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in British Virgin Islands and El Salvador, where the Government has stopped issuing the domestic currency, which has been replaced by the US dollar.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.



Happy New Year Family. This is my second post for the new year and I thought I would give everyone a piece of advice to help you over the usual January blues- financial recoup. There is a saying : those who do not manage their money will always work for those who do.  Lets admit it – we all overspend during December  for a lot of reasons. Its cyclical. And every January is referred to as Depression January. We need to get back on track. Dr. Andre Haughton, noted economists and lecturer at the UWI has this uncanny way of breaking down  complex issues into everyday down to earth  language. With his permission I have reblogged his piece on how to manage your wealth in 2015. Enjoy.

MONEY MANAGEMENT – Dr. Andre Haughton

MANY PEOPLE encounter extra spending during the Christmas holidays, whether through pampering oneself, general home improvement, buying gifts and providing cash for others, plus various additional spending.

Some people receive Christmas bonuses to cope with the additional spending, while some borrow and or use their savings. In either case, the extra spending will put a dent in pockets, which makes it important to understand how to manage your finances to cope and restore your financial position. Here are 10 tips to help you manage your finances properly for this New Year.

1. Track your monthly spending.

Many people have no idea how much money they spend on food, bills, clothing, entertainment, etc. per month. In order to have a healthy financial position, it is important to first make record of how much you spend on a monthly basis. This will provide an idea of you household’s or business’ cost structure.

2. Develop a budget and stick to it as closely as possible.

After recording your average monthly expenditure, develop a realistic budget based on your important expenses and track to see that you are sticking to your budget closely. Only making allowances for very important unforeseen events, record these unforeseen events (hospital emergency visits, lawsuits etc) to see how they impact you budget throughout the year.


3. Develop a marginal propensity to save.

Your marginal propensity to save is the portion of your income that you save on a monthly basis. For example, if you receive $100,000 per month and you budget to spend $80,000 and save $20,000, your marginal propensity to save is 20 per cent. Try to improve on this margin if your budgeted expenditure allows you to do so as time progresses. Your savings are very important, it provides the cushion of cash for rainy days or in the event that you lose your job or someone in your family becomes very ill; always budget for savings.

4. Avoid late fees and charges.

Most companies charge late fees when bills are not paid on time. It is important to avoid these late fees and charges by paying bills on time to the best of your ability. Record your monthly bills and due dates and keep reminders on your phone or elsewhere to make sure you pay bills on time. Late fees encountered every month for the year can add up and prove to be very costly unknowingly.

5. Analyse your debt and credit position.

Always keep check of how much you owe and budget debt repayment in your monthly plans. Remember, if you borrow money from someone, it is not yours. Budget to repay this and try not to borrow from one person to pay another, especially if you are paying large interest on these debts. You will end up paying much more for the same debt over a longer period of time.

6. Monitor credit card debt.

Credit cards can be very useful, especially for shopping online and engaging in cashless spending for security reasons. People increase debt very easy via credit cards. It is important to keep track of your credit card spending and monitor your repayments on a monthly basis. Credit cards are some of the most expensive debts as they charge interest rates per day plus a fee for late payment, try as best as possible to service your credit card bill on a monthly basis to avoid interest rates and late fees.

7. Take advantage of free money.

Some employers offer contribution to match your savings for retirement, if you work for one of these institutions; be sure to pay the maximum amount so that you can receive the maximum contribution from your employers. Also be sure to use any coupons, stubs etc that you receive. This will help to minimise you total expenditure on a monthly basis.

8. Analyse your insurance policy.

Life and health insurance policies may take up a portion of your monthly expenditures for which you might not have the appropriate coverage. Be sure to analyse your insurance policy to reduce payments to a minimum while getting maximum coverage over time.


9. Seek sound financial advice.

With sound financial advice, people and their businesses can improve their financial position and become gradually self-sustainable and profitable. Never be afraid to get professional financial advice and consulting; it will be worth it in the long run.

10. Make rational spending decisions.

Finally, always make sure your choice to spend is rational. A rational choice weighs up the cost and benefit associated with a particular spending. If the benefit associated with a particular spending is greater than the cost, then and only then is the spending rational.

Dr André Haughton is a lecturer in the Department of Economics on the Mona campus of the University of the West Indies. Follow him on twitter @DrAndreHaughton.


