Devaluation in Barbados Imminent? Looks That Way!

The news in this morning's online Barbados NATION is exactly what many of us who used to live there, and still hold assets there, didn't want to hear. That it isn't a question of whether or 'if' a devaluation will occur, but what manner it will take.

According to the brief article, THREE DEVALUATION OPTIONS have been presented to the Caribbean (specifically to Barbados) by the Inter-American Development Bank (IDB), which also "hailed Barbados as having successfully implemented one over two decades ago." That was the one I was there for, which entailed an eight percent cut across the board in civil servants' wages. That was also the one that drove wifey and myself back to the States, realizing that if we remained we'd be in endless penury and not even be able afford "poor man's" food of chicken and rice or macaroni pie or salt fish and cuccoo. (For reference, imagine having your wages cut 8% and paying up to $14 for a box of cereal, never mind bacon at $6 a lb. and eggs for $1.50 each- in the money you earn.)

As I pointed out in a letter published in The Financial Times, in 2008, the lead up to that "internal" devaluation - whereby the fiscal deficit was reduced from eight per cent of Gross Domestic Product (GDP) to two per cent by 1992, and capital expenditure diminished by 50 per cent- was a "tax cut" implemented in 1986. At that time the then newly elected DLP government decided to hand out generous tax cuts based on the Reagan "supply side" nonsense in the U.S. Like many others, I strongly argued in the Bajan press against this, given that: a) Barbados was not the U.S., and b) the loss in revenue would seriously compromise Bim's balance of payments issues, as well as banking liquidity.

This proved to be prophetic, as less and less revenue was collected leading up to 1991, and the conditions became so unstable that they drew the attention of the International Monetary Fund, or IMF. The IMF insisted on a full currency devaluation (fiscal) devaluaton, but the administration wisely begged off, seeing what such moves had already done to Trinidad, Guyana and Jamaica. The result was an across the board permanent wage cut for hospital radiotherapists like my wife, and for college physics teachers like yours truly. Within another year, we'd left for Columbia, MD given we couldn't break even or save a dime working our regular jobs plus two after-hours jobs (tutoring physics for me, repairing VCRs for wifey).

Anyway, in its latest policy brief the Washington-based IDB listed "external, internal and fiscal devaluation" as the main choices in the face of reduced competitiveness and a sustained current account deficit across the region, while noting that Barbados "had successfully implemented the internal option in the 1991 economic recession." Let's understand here that the reasons for the current morass are the under-utilization of the tourist industry, and the essential regression of the island's offshore banking business - no thanks to Neoliberal ideologues like France's (now deposed) Nicholas Sarkozy who several years back (at an OECD confab) complained about "offshore banking outlaws" in the region. Most of the island nations with offshore banking went apoplectic at the scurrilous lies, given that this was one of the few financial pillars that remained, after the loss of tourist dollars and the downscaling of the sugar cane industry.

The other problem is Barbadians are spending beyond their means, to be sure, as I pointed out in a blog back in May, 2010 ('Will Barbados Fall to the Sovereign Debt Crisis', Pts. 1 and 2). In terms of food, nearly all has to be imported and fuel costs add to the import costs. Bajans do grow a lot of their own, e.g. chickens for example, but it can't meet the island's demands. Another drag is the ever prominent "motor car" - which now clogs the island's narrow highways and biways. Each also must be imported, as does petrol, and the costs of both are eating up precious capital. Coupled with loss of income in an ongoing aggregate demand crisis (worse than in the U.S., obviously) the island has barely seen one percent growth in the past year - while it' s suffered credit downgrades.

So, the writing may now be well on the wall. In the brief entitled The Question Is Not Whether To Devalue Or Not To Devalue, But Rather What To Devalue, IDB senior economist Inder Jit Ruprah stated that “the typical example of success, given by proponents of internal devaluation, is Latvia. Rarely is Greece or Barbados mentioned”. True, but the fact he is mentioning it now again, indicates that Bajans - as well as other Caribbean island nations- may soon be expected to follow suit. Again, for Bim. But at least an internal devaluation would be a bit more tolerable than a fiscal (currency) devaluation. Ruprah added that before 1991 Barbados’ external position had begun to rapidly deteriorate but after the implementation "the current account improved."

Realistically, however, we can expect any current account enhancement will only be temporary - irrespective of devaluation (if at all forthcoming)- unless Bajans learn to somehow live within their means! One also hopes this can be achieved without acceding to the increasing demands from the local Neoliberal bastions (mainly former sugar plantation owners and long time, inherited business types) to "cut pensions" or "privatize" them.

YES! The Tea Baggers Are Nuts Enough to Crash The Government!

Rebel traitor Jefferson Davis, whose visage still appears on many Southern license plates, must be smiling from his grave at how his neo-Confederate ideological descendants have brought the government to the precipice and will now likely toss it over the cliff.

