Wednesday, January 21, 2009

THE USA DEPRESSION EFFECTS BELIZE

THE USA DEPRESSION OF 2009-10 and HOW IT EFFECTS BELIZE?

Obviously the coming World Depression is going to effect Belize in some way? What way exactly we cannot know. Since our currency is fixed to the US dollar, we essentially have a US DOLLAR economy, even though we print our own money in Belize. Our money is not tradeable on the international markets and is basically used for internal circulation. This gives our Belize dollars a certain strong validity for a country like Belize that is self-sustainable. The fact of our own money valuation is a STRENGTH. This presumes our politicians (the UDP party controlling the government of Belize ) has the SMARTS to control the size of government, be frugal and wisely spend the government revenues in a tight fisted manner, and more particularly, keep a strong rein on the money supply. ( printing of money )
Generally speaking, we are a country with a small population and can feed ourselves. To some extent, we can if needed, even supply our own fuel, from diesel made here and E-85 200 proof ETHANOL. We seem to be in good shape for a world depression? Some curtailing of the materialistic life styles might be experienced from importation of manufactured goods. Being an agrarian society, this is unlikely to really prove a hardship. Much of our population already live DEPRESSION style anyway. 20% of our population in my Hillview Community, of Santa Elena Town of the Cayo District, continue to cook using fire hearts. A system of wood boxes filled with sand, and the burning of firewood. This is a method used in the USA during the 1700’s and 1800’s but still used in much of Latin America. About 10% of our community do not use electricity, because they cannot afford the service and rely on kerosene lamps and candles as in colonial days, when our population was smaller. Cost is the factor here, versus incomes. There is going to be some hardship as our population has grown and in the larger district towns, water supply has shifted from the old pioneer days of creeks and rivers, water vats, for the collecting of rain water and in a few cases of water wells, to a National Water Service, supply of water via PVC pipes under chlorinated pressure. The BWS company recently exchanged my water meter, and my water bill has jumped 400%. So the cost of water looks like it will effect larger communities with newer housing suburbs, now relying on pipe water systems. We will probably in a depression, see a return to rain vats, which are still sold around the nation of Belize anyway and quite common.
The biggest danger in a world depression is the fact our nation is so small, the population also small, that economies of size and ideas and plans of politicians in our UDP Cabinet for spending, will tip the balance and send us into a situation where our internally circulated money becomes devalued, either through inflation, or devaluation. The latter caused by our Cabinet borrowing, of foreign loans. We have to watch our national debt to GDP ratio here! The massive borrowing in proportion to the size of our government revenues is a worrisome trend by our UDP Cabinet. They borrowed in our name $150 million during their first year in 2008. Against revenues of around $750 million and a debt load already crippling our government financial operations, with debt payment obligations of around $250 million this year, of those government revenues. Debt payments are scheduled to double in three more years because of BOND interest agreements. Financially speaking, because of the small size, vulnerability to outside disasters out of our control, Belizean governments live continuously on the knifes edge of fiscal disaster. One simple emotional, amateurish political mistake in handling our government revenues, can ruin us for decades to come.
That said, there has been some reason for HOPE in the first month of 2009, as I watched Attorney General, Wilfred Elrington, on television, tell Justice Conteh in a seminar meeting of magistrates, Supreme Court Justices and lawyers of the legal profession, that the plea by Justice Conteh for more money for the legal division of government is DENIED. In fact, the Attorney General, Elrington, went on to say the Government of Belize is not getting value for the money they are spending on the government legal justice system. Judges are careless, lazy and lax in submitting court case judgements in a timely manner, even as the majority of the court cases are simple ones, with rote solutions. I must say, Elrington has made some foolish mistakes, such as over the BRAND NEW GUATEMALAN CLAIM, be even considering going to the ICJ over it, but in that pronouncement against Justice Conteh and our legal system, he vindicated himself handsomely. Another good sign is the recent spurt in GRANTS coming into our government for various government institutions. I note here, the GRANT for $350,000 from the World Bank, for stricter financial controls establishment of the government purchasing system, which is a proper way to go for our small country. This is the correct path ( GRANTS ) to follow, in my opinion.
