Hopes on Warner to increase cash flow

There is an apparent oddity in our economy at present, ie, the high liquidity (savings) with low private sector investment and low consumer spending accompanied by relatively high interest rates with a large spread between the banks’ borrowing and lending rates. This low economic activity is being put down by commentators to a recently developed lack of confidence by consumers and the business sector in the economy and in my Government; it is nothing of the sort. It is a characteristic of this plantation economy.
When I was at UWI I was taught that “savings equals investment.” I wrote an article many years ago saying that this simple equation does not hold in our economy. A characteristic of this plantation economy is that investment, private sector borrowing, is driven by national cash flow, ie taxes from the energy sector etc to the Government, government spending so increasing the velocity of money and internal liquidity.

Stop this cash flow, even with savings available, and the private sector closes up shop. Savings, with such high cash flow, drive local mark-up inflation as we saw so dramatically in the last boom. There is very little risk-based investment to create or support ideas which then can create new cash flow and wealth (ie innovation). Hence the only lasting solution is our Government’s implementation of a national innovation system. We are all pinning our immediate hopes on Minister Jack Warner and others whose spending on infrastructure will increase this cash flow, putting money into the hands of those who will spend via employment, but who cannot afford to go to the bank.

Mary K King
Minister of Planning, Economic
and Social Restructuring
and Gender Affairs