Dennis Jones is a Jamaican-born international economist, who has lived most of the time in the UK and USA, and latterly in Guinea, west Africa. He moved back to the Caribbean in 2007. This blog contains his observations on life on this small eastern Caribbean island, as well as views on life and issues on a broader landscape, especially the Caribbean and Africa.







**You may contact me by e-mail at livinginbarbados[at]gmail[dot]com**

Wednesday, October 08, 2008

Only Fools and Horses.

You have to wonder what some of the journalists at the major Bajan newspapers really think about their credibility. Today I read the editorial of the Nation, which blared under the headline "Aftermath of the US bank crisis" (see report): "THE CONSENSUS SEEMS TO BE that there are unlikely to be any repercussions in this area. We do not support this position and fear that some people in local financial circles may be more hopeful than realistic." Well, I wonder what basis they have for a consensus. Just last week the same newspapers published the result of its poll (see report), which showed "The financial crisis in the United States is unnerving Barbadians both at home and away. The vast majority of respondents to a www.nationnews.com poll made it clear that they "definitely" thought the financial crisis would impact Barbados, with 79.6% choosing that option". So, that little attempt at analysis of what people on this rock thought and felt, showed that 4 out of 5 people thought there would be an impact. Do right hand and left foot not hang from the same body at this media house?

Barbados's central bank governor indicated in late September, that while the situation is unlikely to have a significant impact on Barbados immediately, “as the US economy slows or goes into recession as it copes with these difficulties, the result could be a slowdown in the growth of the Barbados economy going forward”. She added that recession in the United Kingdom and European economies would also impact adversely on the country’s tourism prospects and investment inflows. But she was optimistic that the Barbados economy could withstand the effects of the turmoil.

I have heard no one else with any sense say there are unlikely to be any repercussions in this area. In fact, people have been at pains to point out that, while it may not be possible to state precisely what the effects will be, there are likely to be negative results for the Caribbean in areas like tourism, direct investment (including in real estate), and remittances--not just from the immediate or longer lasting effects of the US financial crisis but from the effects of a world that is seeing much slower growth than previously envisaged. For example institutions such as Standard and Poor's indicate perhaps no immediate effects but signal repercussions down the road.

So, in a word, you can seem clever by claiming that someone believes something stupid and then correcting this. But only a fool would fall for this sort of flimsy attempt at seeming clever.

The other point that struck me was the repetition of something that is just not true, and getting stuck on what direction things are moving and what effect they might have. The statement in the editorial, "The almost unstoppable slide in the value of the United States dollar is sure to serve as a disincentive to travel and this, along with the United States elections, will cause a decline in visitors to our shores." is just not accurate. [There you go again. Fact checking.]

Now, without going into a long piece on economics, let's just look at where most of Barbados's tourists come from, Britain. In September 2007 the pound stood at 2.10 to the US dollar; the rate declined gently for nearly a year, bouncing between 2.05 and 1.95--that is the dollar was getting stronger; as I write sterling has had another bad day as it has since mid-July and is now around 1.73 to the US dollar. So, in broad terms that is nearly a 20 percent rise in the value of the dollar over the past year. [Though following a different path, we see a similar improvement of the dollar against the Euro, particularly from its peak of 1.60 to the dollar around April-July this year.] That would be good for Americans wanting to head to England and Europe. For Britons and other Europeans, it's the strength of the US dollar that might dissuade them from travelling. For Americans travelling to Barbados none of this matters because the US dollar and the Bajan dollar have been pegged at 1-to-2 for 33 years.

It's a mystery why the elections in America will dissuade the relatively small number of American tourists from coming to Barbados, except on the day of the election. If they are going to be dissuaded it's more likely to be because Barbados is an expensive destination that has little extra to offer than could be found closer to the US shores, whether it be Florida or The Bahamas. Sorry, have to give the student a fail on this test.

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