The danger to Belize in a World Depression is primarily in our money supply situation, the printing of money by our government and the possibilities of DEVALUATION caused by too high a National Debt load to GDP ratio. With the economies of the world rapidly shrinking and winding down, our own situation in Belize is primarily effected by reductions in tourism revenues. The possibility of people losing all their savings and our banks going into crisis is very real and we are but ONE POLITICAL DECISION MISTAKE away from this happening.
In a depression and particularly in a small country like Belize, the DEBT load causes many unforeseen conditions. Almost always causing DEVALUATION. Devaluation and Inflation our our biggest worries for our small nation. These effects can cause more ruin than a WAR, or invasion by a neighboring country, to our population and economy.
It behooves our academic intelligentsia to learn how to live in a COLLAPSING ECONOMY, which could happen in Belize, through just one or two fiscal, amateurish mistakes done by our Cabinet and Financial Minister. We do live on an economic knifes edge here, in such a small population. The BARTER system, and parallel market system is common to collapsing economies, rendered worse by amateurish politicians, mistaken policies. When the value of the government national money collapses, then barter takes over. I have some experience as a young boy in Vienna, Austria in 1945, a conquered city, in which for about a year, cigarettes were the barter system money. Soldiers could get cigarettes and six British cigarettes were worth about five Yankee cigarettes and 20 Russian cigarettes worth five British cigarettes and the French occupation forces didn’t even have their own French cigarettes but had to rely on the English and Americans to supply their occupation soldiers with cigarettes. Six British cigarettes bought me the use of a rowboat on the lake in Vienna for the summer and Fall, every day, for recreational purposes. You could buy a huge valuable stamp collection of hundreds of stamps for a pack of cigarettes and I remember my father buying a 35 mm minature spy camera, which shot photos through a button hole for a pack and a half of cigarettes, for example. The cigarette barter money system eventually was replaced in late 1946 by an Allied Commission issuance of plastic made money. You need something to value the exchange of different goods.
That said, if our academic intelligentsia feels the UDP CABINET are ruining our economic money valuation system internally in Belize, through INFLATION, or DEVALUATION, then they should know and study the effects of the DEPRESSION during the 1920’s and 1930’s in Germany. This was post World War 1. There are articles on the internet to assist them to study. To make a long story short, each village and town in Belize should then create it’s own system of barter, or money exchanged. A private business, or town council can print coupons after the Belizean currency collapses and becomes virtually valueless, like currently in Zimbabwe under Mugabe. Each community requires it’s own money and the most successful villages and towns in Germany, were those that made their own money system, separate from a central government authority. I remember the MARK becoming worthless, and the coins, like the Groshen useless. The national currency quickly becomes worthless as politicians tend to make many mistakes in times of economic stress. A local currency, or exchangeable coupon, for say the Twin Towns, allows people to buy food at the market, gasoline from the gas station, get your shoes repaired, within a very small tight situation in which people band together to help each other. BARTER is improved by having a common system of exchange on the local internal economy of a village, or town. In the meantime, the Central Government is usually declaring all bank notes and coins printed before certain dates worthless and your savings are so wiped out. The Central Government then goes on to print new types of money, which due to bad political policies also becomes worthless quite rapidly and this cycle is repeated. Our intelligentsia need to study this DEPRESSION phenomena of the barter system, that MAY BE required soon in Belize. In so studying, perhaps our politicians will also learn the basics of controlling money borrowing and spending desires they wish to get rich quick, or do things that cannot be done within the reduced fiscal circumstances. It pays to be PREPARED and the DEPRESSION is soon here, for sure, this year of 2009, I have no doubt. Learn how to deal with it, to minimize the effects on your local village or town in Belize. Prepare to lose all your SAVINGS and have the local banks get into trouble. When you are prepared NOTHING ever happens.

No comments: