Clarification on financing and Jamaica's growth prospects

Wilberne Persaud, Financial Gleaner Columnist

My last column elicited comment from someone calling himself/herself 'Vomit Government'.

"Olint and Cash Plus are not just Ponzi schemes and whoever holds that line (lettered or not) is simple," he/she asserted. "Black people won't know themselves until their backs are against the wall."

I wonder at that choice of moniker or pen name—is it reference to government, or the person making the comment? Nonetheless, the assertion that these two Ponzi schemes included money laundering elements is eminently plausible.

The holder of dirty money, to the value of say US$1 million, holds nought. Pretty as they may be, those bills are of no use to him. For this reason a hefty premium is paid to the laundry machine, whatever form it takes—be it used car dealerships offering financing, alternative investment schemes, collectors and auctioneers of art, philanthropists, indeed whatever device creative humans may determine.

Tremendous injustice

A 25 per cent premium is not bad. If $1 of dirty money is useless, why not trade it for $0.75 of clean money that you can spend immediately? So here's the difficulty with these two Ponzi schemes as money Laundromats—why attract so much attention with impossible 10 per cent interest per month?

If they paid 5.0 per cent interest as in our example, they would still have $0.20 in each dollar to run their business. This is worth a thought isn't it?

But why the focus on black people? I don't quite understand it. Black peoples' backs have been against, indeed under the wall, during the whole period of enslavement and beyond. Enslaved black people in the West Indies suffered not only tremendous injustice but also mental and physical torture of unimaginable brutality.

An elderly West Indian churchwoman, upon reading an account of a pregnant enslaved black woman subjected to the lash, asked the author of the narrative, who was young enough to be her son: "Son, did this really happen? Is this really true?"

Correspondent Joan Porteus focused on a different point. Reading the original article, which says: "They don't want John Public to know. We get the government we deserve: 'One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors' - Plato. Golding, Vaz, etc. We corner dark fi true!" — she claims that: "From your analysis, what happen to Mrs Simpson-Miller? Your list is unbalanced."

The words were not mine but comments of a reader. I imagine that reader had other politicians in mind but simply gave what he thought to be two examples. So there's nothing for me to respond to here, merely to clarify.

Growth prospects

Half my allotment of Gleaner real estate is gone but there's enough space for a comment on material centred on Jamaica's growth prospects.

Claude Clarke asserts in a December 19, Sunday Gleaner Gleaner column that: "Few would disagree that the economic collapse which led to the devastation called FINSAC and its even more destructive successor, the cynically misnamed Jamaica Redevelopment Foundation, was the result of Government's high-interest rate policy of the 1990s."

Sorry, Mr Clarke, the many people, including opinion shapers, holding this view are entirely wrong!

Please consider the blue glass elephant in New Kingston initially called Island Life Centre, Crowne Plaza Hotel, Mutual Life second tower. What did these edifices have to do with government's high interest rate policy? These buildings ended up costing more than J$1 billion each.

Such outlays of other peoples' money would never be recouped from later sale. What about the many unfinished condominiums, town house complexes, speculative greenfield sub-division lots all across St Andrew and more? Consider also National Commercial Bank's purchase of what is now the Wyndham Kingston hotel and other institutions' purchase of hotel properties when they boasted no in-house expertise whatsoever, in managing and negotiating with operators of such assets.

Risk assessment

Where were the risk assessment professionals in these our financial institutions? What did these discrete and concrete events have to do with government's high interest rate policy?

No, Mr Clarke, this was a period of classic euphoria, described in the literature by so many commentators over the years. Inflationary impulses lead to asset bubbles that drive, herd, people into speculative rushes.

In Jamaica, it was particularly in real estate. Imagine all the domestic insurance companies but one, and unit trusts too, holding the majority of their assets in real estate. Facts exist, interpretations vary, but it would be pleasant if one adduced and marshalled the facts to support interpretive flights of fancy.

Yet I do like the turn of phrase used to describe the Jamaican economy of that moment: "The hopelessly deformed economic structure that emerged bore two distinctly contrasting features: a puffed-up financial sector, and a shrivelled productive sector."

But was our construction sector not booming too? And is that not private and productive? Question is what did it produce? Those cranes, backhoes, etc, ended up idled. Government has its share of the blame but let's be realistic—only partial.

To my readers let me wish a fruitful New Year. I know we're going to be bombarded by polls of all sorts in 2011, so, much as my editor may want me to stick to money and finance, I do have a few comments to share with you on polls both historically and now. In the meantime, enjoy the season immensely, but carefully.

wilbe65@yahoo.com