"If you listen to right-wing radio, watch FOX News and read their online media and take it seriously (because they do) then you would know that many on the right don’t want to live in a country that has Social Security, Medicare, Obamacare, the minimum wage, Food Stamps, immigration, public schools, infant nutrition programs and the rest of the things government does to make our lives better. And they don’t want anyone else to live in a country that has those things, either."-  Dave Johnson, 'Misunderestimating Who They Are', smirkingchimp.com


Okay, I admit I was wrong. Way wrong! In my fulsome over optimism (which only occurs a few times a century) I had actually predicted the government shutdown would end after a week and never ever bleed into the debt ceiling deadline. I had somehow expected rationality to eventually prevail so we wouldn't have reached this point. But, alas, I'd underestimated the supreme idiocy and insanity of the Tea Bagger neo-Confederate band of loons holding this country hostage. Many of whom, let's be clear, don't even think a default matters or will have consequences. Thanks to these assholes, all of us will experience real consequences!


Ol' Jeff Davis must be smiling from his grave, to see his ideological and other economic descendants (in the Tea Party especially) are on the verge of crashing the federal government into what many financial analysts have called "Armageddon" if the debt ceiling isn't raised by midnight tonight.

Already credit rating service Fitch has put the U.S. on a watch list for credit downgrade, below its current AAA bond rating. If that happens, and if no solution is reached by midnight, then we are headed to default. The U.S. Treasury will be able to borrow no more money, and risks not being able to pay Social Security, Military Vets benefits, or bond interest. In this case, which could transpire by Oct. 31- Nov. 1 (as Steve Rattner noted on Chris Hayes' All In on Monday) then people will see pain across the board. Start with your student loans, home loans and car loans all going up. As Rattner noted, every 1% increase in interest means $20b not available for purchase of goods and services. One financial analyst firm already estimates the shutdown has cost this fragile economy $22b.

Meanwhile, this morning, John Chambers -   Chair of the Sovereign Ratings Committee at Standard and Poor's -  has noted that each week of shutdown has cut 0.3% of GDP from the 4th quarter output This alone is parlous, given the GDP in any given year remains unbelievably low at 2-2.2%.  Chambers noted that if we go past the point the government can't borrow any more, "one of two things can happen": 1) You'd have to cut government spending (other than debt service) by over a quarter of gov't spending, which would put the economy in recession, OR  2) refuse to pay bond interest coming due  -leading to absolute default. In this case, the outcome would be "much worse than Lehman in 2008". For those who don't recall, Lehman paved the way for the massive stock market crash (and credit meltdown) that year,  with most 401ks losing up to 40% of their value - from which many ordinary citizens have just started to emerge.

Chambers also dispelled a long standing myth among the ignorant Tea Bagger crowd, i.e. that the debt ceiling being raised allows spending.  In fact, as Chambers pointed out, "the spending has already been approved as per acts of congress, but now elected officials are balking at funding that spending."

And let's get it straight WHO these assholes are: they are entirely the Tea Bagger nutsos who have threatened Goopr  weak sister John Boehner with his Speakership unless he conforms to their idiotic, insane agenda - defunding the Affordable Care Act.  This is why Boehner, wussie that he is, turned down the reasonable bipartisan solution worked out in the Senate yesterday- which was really the last best chance to conclude a deal.  That deal would have re-opened the government at least until January, and raised the debt ceiling without any major strings attached, until February. So anyone prepared to blame the inability to go to military monuments (including Vietnam War Memorial) in D.C. on Dems or Obama needs to get their heads on straight about who the real culprits are here. (Oh, and stop watching FAUX News!)


Because as soon as the rational re-opening solution was sent to the House, Boehner's rebellious crew warned him it was a no -go. No way would they vote for it, because "it didn't go far enough". Now note- this was after GOP Senate stalwarts like Mitch McConnell, had already backed it. So WHO are the crazy whackjobs here? WHO are the ones responsible for this bullshit? They comprise a kernel of about 44 -odd,  recycled proto-Jeff Davis backers in the House - about 1/30 of the whole gov't holding the rest hostage.

Chris Hayes had a feature segment on 'Who Is Shutting the Government Down?'

At the top of the list, Rep. Paul Broun of Georgia's 10th district, about whom Chris played several clips, including showing this asshole stating:

- The South was victimized by "Yankee Aggression" in the Civil War

- Climate change is the "biggest hoax of the century"

- " Evolution, the Big Bang Theory and Embryology are ALL lies from the Pit of Hell".

Get this, this delusional psychotic jackass sits on the House Committee on Science, Space and Technology! You want to know why your government is shut down, look no further than under -educated Tea Party pawns  like this. Though he claims to have an "M.D." degree, it could only have been awarded by Smokehouse Online Bible College since he professes the Bible governs and dictates science. And no real scientist would ever make a statement (following his fulminations against evolution, etc.)  like:  "It's these lies that try to keep me and all the folks who are taught from understanding that they need a savior".

