So sad for Bermuda

I was focussing on the public purse, Bermudians get double stiffed!

You sound like a really clued up analyst, the statement above contains such a well qualified and professional insight. I am so amazed. Maybe you should read it again and admire your own work. You obviously know a lot more about economics than the likes of John Swan, it really shows in your writing.

Nevertheless, I respect all the persons you mention, as I know them personally, however, this does not mean I should take what they say without fully evaluating it for myself. It is always important to critically review anything someone presents, or says. I am sure you are aware that, even the most intelligent and experience persons are not always right on various issues. But, intelligent persons would examine, evaluate, review any theory, statement or proposal stated by any individual, regardless of what qualifications or experience they hold. One should not just automatically assume that just because “MR. Whiz Kid” said it, all is well. No we must learn to think more critically. Lastly, Just because “Mr. Swan” said it does not always make it right! Regardless, of his qualifications, experience or knowledge and, the fact that I love him. Come on a wise thinker knows better than this.

Taking one well paid executive (many have left in the last year or so and many continue to leave)

$750,000 @ 14% = $105k per year lost. Add in the duty paid by that individual, payroll tax for their nanny etc. and you could easily say $150k leaving the public purse per year PER INDIVIDUAL.

That $150k per year is a MASSIVE loss in the scheme of things. It would be great to see a detailed analysis of the loss to the economy from these continued departures.

Jesus christ woman, what is YOUR solution for PLP failure? How would YOU reverse the disaster?

and do we really need a Billion $ hospital?

oh and mark my words, Government projections are wrong….just saying.

-Noel

I still don’t understand why they have to write as a couple. As I said, it makes no sense to me.

While I applaud Sir John’s business acumen, and I have done so publicly on more than one occasion, I still don’t understand why he can’t speak for himself.

Happy to oblige. Sir John Swan is without doubt the most experienced politician/businessman alive in our country and he knows of what he speaks. Larry Burchall has been a member of the Progressive Labour Party so one might argue that he has nothing in common with Sir John Swan – but he does. They are both highly intelligent people who have joined forces out of love for their country and they are trying to inject some common sense into the economic mess we find ourselves in.

To be honest, I think most of the rest of us would be greatly relieved if our Government would seek out the advice and counsel of the best minds on the Island, including Sir John and Larry Burchall, and seek some kind of collaborative approach to solving our dire economic problems.

Sadly, we all know that that ain’t going to happen. Our Government will continue to dig a deeper and deeper hole, and then blame the Bob Richards of this world for being unpatriotic! The people might even turf out the Government and elect the OBA at the next General Election, but then the OBA will be blamed for the economic chaos, just as President Obama is being blamed for America’s economic morass – a problem he inherited from George W. Bush, with spades!

The key is to get money moving again. Money must move to fund a recovery. With the government unable to spend, you must look to and depend on the private sector. The private sector is owing $5B you say? True, but the key is – the institutions (that hold the private debt) that can turn things around for you in an INSTANT – are the banks. As it is credit and poorly structured instruments that got us all into this mess, it is only the financial system that can get you out of it. The Bermuda banks cannot continue to charge 4-5 points above the 30 year US mortgage rate which is 3.75%. Their spreads have not been touched in all this. HSBC is recording record profits at your expense. While they lay of 8-10 Bermudians every month. They have gotten rid of more than 400 jobs since the somewhat naive PLP government allowed them in. Simple Economics 101. Why is it that a mortgage in the states cost 3.75% and in Bermuda it is north of 7%. Capital is mobile and has no cost of rent, overhead associated with it. More than ever the banks are using USD to fund BMD mortgages. See BMA report. So they are charging you twice what they are paying for it. And you complain about the retailers? You should be directing your complaints at the banks. Remember their interest is NOT Bermuda and the local economy. Their responsibility is to their shareholders so a shrinking Bermuda economy means they can now start to formulate their exit strategy. They can afford to write off a relatively small “loan book” that they have made millions off for years. They have done so in other jurisdictions. HSBC is foreign owned and Butterfield Bank is Canadian and Capital G considers each loan a selection for the family portfolio so won’t / can’t support the local market to any large degree. They are already the single largest property owner in Bermuda? So their prudence re: no 100% mortgages was family risk aversion rather than bank portfolio prudency.

When the cost of capital comes down, you will have developers / investors interested once again in this market. The risk tied to the cost of development is way too high right now so you won’t have any developers. If you lend money at say 5%, yes you are making less on the loan – but you are helping to re-invigorate the local economy. That has to be the objective over the next 2 years. Invigorate the economy and the ONLY way to do that sustainably is to reduce the cost thus increasing the velocity of money. This is the strategy undertaken by Obama. He called it a bail out. But with government money, debt issuance, the banks were able to write off some loans, re-price existing loans and put the US economy on the recovery track that it is clearly on.

Be reminded too that as the non performing loans increase at the banks, their credit ratings deteriorate. When that happens, Bermuda’s credit rating deteriorates. And then what happens? The banks pull out. The IB companies pull out (they can’t operate in subpar jurisdictions) and the cost of debt goes through the roof. And overnight, yes overnight, Bermuda turns third world.

So again – focus on the financial system. Interest rates must come down. The government can’t legislate it but certainly collective pressure must be directed to make the rates come down. This will be a lot more difficult for still inflated Butterfield but this is key. A reduction by 2 points for the household holding a $1M mortgage translates to a reduction in monthly payment by $1400. She in turn can spend that money at the restaurants, retailers….She can reduce the rent on her 1 bedroom apartment….She can get her hair done at the beauty shop…buy a new airconditioning system….She can update her vacation home or guest house…The multiplier effect on a population of this size would be significant and immediate.

I welcome your comments at praxislimited@live.com.

What more needs to be explained, LaVerne?