At odds with itself

LUCAS STOCK INDEX The LSI declined by half of one percent in trading this week. While the stocks of Banks DIH (DIH), Demerara Distillers Limited (DDL) and Republic Bank Limited (RBL) remained stable that of Demerara Bank Limited (DBL) declined by 3.17 percent. No other stocks were traded. As a consequence, the spread between the index and the risk-free Treasuries due to mature in December 2011 remained below 20 percentage points.

Spend More

There comes a time when monetary policy must concede to fiscal policy.  One of those times is now, when private spending has slowed down considerably and the most potent of monetary policies, interest rates, is not as effective as it could be.  In Europe, all eyes are on the governments that make up the 17-member Eurozone, but more particularly on Germany, which along with France, is attempting to lead the rescue effort.  The members of the European Community which use the Euro as their currency are the principal economic agents that could provide the much needed money to take care of the troubled sovereign debt of its members.  No one expects it to last, but the willingness of the International Monetary Fund (IMF) to encourage governments of major economies to spend more and not less was probably the last thing some expected from the world body.  That was the call coming from its new Managing Director last week in an effort to help stave off the collapse of the Euro.

The IMF spends most of its time preaching the virtues of sound macroeconomic policies which often means sound monetary policy and the need to stay away from too much government spending.  This sermon, more often than not, is delivered to the