PRIVILEGE & POWER CORRUPTS. EXTREME PRIVILEGE & POWER CORRUPTS COMPLETELY.

AFFLUENZA

quote –Paul Krugman

The discussion is alive in Jamaica 2016 and it focuses on the demise of Jamaican Entertainment featured in our Resorts.

Most people equate it to economic dollars and cents but in reality it is far more than micro economic principles. The investors are all affected by a new disease that only affects the wealthy – “affluenza “.

Wealth in itself is not bad. It’s what you do with it that really counts. Extreme wealth can do extreme damage and in the Jamaican context where any investor bringing with him cash and a promise of employment will suddenly realize his power on a grappling economy and one that lies prostate and welcoming.

So what happens to a so called “poor” country that gives so much to the #SuperWealthy? You simply have #affluenza!

The economic smothering of the Jamaican entertainment product by super wealthy Hoteliers all points to the growing political power of the wealthy few that shapes Jamaican politics.

They may not out rightly display their influence, but you can deduce their power from the silence or ineffective investigation of any government to the battle cry of the impoverished. The recent #GasScandal and now the ever louder #EntertainerScandal are just examples of such cries.

Why does it matter? Because it is economic slavery, the wealthy rig the system and enjoy the advantages of stifling bureaucracy.

#Oligarchy, the unfettered rule of the wealthy is alive and well in cash begging Jamaica. From telecommunications, food, auto and now tourism they hold the country by the balls and an apparent impotent government seems hooked on the pain.

#Narcissism, #Affluenza or maybe it’s #TheMullahTalksLoudest , it is a scary thought and for a small island it will be a debilitating disease that cripples only those without the dinero.

A new year has begun and now a new opportunity for change, change in the way our people are treated in their own country, a change to the perception that entertainers are not worthy , a change to the way we manage our music, our creative and intellectual property, a change in the way foreigners are hired in this country depraving Jamaican jobs and livelihood.

The discussion must begin and the truth will make a lot of people uncomfortable. But progress is impossible without change and those who cannot change their minds or their perceived beliefs of an equal playing field for every Jamaican , as well as the right for every Jamaican to work and express their creativity without fear of foreign imposition and dominance in their own country, cannot change anything.

THE ANSWER IS BLOWING IN THE WIND- SHOULD JAMAICA DOLLARISE?

Jamaican economist Dr. Andre Haughton ask a question if Jamaica should dollarise its currency in light of its prevailing economic conundrum. He explains the process as clearly as he can in this essay and leaves you the reader to make your own decision .I will withhold my comments however I will add that it will take a hurricane to clear up the mess created.

moneyWhat is dollarisation? By Dr. Andre Haughton

IN LIGHT of the depreciating Jamaican currency relative to the US,Briefing revisits dollarisation.

Dollarisation is the situation where a country replaces its domestic currency with the currency of another country. This foreign currency for example, the US dollar or the British pound, becomes the legal tender which is used to conduct day-to-day transactions and as a store of value. If Jamaica decides to use the US dollar instead of, or along with the Jamaican dollar as legal tender; Jamaica is dollarised. Any situation where the domestic currency is replaced by a foreign currency is considered dollarisation. So if Jamaica decides to use China’s currency as legal tender and a store of value, then Jamaica is dollarised under this circumstance as well. However, for simplicity and ease of explanation, the US dollar is used as example to explain how the process works in this article.

What are the types of dollarisation?

Dollarisation can either be official, semi-official or unofficial. Official dollarisation is a direct currency substitution. Here, the foreign currency completely replaces the domestic currency as legal tender. Such is the case in British Virgin Islands and El Salvador, where the Government has stopped issuing the domestic currency, which has been replaced by the US dollar. There are instances as well where the domestic currency is used alongside the US dollar as legal tender; such is the case in The Bahamas and Uruguay. This is referred to as semi-official dollarisation.

Unofficial dollarisation, or asset substitution as it is called, occurs where residents of a country hold a significant portion of their financial instruments (bank deposits, stocks and bonds) in foreign currency instead of local currency. Unofficial or financial dollarisation is normally a characteristic of developing countries like Jamaica.

In these economies assets denominated in US dollars will maintain value even if the exchange rate increases and domestic currency loses value. More than 40 per cent of Jamaica’s financial assets were denominated in foreign currency in 2004.

What are the advantages of dollarisation?

Official dollarisation can improve Jamaica’s trade and investment. If Jamaica decides to use the US dollar as legal tender, this would remove all the foreign currency transaction cost between Jamaica and the US as well as between Jamaican and any other country that uses the US dollar. All goods, services and financial instruments purchased by Jamaicans from the US would be done in a common currency, thereby eliminating exchange-rate fluctuations which tend to have a negative impact on trade and investment between countries. By dollarising, Jamaica might increase investors’ confidence in the economy, in so doing attract more investment to the country as investors face less exchange-rate risk. This increase in investment could boost production and stimulate economic growth. Furthermore, the empirical evidence suggests that by adopting the same currency, trade can increase between countries (Rose 2000). Dollarisation can also improve availability of foreign currency (liquidity) and reduces the possibility of a currency crisis arising from the financial market channel. Evidence suggests that dollarisation has improved liquidity and asset quality in Ecuador and El Salvador; see Quispe-Agnoli and Whisler (2006).

What are the disadvantages?

By officially dollarising the economy, Jamaica would lose control of its monetary policy and the ability to use exchange rate as a tool to impact the economy. For example, Jamaica could not depreciate the value of its currency in an attempt to increase international trade under any circumstance. Jamaica is basically surrendering its monetary policy to the United States; all decisions by the Bank of Jamaica become dependent on United States Federal Government.

By officially dollarising the economy, the Government would lose the ability to print money to pay domestic debt or to finance domestic public expenditure. Neither could they print money to lend to commercial banks in cases of emergency. If the economy is financially dollarised, commercial banks might encounter mismatch currency risk and default risk. If commercial banks convert deposits denominated in US dollars to loans in Jamaican dollars, they face the risk of losing on these investments if the exchange rate depreciates before the assets are reconverted to US. Also commercial banks face the risk of default when they lend foreign currency to local investors.

What is the outcome?

Whether Jamaica decides to dollarise or not depends on the trade-off between exchange-rate stability and the need to have control over its monetary policy. By dollarising, the macro economy might become more stable given that there is less exchange rate risk, which comes at the expense of losing autonomy over monetary policy. The answer my friend is blowing in the wind, the answer is blowing in the wind.