atmospheric depression is likely to occur anytime anywhere on the planet ,, much of what is now undetermined ,, in weather patterns ,, that is becoming more on the scale of mega disasters ! will continue unless inteligence is applied for the relief of nations whose economy depends on weather for survival ,, it is difficult to see that govts and world leaders ,, who with expert advice as to how to curb this is ,, not adhereing to such advice ,, the “three river gorge dam ” which is now the largest on the planet after the itaipu dam which was the largest in Brazil ,, is now considered to be the cause of the burma ,, disaster ! this three river dam ,, is so large that it has considerably altered the weather patterns in it’s immediate and out lying radius ,, that is in excess of 100 miles ,,,mans destruction by man is reversible ,, with the required “world oder” that is mandatory NOW ! is cause for not just concern ,, but ,, “immediate action”……..

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