Again, HOW the fuck can this fool be a member of any Science and Technology committee? Shit, how the hell could he even be a member of congress? The only explanation is half wit goobers in his district no more educated or informed than he is, electing his sorry ass!  And it is because of 44 such districts across these United States (mostly in the South), with hundreds of thousands of such halfwits (many pining for the glorious days of Jeff Davis and his lot) that we have 44 Tea Bagger traitors in the House ready to turn this country upside down to try and get their way. Are we now into appointing blithering imbeciles? Well,  figure it out for yourself when you next consider another Tea Pea moron backing the shutdown and default: Doug Lamborn.

Lamborn hails from El Paso County, Colorado, where he's been re-elected by the goober hyper military nuts ensconced here. Though these goobers piss and moan about "welfare" (Medicaid) for a pregnant mom working at Walmart unable to make ends meet from a piddling wage, they are quite happy to snatch military welfare benefits.  This includes defense contractor benefits such as Lamborn has proposed to construct a $1 billion 'combat air brigade" here in the Springs, defended as "necessary for training support in Afghanistan" - despite the fact the U.S. is supposed to be leaving next year.

In other words, $1 b down the drain, and that's not even figuring in the tens of millions wasted each year in fuel costs with 122 choppers flying hither, thither and yon.

Lamborn has also gone on record to defund any health care act, especially the ACA, which allows birth control. He also is against contraception, period, and demands a "personhood" amendment to "protect the unborn citizen".  Thus, he advocates passage of a new personhood amendment currently on offer, which penalizes any pregnant woman with up to 5 years behind bars if she is caught riding on a motorcycle, skiing, or drinking alcohol - which would be "voluntary manslaughter of the unborn citizen."

Now you know the basic psychological profile of the Tea Bagger assholes shutting the government down, and holding a gun to our collective heads as we near the 11th hour. Don't fucking blame Obama for any of this! He's finally standing his god damned ground as he should have the first time these fucks tried to extort concessions in 2011. Blame the Jefferson Davis, neo-Confederate dickheads who are hell bent to avenge the South's surrender to "Yankee aggression",  by taking down the current federal gov't led by the first African-American President.

To read more about the issue under discussion, see:

http://www.salon.com/2013/10/07/shutdown_shows_the_civil_war_never_ended_partner/

http://www.salon.com/2013/10/13/the_south_is_holding_america_hostage/

http://www.smirkingchimp.com/thread/joshua-holland/52150/tea-partys-war-memorial-rally-was-another-let-him-die-moment

http://www.smirkingchimp.com/thread/jack-lessenberry/52151/meet-the-gop-Taliban

http://www.smirkingchimp.com/thread/dave-johnson/52148/misunderestimating-who-they-are

Does Obama Understand That He's in a WAR, Not Leading a College Debate Team?

"It does seem like this group of really hardcore Tea Party types may not really be impressed (by a stock crash). They seem to believe that the cause of justice is on their side, and that they are making some sort of glorious last stand or avenging the surrender of the South in 1865 or something. They may not listen."
- Doug Henwood interviewed in salon.com piece, 'Tea Party's Shutdown Lunacy: Avenging the Surrender of the South'

As I write this the news is that, once again, Obama plans to “talk with the GOP”. Does he not grasp that the time for rhetoric and talk is over? Does he not grasp that he is in a war, and not participating in a college debate society face off? Sometimes I wonder.

On the line is the full faith and credit of the U.S. government, and the restriction of payments such as to Social Security ($25b due on Nov. 1st) and for Medicare providers, as well as disability for vets. Already, death benefits have ceased. Meanwhile, the nation’s largest creditors, China and Japan (to the tune of over $2.14 trillion) have warned of the consequences of a default, or failure to raise the debt ceiling. Meanwhile, asshole Tea Baggers compare the ACA to the “Fugitive Slave Act” of 1850 and some of these nincompoops even profess that a default won’t be any biggie!

How much more of this bullshit is Obama going to take? How long will he yap with these Teabag Confederates before he understands they are just game- playing him? Already, a new AP poll shows his approval rating is in the tank, at 37 percent, barely 2 points above Bush Junior’s before the 9/11 maneuver to jack it back up .

But all I hear is rhetoric and blather. Why is it the man refuses to boldly act as a leader against these traitors? By that I mean doing one of two things: 1) minting a trillion dollar platinum coin and depositing it in the Treasury, de facto raising the debt limit in one fell swoop on his own, OR 2) invoking Section 4 of the XIV Amendment via Executive Order to do the same. Obviously, neither can be termed 'prosaic', but letting us become a deadbeat nation and allowing a stock market crash, not to mention credit default ….merits extraordinary action…..to my way of thinking. Which is preferable under the circumstances: a constitutional crisis (acknowledging the Civil War is active once more), or a worldwide recession? I will take the former any day of the week, twice on Sunday!

