Bahama Pundit

What the Economic Crisis Holds in Store

by Larry Smith

"The most we can say is that there has been a general lack of judgement...We have learned that we are not so big as we thought we were." -- Former US president Calvin Coolidge on the Great Depression

Ironically, the gloomiest economic doomsayers of today are often the staunchest advocates of free market capitalism. And one of them was in town last week to speak at a public meeting organised by the Nassau Institute.

Dr Robert Murphy is an economist who works for a plethora of libertarian think tanks in the US. At the Nassau Institute meeting, he offered a devastating critique of current American policy, touching briefly on the likely fall-out for the Bahamas from the current economic crisis.

In his view we are all in this recession for the long haul (read 10 years or more), and we are very likely to suffer the kind of stagflation last experienced in the 1970s - only squared. According to Murphy, US government policies are destroying the dollar and setting us all on a course towards hyperinflation.

Clean Energy Still in the Cards Despite Global Recession

by Larry Smith

Will the global economic slump set back efforts to promote green energy? Well, there is one significant source of optimism in this regard—the new American president, Barack Obama.

Although the short-term outlook for clean energy may be poor, Obama acknowledged in his inaugural address last week that "each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet."

He has pledged strong support for a clean energy economy in America, by doubling the production of alternative energy in three years and implementing a nationwide carbon market to cut the greenhouse gases produced by fossil fuels. In the process, he promises to reassert US leadership on global climate policy.

The Road to an Electric Car Future

by Larry Smith

Tough Call spent three days last week at a conference in Washington DC sponsored by the Electric Drive Transportation Association, an industry grouping that supports the commercialization of electric transportation technologies. Speakers included top executives and engineers from mainstream and niche automakers, battery and component producers, electric utilities, the US Department of Energy and venture capital funds.

Although oil demand has collapsed due to the global recession (prices have plunged $100 per barrel in only four months), the mid-term forecast is for continuing volatility, with some experts predicting a price of $300 per barrel when the economy recovers. The Bahamas gets all of its energy from imported fossil fuel, and the transportation sector is a big consumer. And if we can't import enough oil for whatever reason, our economy will shut down.

Burning oil not only wastes our scarce foreign exchange, it pollutes the air and contributes to global warming, which scientists say could melt enough polar ice to inundate our islands. But there are interesting things afoot that could change all that  - if we have the vision to take advantage of them. What follows is an up-to-the-minute report on the current state of the electric car industry. Next week we will talk about how this industry may relate to the Bahamas.

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Turning the Screws on Tax Havens

by Larry Smith

Bahamians tend not to think about taxes - preferring instead to complain about the high prices of dutiable imports.

But taxation - or the lack of it - is at the heart of a multibillion dollar business that contributes a big chunk of our GDP. And this key business sector is about to face another attack on its legitimacy - just as our economy is tanking.

The Paris-based Organisation for Economic Co-operation and Development is preparing a new blacklist of tax havens around the world. That's because experts say that 400 banks, two-thirds of hedge funds and two million top corporations have stashed some 10 trillion dollars in secret offshore accounts away from the prying eyes of tax inspectors.

"This issue has become a question of the highest political importance," the OECD said recently following a meeting to discuss the crackdown on tax havens. "We cannot resolve the financial crisis by introducing more regulation and leaving pockets of non-regulation to prosper."

There are about 40 low-tax jurisdictions around the world. But only three - Andorra, Liechtenstein and Monaco - are currently on an OECD blacklist for refusing to share financial information. A new blacklist could contain about a dozen countries - including the Bahamas - according to European officials.

Civil Service Holds Bahamas to Ransom

by Simon

•Simon is a young Bahamian with things on his mind who wishes to remain anonymous. His column 'Front Porch' is published every Tuesday in the Nassau Guardian. He can be reached at frontporchguardian@gmail.com.

Pushing an important initiative through the Bahamian civil service usually comes fairly easily.  Take, for example, the highly complex issue of the refurbishment of the bathrooms at the then Nassau International Airport.

It only took many years and frequent flyer miles, ceaseless complaining and inconvenience, corroding plumbing and foul odors, broken sinks and tiles, negative press reports, national outrage and international embarrassment to get authorities to clean up their act regarding these lavatories.

