Economics at West Indies College

It was during my time at West Indies College in the late 1970’s I fell in love with economics, especially macroeconomics. My tutor was Miss Edna Parchment (affectionately known as Miss P.)

She had a way with the subject that I connected with straight away and one book that she recommended changed my viewpoint on the subject, Economics by P. Samuelson.

How many of us really pay attention to the financial and economic news around us? This current economic crisis is being played out right in front of us; it’s like being at the front seat of a boxing fight. What makes this crisis so different from others is that we have no “play book” to refer to we are in unchartered waters. Who could believe last September we witnessed the near collapse of the world’s banking system, Lehman Brothers, the fall out of AIG and the trillions of dollars being pumped into the system to keep our way of life alive. It was my grounding in Miss P’s classes that I could understand and comment as to the events around me. We have a duty to understand finances and not just bury our heads and hope for the best. Many people have lost fortunes and through desperation have killed themselves rather than face up to financial ruin.

Jamaica in the 1970’s and 1980’s had a rollercoaster of a ride with Balance of payments deficits, currency devaluations, IMF agreements added to this a brain drain as some of the best minds took refuge abroad. Put simply that period of time was my economics lessons the real world Jamaica style.

President Obama advised the American people whilst in California he would be making some tough economic choices, however he encouraged them to attend town hall meetings, engage him through the internet and challenge his policies, we should therefore not be surprised when unpopular choices are made if we have not at least raised concern to these choices.

I don’t have a gift where I can see the future but at some stage paper money (Fiat Money) will basically have little value as inflation erodes the value of our currencies be it Dollars, Pounds, Yen, or Euro. Try and move some cash into precious metals such as Gold, and silver for these my friends cannot be replicated by man, they can’t be printed like Dollars and pounds. Look back in history and remember where we have an expansion of the money supply we have inflation. However what is being stored up for the future will probably be like no other inflationary period we have witnessed. The UK government through the Bank of England are prepared to print £150 billion pounds of which £75 billion is about to go into circulation via the banks. The US has also been using the printing press creating in excess of $1,500 billion dollars as of Jan 2009. So you see once the Gold Standard was abolished in 1971 paper money creation has to kept under tight control, its not if but when will this almighty inflationary bubble burst.

Because the banks are not lending the idea by central banks is to create enough money for banks to recapitalize and any excess to loan to the wider economic community, however as I mentioned before the banks are in denial some are in very bad shape. Fix the banks and you go some way in fixing the problems in the economy.