As the great former Barbadian Prime Minister J.M.G.M. 'Tom' Adams once noted, after one of his several constitutional debates in 1972:

“When ordinary means are insufficient to change those who would seek to undermine our polity, then the true leader must use extraordinary means to re-establish it.”

Is Obama a true leader, like John Michael Geoffrey Manningham ‘Tom” Adams? (Who used fiery street oratory as he traveled round the Barbadian nation to mobilize public opinion against a plan to change the Barbadian Constitution). I don’t know, but so far the indications are he is not. He fears conflict and “unintended consequences” which is exactly what a real leader must not fear. And despite avoiding what he might assess as “precipitate actions” (in minting a $1T coin, or invoking the 14th) his approval polls keep falling like a lead weight.

Nor does he see his opposition for what they really are: rabid, proto-Confederate rebels who’d rather trash the nation than see his signature law gain traction. Instead, he continues to labor under the delusion that he’s dealing with reasonable and rational men. Hence, the endless rounds of confabs …never amounting to squat. It almost makes one believe the narrative that Obama is a consummate campaigner but a leader…..not so much.

As a recent salon.com article already pointedly noted, this standoff on the debt isn’t about fiscal issues or debt at all, it’s about the Old South (via the old Confederacy) attempting to “avenge the surrender of the South”. See e.g.

http://www.salon.com/2013/10/09/tea_partys_shutdown_lunacy_avenging_the_surrender_of_the_south/

In an earlier, similar piece on the Tea Party's Southern heritage it was observed that the Civil War never really ended. A "truce" or armistice was merely signed, similar to the one halting the Korean War. What we now see, is the Civil War re-activated via the Tea Party's government shutdown and soon enough, refusing to raise the debt limit.

In their terrific book, Banana Republicans, Sheldon Rampton and John Stauber observed that the reason Republicans usually emerge victorious in political battles is because they treat them as "warfare", while Dems typically treat them as "college debate society meets". Hence, adopting a milder modus operandi etc. they consistently get their asses beat. It's time for this shit to cease, especially now with our financial future at risk.

The sooner Obama grasps the dynamic here, the sooner he will also grasp that talking with unreasonable, ideological puppets is useless, so is rhetoric via presidential speechifying. The time for timidity is over. Either mint that damn coin, sir, or invoke the 14th. Don’t dismiss them if you don’t want the nation taken to perdition by these latter day Johnny Rebs! ACT!

---

Addendum Note: From Bernie Sanders

“Yesterday, the Republicans were using the Affordable Care Act as the reason why they had to shut down the government and not pay our bills. Today, it’s ‘reforming’ Social Security, Medicare and Medicaid. What will it be tomorrow?

“Social Security, which is independently funded through the payroll tax, has nothing to do with the deficit.  The deficit -- which has been cut in half since 2009 -- was significantly caused by the Bush wars in Iraq and Afghanistan, the Bush tax cuts for the wealthy and the Wall Street-induced recession, which led to a significant decline in federal revenue.

“The Republican Party and Paul Ryan cannot be allowed to get their way by threatening the American people with a continued government shutdown and a default unless Congress cuts Social Security, Medicare and Medicaid.  That is not what the American people want.  Rather, we should be passing legislation which rebuilds our infrastructure and creates millions of new jobs, address the crisis of low wage employment by raising the minimum wage, make college affordable and fight for equal pay for equal work."

Below is a recent interview that Bernie did on CNN with Wolf Blitzer which discusses these issues.

Obama Must Be As Good as His Word and Not Let Himself Be Rolled Again by the PUKES!

Depiction of Obama from two years ago when he basically allowed the country to be extorted by the Reepo Economic Terrorists. This time he needs to approve the debt ceiling limit increase under Executive order- under the 14th amendment - even if brings on a constitutional crisis.


In a heartening speech yesterday Obama basically said that the nation was being held hostage on two counts - with the upcoming potential gov't shutdown if  Obamacare isn't defunded for a year, and with raising the debt ceiling to pay the nation's bills. In the latter case, if the GOOPs are allowed their extortion gambit again, it may well mean another credit downgrade, stocks crashing and people suffering.  One news anchor, Scott Pelley, on CBS New last night noted from his correspondent (Nancy Cordes) in the field, that Social Security checks could well stop going out by early November if a shutdown ensues and the debt ceiling isn't raised. For sure, all 401 National Parks will close, and service members' checks as well as military death benefits will be delayed. Thank your local Tea bagger fascist for that!

Obama responded that such a debacle would "not occur on my watch". In other words, he is not prepared to deal again with these terrorists "with bombs strapped to their bodies"  - which is literally what it amounts to. In this case, an economic "bomb" that will affect tens of millions of innocent citizens.  But will Obama hold strain, or allow himself to be rolled again by the extremists in the Tea Party? As Bill Clinton observed last night on a CBS news segment, their tactic is simply to try to dictate to Obama their terms, and not negotiate at all. This is the standard terrorist modus operandi, and in that case it requires the standard response: NO deals, no matter what transpires.

Now, it is a shame, a pity in fact, that some 33%  (in a recent CBS News poll) place the blame on the Dems for this impasse and impending economic crash, but they are either congenitally dumb, fundamentally ignorant or Reepo Foxites.  Anyone with more than air between the ears knows the reprobates are those who threaten a nation via extortion , i.e. "You will do so-and-so or these will be the consequences.",  or seek to dictate their own terms with horrific results for millions if they aren't accepted.

This time the way to deal with these thugs is obvious. In the case of the potential shutdown, given more sane Reeps are against it in the Senate, there is no issue on refusing to make any deals. The fallout will be largely on the heads of the Teepee House which Boehner has shown he can't control. That means someone must exercise adult authority over them, and that has to be Obama. So, don't give in, let the cards fall where they may, but don't yield....not one inch, not one nanometer!

They will demand "spending cuts" in return for paying debts already owed, but this nuts. The graph below shows the spending cuts ought to have occurred under Bush II's term, since the spending increases were actually MUCH greater during his rein, yet the debt ceiling was raised 7 times without fanfare!
The numbers in the chart come from Budget of the United States Government: Historical Tables Fiscal Year 2012. They are just the amounts that the government spent and borrowed, period, Anyone can go look then up. People who claim that Obama "tripled the deficit" are either misled or are trying to mislead, stupid or outright lying to gain specious political advantage.

One can easily see that over his tenure Bush's deficits consistently increased and at his last budget showed a $1.4 trillion deficit. This was fobbed off directly onto Obama.

Bush's overall spending increase was 88% over his time, vs. 7.2% for Obama. If anything, Obama's spending immediately after he took office wasn't enough, and we ought to have had at least double the stimulus he implemented and with NO tax cuts!


In the case of the next round, over the debt ceiling, the solution is also clear as day. If the Reepos won't raise it to pay existing debts then Obama needs to do so on his own, and fuck them and their terrorist ways. The Constitution (Amendment XIV, Section 4),  stipulates:

The validity of the Public Debt of the United States, authorized by law, includes debts incurred for payment of pensions ....and shall not be questioned.

It is clear to me that if the Republican Congress refuses to act to raise the debt ceiling (and thereby honor the validity of paying the Public Debt) then President Obama can and MUST issue an Executive Order to override a putatively derelict Congress and invoke Article 4 of Amendment XIV to raise the debt ceiling himself. If this triggers a "constitutional crisis" then let it be! If the Reepos are going to act in an extremist way you must be MORE extremist in the interest of the nation. You cannot roll over again. Or evince a scenario such as depicted in the bottom cartoon from two years ago.

We have in fact, because of the Teepees and their lot, been leading up to a showdown for some time, given the polarization in the country. What better way to resolve it than via a constitutional crisis?  I am fully convinced, given what's at stake, that even the Roberts Supreme Court will see where the national interest lies and side with Obama  - if he has the courage to raise the debt ceiling limit on his own authority - given the congress has devolved into reckless simpletons who can't be trusted with the keys to the congressional rest rooms, far less the nation's economic welfare.

Give in to these turds again, as he did two years ago, and Obama will only be recalled as a weak and timid wuss who was unable to deliver more than tough rhetoric in the nation's moment of need.

Is Barbados Soon To Go the Way of Greece?

Tourists and Bajans flock to a vendor's stall to buy fresh grilled deep sea fish and "fixins" at the Oistins Fish Market. Will they still be able to enjoy this simple pleasure in the near future?


The recent news that Barbados bonds were downgraded to junk by Moody's - this six odd months after Standard and Poor's did the same -was disturbing in the extreme. It elicits the question of where the island nation is headed, and indeed if its future is one of profound austerity like that of Greece.

The downgrade lowered the country’s foreign and local currency bond ratings to Ba1 from Baa3. (note: a junk bond, is defined as one that is “below investment grade” due to a heightened risk of default, is any bond with a rating of Ba1/BB+ or lower, according to the system used by Moody’s.)

Standard and Poor’s lowered Barbados’ rating to junk in July. (The country’s S&P rating is BB+).

Moody’s  accompanying statement held that Barbados’ outlook remained negative, and cited two factors in the downgrade: Barbados’ “continuing lackluster economic performance,” and “ongoing deterioration in the government’s debt metrics.”

Barbados’ economy grew by 0.6 percent in 2011 and 0.2 percent through September of 2012, well below expectations, according to the New York-based ratings firm. (The United Nations Economic Commission for Latin America recently projected  the country’s GDP to improve in 2013 with a rate of 1 percent . Much of this obviously can be traced to the U.S. recession which hit the islands with the force of a hurricane). The Moody's statement went on:

“Moody’s believes that the country’s growth prospects remain very limited due to its deteriorating competitiveness and declining productivity coupled with heavy dependence on tourism, particularly from the United Kingdom and the United States. Given the prospects for continued low economic growth in those countries, discretionary spending on travel is likely to remain subdued.”

Over the last 10 years, according to Moody’s, Barbados has grown at a compound average annual rate of just 1.2 percent, among the slowest for countries rated by the firm.

The firm also said that Barbados’ offshore business sector, the country’s second-most important industry, “also faces greater competition and is coming under increasing pressure from changes in tax laws in the US, Canada and the UK.” Adding:  Barbados’ negative outlook considered that economic performance is likely to remain weak.".

This ought to be obvious to anyone who knows the island and its employment situation, lack of resources and depending largely on the one trick pony of tourism. Also that although offshore banking had helped with diversification, attacks by minions of the OECD nations (i.e. on any offshore banking as somehow disreputable and 'unlawful')  caused harm to Barbados' economic health.  Few of these attacking nitwits learned or knew that many of us had lived in Bim over decades, and hence had set up and kept banking accounts there- even after we departed. Not to get secretly rich, but to use the $$$ whenever we visited - for beach house or hotel accommodation, car rentals...and just to purchase freaking expensive groceries at the food marts! Anyway, Moody's goes on:

“While the worst appears to be behind Barbados both in terms of fiscal deficits and economic deterioration, Moody’s anticipates that the government’s deficits will remain large for the next few years and its debt levels will continue to rise, albeit at a slowing pace. Even if the country is able to consolidate its finances and stabilize its debt metrics, they are unlikely to improve meaningfully for the foreseeable future given its poor economic prospects.”

The credit rating agency said that Barbados’ government faces “difficult choices” in its stewardship of the economy. Well, uh yes! Choices much like Greece's: to make serious cuts on top of existing high VAT (value added taxes) and send the populace into a furore, or try to keep a slow steady but small growth pace and offend the high and mighty rating kings. (The same lot that awarded AAA ratings to bonds laden with credit default swaps back in 2007-08)

Anyway, we who once lived there and continue to visit also  hope that doesn't mean a currency devaluation or worse! We hope Bim doesn't go the way of Jamaica and Trinidad!(One TT$ is now worth 1/6 of a U.S. $)

Moody's statement ominously goes on:

“In the absence of significant corrective measures, debt metrics will continue to rise, and if the government does take such measures, it risks putting the economy back into recession, On the other hand, many of the proposals to boost economic growth carry the risk of continued deterioration of the government’s financial position, at least in the near term.”

More distressing, in terms of currency issues,  Moody’s announced that it had additionally revised Barbados’ local currency bond and deposit ceilings to Baa1, its long-term foreign currency bond and deposit ceilings to Baa2 and Ba2 respectively, and its short-term foreign currency deposit ceiling to NP.

A Moody's threat perhaps?

“The rating will face further downward pressure unless the government is able to successfully navigate the current situation such that a clearly visible and easily achievable path to stabilizing debt metrics is established within the next 12-18 months, in which case the outlook could be revised to stable. The rating could also be downgraded if pressures on the currency peg mount significantly.”


The Central Bank of Barbados itself added, however, that Barbados' economic strategy "remains unaffected by the downgrade," and continues to focus on conserving foreign-exchange reserves and growing the foreign exchange-earning sectors.

"Thanks to a sufficiently tight fiscal stance, foreign-exchange reserves of BDS$1.4 billion on December 19, 2012, have been maintained at about the same level as at end-December last year."

See e.g. http://www.youtube.com/watch?v=A9g1DOm6By8


Meanwhile the claim that Bajans are “heading back into poverty” (Barbados Sunday Advocate, p. 3, yesterday) , is disconcerting to say the least. This is especially pertaining to the statement (by one political rep, Trevor Prescod) that people are “begging in the street for bare necessities.” One hopes not!!

My personal barometer, meanwhile, remains the status of de-mutualized Barbados insurance shares. Their value has plummeted more than 50% in the past five years and this brings the whole “junk” meme into a whole new immediate realm! To clarify, de-mutualization of an insurance company, in this case the Barbados Mutual Life Assurance Association (after being taken over by Sagicor Financial Company), meant a component of life insurance policy value was transferred into stock shares (in this case of Sagicor). The process itself is termed “de-mutualization” and there is no choice by any insurance holder to accept them or not. (Though a 'policy holder's meeting' usually determines the decision.)