Friday November 7, we woke up to a major headline carried by all the local news outlets in Jamaica and around the world. It was “Cable & Wireless buys Columbus International.”

“ British telecoms firm Cable & Wireless Communications, parent company of LIME, on Thursday agreed to buy Barbados-based peer Columbus International, operators of Flow Jamaica, for US$1.85 billion.  CWC said it will also assume US $1.17 billion of Columbus debt, taking the total value of the transaction to US $3.02 billion.   London-listed CWC will pay $707.5 million in cash, with the rest in shares. It will fund the acquisition via a share placing totaling ten percent of the group.”

moneyThree BILLION dollars for a company that provides telecommunication services a lot of Jamaicans have come to be very familiar with their disservice rather than their service is staggering. Comments made by the average Joe on the street primarily centered around one thing..’they hope the service will improve.”  What was totally lost to him was the hidden crime being committed blatantly in his face, the crime of money heroin!

Cable & Wireless is only one of the big players in a world created and run by Banks, monopolies and oligarchies, to  prostitute their wealth in public making  an announcement of considerable financial transaction. Days before,  another of the addicts, Grace Kennedy, reported $57 billion revenue in their 3rd quarter earnings, and another Scotiabank,  enjoyed its own injection by announcing on one hand major investment in Jamaica  by raising J$1Billion dollars in financing for shipping tycoon Jamaica Producers Group whilst on the other announce that they will close several branches in the Caribbean.   And this is just Jamaica. Imagine the world transactions by their wealthy friends.

This kind of news would have passed over the  average Joe’s head and understandably  so. The quantity of money these boys talk about are beyond his understanding and perception. But what the news media, also owned by rich oligarchies, and the system  fail to do is to  enlighten him on who is paying for this big money ticket? Where does all this money come from? Once upon a time financial language spoke in millions and at the time such utterances were beyond comprehension.  Now the language is Billions and Trillions equating a Million to a mere petty cash transaction. The answer to that question of WHO is simple, HIM, Joe Blow, the average man toiling, borrowing, paying taxes, swiping, purchasing cable, buying Grace products, excessively talking  on his phone, HE is the one that make these transactions possible whilst the addicts shoot up themselves,  offering more, acquiring more, spending more, reaping more and smiling as the profits keep rolling in. You ask yourself when is enough, enough? For an addict, it is NEVER enough.

Stop and think for a minute. How did this all begin? How did we become so dependent on a piece of paper printed with pictures on it? Who started all of this? History will tell you 2700 years ago someone came up with the idea of using metal to fashion into coins to be used for money to trade for the things people would need. Its simple- I need a horse, you have a horse and you need some crops which I have. We arrive at how many coins we want for each item, we pay each other and we smile and go home. No one was hurt in that transaction, everyone slept well. The Chinese invented paper years later and it was only a matter of time money was now printed on paper to make life easier but if you are lucky to have it, you are lucky!

Wealth over time has evolved to mean many things to many people  but one thing that has not changed is the truism that  He who has wealth, Has power, so the accumulation of wealth which has become the favorite pastime of most, has become the successful race of the few and the runners in the race are  aided by the suppliers of this heroin , the Banks. These bad boys tell you to give them your wealth, your money, whilst they in turn use it and then ask you to pay them for using your money. We give it to them without complaint. Their pockets fatten and with their wealth they create more wealth using your money. The astute and connected people take this money from the Bank to create services and products  they say you need thus creating their wealth, whilst Joe Blow in turn go back to the Bank to borrow his money to purchase the products and services that his money helped produce in the first place. You see the mess?

 It is all one big circus of what is seen as legitimate transaction, but in reality  is a junkie party, creating oligarchies like Cable and Wireless and a good neighbourly friend like the JPS,  and those other FAT BOYS  that have accumulated excessive wealth, together they lie in bed with government whose job it is to maintain the status quo giving them the opportunity to reap more from Joe Blow’s pockets, just like an addict on alcohol and drugs. They are junkies, money junkies and  they cannot get enough. The banks supplies the Big Boys with the money and the Bank’s profits soar. They are all hooked on money, money heroin. These boys  are not titans of the industry as many would like to describe them , they are just better at playing the game, a bunch of guys spending Billions of dollars for what? Billions in bonuses for what? So you have money junkies on one hand and power junkies on the other, the latter is otherwise called government.

All this started from Joe Blow trusting the Banks, giving them his  money, and the Banks  using it  for something else. What an ingenious system? The Banks,  in partnership with Cable & Wireless, seem to be saying to the public …..

“‘Our aim is to promote development, offering a higher efficiencies to compete in the global market, blah blah blah….”  

We become slaves to the system created and controlled by the Banks and  managed by the oligarchies like Cable & Wireless whose sole concern is to make a profit, taking the coins from the pockets of the gullible global market of Jamaican citizens that love to talk.

How can we solve this problem of socialism for the rich and capitalism for the poor? The government will tell you it is a good deal and we should continue with their services . They will also  tell you to tighten up on our spending, buckle up and better will come. The problem with that is if Joe Blow  must tighten up why aren’t the big boys tightening up? The answer to that is the rich are ‘creating jobs’. the usual trickle down theory that in essence means while the big boys spend it will somehow benefit Joe Blow. To use a more real example , when Cable and Wireless buys Flow it will somehow benefit  the consumers and workers in the long run. What the government  will not tell you is that there is another solution and that is to cut the benefits to  the Bank to create money out of nothing. Why? Simple, because they can afford to.

Banks  are the most protected and subsidized businesses in Jamaica and the world , yet they make money out of nothing and out of lending, sometimes foolish lending.  Have you ever seen any Bank head office lately? They are marvels in architecture. Banks control , own and run the entire digital money system. Joe Blow is convinced to take out a credit card, further putting him in debt, one that he will never pay off . You would think banks would channel their money in the things Jamaica really needs like schools, public transport and hospitals but sadly Banks don’t want the credit, they want the debt. if it does not make them a profit, they are not interested. It can be argued that because of the Banks, the over spending  on items we do not need or cannot afford helped in causing the present economic instability in our balance of payments, and now Joe Blow is being  asked to pay for it. Never forget it was the Banks that caused the world  economic meltdown , a problem they collectively came out of that furnace burn free, whilst Joe Blow once again had to pay for the Bank’s sins.

The aim of the Bank in this business transaction is simple- control the debt that this transaction will produce. The real value, the true value is the debt that will be created, a debt that Joe Blow will ultimately pay for  through the over priced services Cable and Wireless will deliver. The bank controls the debt, Cable & Wireless controls the people, the Big boys  control everything. In other words, Joe Blow will be a slave to this debt. Joe Blow is once again f*cked!

Can we continue to live with less while the banks and their friends get more? Can we afford to tie our belt while the big boys loosen theirs and expand their profits? The IMF, another bank, says yes we can. Look at who is talking, the IMF, that beast of insatiable hunger for greed and money, devouring poor countries consuming their debts as collateral whilst implementing their draconian policies that will never see the light of the economic table.

We have another option. Personally I do not trust these banks holding the reign to our economy. Our debt is forever increasing, never to be reduced. The Bank’s ability to create invisible money and controlling debt must stop. The debts are suicidal. The hohini economy only works in their favor. If public institutions take over the creation of money, then this money can be channelled and directed to support jobs and the economy , reducing our national debt in real time, steering our economic recovery. We spend on the things that matters to us in this country. We cannot continue to subsidize the rich in order for them to fatten their pockets. We can have a democracy in Jamaica where all men are given the same opportunity and wealth distributed equally creating jobs, paying measurable earnings and tackling issues in our society  that matters to all or we can have great wealth concentrated in the hands of a few. But frankly we cannot have both.

I agree with Plato. In an oligarchy society where the poor is exploited by the elite and rich, you get social maladjustment and disunity, growing oppression and growing bitterness, high crime ending in revolution. It seems to me Plato’s words may just be prophetic to Jamaica.

”  Get ready for wars in the name of the free                                                                                         Vaccinations for the illness that will never be                                                                                               The assault on your children’s impressionable minds                                                                                    And a microchip world , you’ll put up no fight

Information suppression will keep you in toe                                                                               Depopulation of peasants was always our goal                                                                                               But eugenics was not what we hoped it would be                                                                                         Oh yes it was us that funded the Naziis

But as long as we own all the media too                                                                                                   What’s really happening does not concern you                                                                                              So just go on watching your plasma TV                                                                                                       And the world will be run by the ones you can’t see. ”                                                                                  (c) The Banker by Craig-James Moncur.