In the meantime the airport was renamed and successive governments came and went before the country eventually figured out who had the authority and responsibility to purchase new tiles and change the commodes. 

Now for the easy part: reforming the civil service.   

An Age of Turbulence?

by Simon

•Simon is a young Bahamian with things on his mind who wishes to remain anonymous. His column 'Front Porch' is published every Tuesday in the Nassau Guardian. He can be reached at frontporchguardian@gmail.com

As the financial crisis bleeds into an economic one, the market is increasingly relying on massive state aid to save it from its worst excesses. Government, which was once religiously described as the problem is now an essential part of the solution.

Life has unintended consequences. Thanks to those who demanded nominal government and a self-regulating market, the state is about to own an even larger and unhealthy share of national economies and the global economy.

Finding a Strategy to Deal with the Economic Crisis

by Larry Smith

A few months ago - in May to be exact - Tough Call asked the question: are we in for a macroeconomic adjustment?

We suggested (along with others) that the world economy was about to shift gears in some fundamental ways, and it was fair to ask just how serious things could get and how we would be affected.

It seems we will soon have a definitive answer to our question.

Business Cycles are Nothing New
Economists have identified 10 boom-and-bust cycles in the six or so decades since the Second World War. On average, the contractions lasted less than a year, while the expansions ran for almost six years.

Those post-war crises included the oil price shocks of the 1970s, the Latin American debt crisis of the 1980s, the Asian financial crisis of the 1990s, and the Dot.com crash of 2000, which was closely followed by the fallout from the 9/11 terror attacks.

But those recessions pale beside the Great Depression - the longest and deepest economic crisis of modern times. Beginning in some countries as early as 1928, it led to unprecedented political and social changes and was brought to an end only by the onset of World War II in 1941 - another great catastrophe.

The Folly of Fundamentalism

by Simon

•Simon is a young Bahamian with things on his mind who wishes to remain anonymous. His column 'Front Porch' is published every Tuesday in the Nassau Guardian. He can be reached at frontporchguardian@gmail.com

Many of the fundamentals of the U.S. economy are as unsound as the market fundamentalism which led to the near collapse of the financial industry and the resulting credit crunch that threatens everything from businesses attempting to borrow to meet their payrolls to individuals cutting back on overseas vacations.

One of the problems with a fundamentalist mindset is that it takes a point of view and converts it into the “truth, the whole truth and nothing but the truth”. This is as true for religious fundamentalism as it is for market fundamentalism.

The New Normal—High Prices Are Here To Stay

by Craig Butler

I know what you must be thinking. 'The new normal', what in heaven’s name is Craig talking about? Well, the other day I was in Florida listening to talk radio.

There was a director from the International Monetary Fund, an economics professor, and a few others. They were talking about the global economy and what the future holds. The professor was the one who used the ‘new normal’ phrase, and he did so in reference to the high prices that we are experiencing worldwide.

He said that, as he did not expect a significant strengthening of the dollar any time soon; coupled with the fact that the price of oil was likely to remain high and the war in Iraq was ongoing, he believed that the current high prices are going to be the norm.

Good News and Bad News About Oil Prices

by Larry Smith

There's good news and bad news on the energy front these days. The bad news? Prices are up. The good news? Prices are up. Analysts are forecasting $200-a-barrel oil, which could put a gallon of gas close to $10 for Bahamians.

Goldman Sachs, the New York investment bank, says a barrel of oil will "spike” at $200 next year, with prices remaining above $100 for the medium term. The underlying assumption is that, unlike the oil shocks of the 1970’s, today's prices are demand driven by the huge emerging economies of China and India, with supplies threatened by geopolitical instability in producing countries.

Skeptics say that Goldman Sachs is part of a speculative frenzy that is driving prices up, but the Paris-based International Energy Agency, which advises 27 rich countries on energy policy, has a more fundamentalist view. Here is what the IEA's chief economist had to say this month:

"I expect that for the next years to come, we will have a high price trajectory. There may be zigzags, but I would be very surprised if prices go down to the levels we saw three or four years ago, in the long term."

So what's to like about high oil prices? Well, here are six of the best reasons.