These aren’t like normal stocks because: 1) The total amount of shares distributed doesn’t vary. Thus, there is no ‘buying on the dips’ to increase the number of shares owned nor can one 'buy' more shares in any case. One is issued a fixed allotment based on the value of the original policy. All that happens is your total stock value on paper continually goes down if the share value goes down. 2) The losses are REAL, i.e. as per a (2008) federal claims court ruling, there does exist an original cost basis (not 'zero' as the IRS once claimed) , and if one sells at a value below that cost basis a real capital gains LOSS is realized.

Basically, in the past five years I have watched as the total value of those demutualized shares  has‘melted down’ to appallingly low levels, vaporizing - at least on paper - what might have helped for a rainy day. But perhaps I ought to have seen this coming. Back in 2010, I sounded an alarm on Barbados’ growing debt (see e.g. http://brane-space.blogspot.com/2010/05/will-barbados-fall-to-sovereign-debt.html

Noting that at the time that while Greece had a debt of roughly 10% of GDP, Barbados’ debt was 53% of its GDP. At such a significant debt ratio it has become obvious in hindsight that the country has had to borrow to sustain itself, eventually reaching the point that both S&P and Moody’s downgraded its bond status.

In a followup blog: http://brane-space.blogspot.com/2010/05/will-barbados-fall-to-sovereign-debt_27.html

I warned that Barbados had to strive to keep the quality of its tourism product high,  given the recession had caused potential tourists from the U.S. especially to be much more selective. Barbados wasn’t the only great beach destination in the Caribbean after all! In that blog I pointed out a number of customer ‘breakdowns’ that didn’t help advance Bim’s rep, or its tourist capital. For example, one service worker quarreling when I asked for an ice cold Diet Coke plus a cup of water with ice. Then at a TGIFridays, a waitress sending assorted platters spinning off her hand nearly toppling over the drinks of my guests, after having been asked why – after 35 minutes- our ice cream sundaes had not been delivered.

Beyond that, in the two plus years since, I’ve been distressed to read in online papers of Barbados continued noise problems, as voiced by numerous tourists. They complain of everything from loud music going way past midnight, to dogs endlessly barking. Make no mistake that NO tourist has to travel so far to tolerate such ‘botheration’ when they can find a relatively quiet beach hotel near St. Lucia’s Pitons and at lower rates.

Hence, in some ways it’s been no surprise that Barbados’ economy has grown so meagerly the past two years, given tourism remains the central foreign exchange earner. (Offshore banking also has been, but has suffered somewhat by being tarred by assorted Neoliberal Loons, like former French Premier Sarkozy, imputing nefarious “tax dodging”  at OECD conferences and Banking confabs.)

Will the outlook improve? One can only wait and hope! The island is holding its general elections this year and perhaps the outcome will spur change in the right direction. This although ominous warnings have circulated regarding impending privatization, including of the water authority, pensions etc. Let us hope that's not the case!

When I next visit the island I certainly don't want to behold a Caribbean version of Greece!

Parsing the S and P Credit Downgrade

So now the news is in: Standard and Poor's, the same credit rating monarchs that mis-rated credit default swaps in 2007-08 (giving them 'AAA' instead of BBC) have "downgraded" the U.S. credit rating from AAA to AA. In other words, we're now (in their terms) on the level of Slovenia and Luxembourg in terms of credit worthiness. What does this all mean, if anything?

In practical terms there's been little impact. Readers will want to note that two of the other big three rating agencies did not downgrade the U.S.'s credit rating when they made their own calls in recent days. (Though Moody's did assign a "negative outlook') In objective, quantitative terms (and weighting all three ratings firms equal) it translates to a credit downgrade by 1/3, or maybe a rating of:

A A (2A/3)


Hence, this downgrade may not immediately change anything and U.S. Treasurys will still be desirable in an uncertain world. (I'd definitely warrant they'd be preferable to anything Slovenia or Luxembourg had to offer!). Bottom line here: the U.S. retains the best reputation as a place to park capital, buy securities or invest in government debt.

Why the negative overtones? Blame most of it on the insane Tea Party radicals of the Repuke contingent, who could have easily agreed to just pass the debt ceiling increase cleanly - with no fanfare- and not make such a noise. Especially, not insist on using the debt ceiling as leverage to parlay their ideology into policy decisions that wouldn't have a rat's ass of a chance of passing in legislation. Not with the TEEpee brand claiming only one half of congress.

At the same time, Obama shares part of the blame for this, make no mistake. Standard and Poor's, recall, had asked for not only a clean debt ceiling increase but also at least $4 trillion delivered in revenue or cuts. This lump sum could have been delivered from December last year, had Obama and the Dems only disallowed the ghastly extension of the Zombie Bush tax cuts! I mean, taking out ALL of them!

In addition, that didn't require any active legislative moves, merely passively allowing them ALL to expire! (Middle class and for the richest). But, instead of acting with simplicity and delivering $4 trillion in revenues, they acted with political calculation and manipulation - defending the middle class cuts (which comprised over 3/4 of the total!) and attacking those for the wealthiest.

And, instead of crafting a solid narrative on WHY all these tax cuts needed to expire (i.e. that if not expired they'd threaten social programs down the road if spending cuts were called for to make up the deficit difference), they wimped out and allowed the repukes to seize control of the language and debate as they usually do. It was sickening to behold and one of the biggest reasons why Obama could never be counted as a true Socialist. A true Socialist would have allowed ALL Bush tax cuts to sunset for the common welfare!

In addition, had they an ounce of gumption, they could have included the debt ceiling raise with the tax cuts issue (even if they only passed the middle class extension).

Why did the Dems and Obama punk out again? The ostensible reason given was to "protect" 13 million unemployed from losing their benefits - which the repugs had tied to the deal: no tax cuts, no unemployment benefits extensions. The problem is, that while the 13 million were granted their extensions of benefits, it was at the cost of more than 43 million who now stand to suffer with this odious debt ceiling deal! (Via Medicare, Tri-care and Social Security cuts). Evidently, the Spock-like Obama had never heard of Spock's first maxim (enunciated at the end of ST III):

"The needs of the many outweigh the needs of the few, or the one."

So, having yielded with the Bush tax cuts, and not even tied the debt ceiling increase to them THEN, Obama and his Dems set themselves up as hostages to be taken in the next two rounds, which occured with the federal budget deal in March, then the Aug. 2 fiasco that will ensure poor economic growth for at least 40 quarters.

I ask you, folks, is it any wonder I am a Democratic Socialist as opposed to a Democrat? I ceased believing in the Democrats long ago, though I did vote for Clinton, as I did Obama - because the alternatives were simply too much to take.(It may be true all presidents end up as 'puppets' but why add toxic puppets to the mix?) That doesn't mean I liked the choices! What happened to the Dems? Why did they mutate into such perpetual wusses?

I ascribe most of it to the infusion of corporate cash. According to Michael Tomasky, writing in The American Prospect the Dems eschewed political point-making and "hard nosed", no-holds barred political partisanship sometime in the early 70s. They replaced it with discussing fact-based policy points, which appeal to "reason" and "temperance" but do little or nothing for core partisans. The very people Dems need to get out to the polls each mid-term election.

Tomasky attributes this substitution of "rational" policy talk for good, old-style politicking to a loss of identity that particularly accelerated with the onset of the Reagan plague years. Those years, which saw the rise of the Democratic Leadership Council (DLC, or what I call "corporate Dems") meant the Dem party would eschew its working class roots henceforth for brownie points and campaign contributions (not to mention lobbying perks)from big Business, the corporate and investor classes. Yeah, they might win a few elections, but how does one say it? "They lost the war".

The problem was that, in making this conscious switch of political emphasis, the Dems lost the ability to really fight verbally. Corporate whoredom and being in Neo-liberal thrall inevitably forced on them a 'back-off' mode, and pussification priority. Lest they upset the hands that fed them! No wonder they are constantly one-upped by Repub PR and spin machines, not to mention tea bagger gangsters who defy the Dems to stop them.

Factored into this was the diminution and loss of an overarching and motivating vision which keeps all the Reeps energized and going to the polls, though they may differ on various platform matters and how to implement them (like 'faith-based' charities).

As Tomasky notes(ibid.), the Reeps are unified around a central idea which can be expressed in both positive and negative language: that they are the conservators of liberty and morality, and that liberals are sending the country to hell in overdrive. Whatever Republicans do or don't believe they believe in those two hypotheses. "This unity gives them their passion." Indeed. But the question is what gives dem voters their passion? The answer is nothing, because they don't have any. Cycle after cycle - since the Carter era- they've beheld their visions and ideals debased on the altar of Neo-liberal tripe. Some perspective on this is provided by Robert McChesney in his excellent book, The Problem of the Media, Monthly Review Press, 2004, p. 49:

With the election of Ronald Reagan, the neoliberal movement had commenced. Neoliberal ideology became hegemonic not only among Republicans but also in the Democratic Party of Bill Clinton, Al Gore, and Joseph Liebermann. Differences remained on timing and specifics, but on core issues both parties agreed that business was the rightful ruler over society.

And of course, Obama has admitted to his worship of the "free Market" as well, and hence is another Neo-liberal. Little wonder then he fawns so much over Ronnie Reagan - the character who actually (by his massive military spending and tax cuts) converted this nation into a global debtor and deadbeat.

Before the next election, with the economic signs now portending a moribund future for this country - since spending cuts were chosen over job growth - the Dems and their Neo-liberal collaborators may well wish to ponder these words of JFK:


"For the Democratic Party is not a collection of diverse interests brought together only to win elections. We are united instead by a common history and heritage--by a respect for the deeds of the past and a recognition of the needs of the future." - John F. Kennedy

Common HISTORY and HERITAGE? Deeds of the past? Needs of the future? Any memory there?

Didn't think so!