Returning to Economic Properity
A few weeks ago I received an email from an anonymous source. It was some analysis of Trinidad’s pricing model for gas exports and it concluded that we could be losing up to US$7 billion annually by selling to low price markets. In summary this is because of our being locked into low price contracts as well as soft prices in the main global markets caused by increasing supply. This is of course is not an unusual view as most interested observers are seeing what access to unconventional gas sources in particular are doing to the traditional economic models. By unconventional, I am referring to six main categories of unconventional natural gas - deep gas, tight gas, gas-containing shales, coal-bed methane, geopressurized zones, and Arctic and sub-sea hydrates.
As the United States in particular becomes less dependent on foreign gas supplies and some projections such as those in the Ryder Scott report suggest that reserves may be depleted sooner than Trinidad would like, there is speculation on what the post-gas Trinidad landscape would look like. Views range from hope that more would be found to comparisons with Haiti once everything is truly depleted. But my view is always that there is value in appreciating the global context.
Globally all is definitely not well. Political leaders in the US, the UK and the EU have honestly failed to kick start economic recovery despite promises and the best of intentions. National debts are rising to somewhat unimaginable levels. The US Federal Reserve and the UK Chancellor are running the printing presses (which we euphemistically call Quantitative Easing) to dull the pain of the downturn. Unfortunately, while it makes things slightly better for some borrowers, savers have to deal with lower interest rates and consumers have to cope with inflation. Retailers and banks get blamed for what is in fact a failure of government policy.
Paul Krugman in the New York Times continues to sing the praises of those who advocate government trying to spend its way out of an economic downturn, while savagely attacking those who advocate fiscal austerity in trying to balance the budget. In a recent column he wrote that “…All around Europe’s periphery, from Spain to Latvia, austerity policies have produced Depression-level slumps and Depression-level unemployment; the confidence fairy is nowhere to be seen, not even in Britain, whose turn to austerity two years ago was greeted with loud hosannas by policy elites on both sides of the Atlantic.”
Nations are typically being faced with two options in the face of the ongoing financial crisis – binge on debt or painful reform. The reality is that we are in unchartered economic waters and no one can conclusively say which is the better policy – at least not yet. Personally, I believe that we, as a global family of trading nations will not return to the pre 2008 level of exuberance, and should, as individual nations, businesses and households, learn to live with lower levels of wealth. Fatca Compliance Singapore
I fear not just for Trinidad but other Caribbean territories including Barbados, St Lucia, St Kitts and Antigua. Trinidad has enjoyed a couple decades of expansion due to its dependence on petroleum exports while other Caribbean territories substituted agriculture unsustainably protected by preferential market access (especially bananas and sugar) for the new monoculture of Tourism. It is possible at some point everyone will have to stop living off budget deficits and readjust to a new economic reality.
Most appropriately, I am writing this piece in St Vincent. St Vincent seems to have had less success than its immediate neighbors in switching from the banana monoculture to the tourism one. With the decline in banana production, St Vincent’s economy appears to have stagnated and driving around Kingstown one can see a much simpler lifestyle than neighbouring islands. Not that the island is without its own share of problems but there is more subsistence agriculture and less of the consumerism than has become the norm elsewhere. Perhaps for those other islands wanting to imagine a possible future, St Vincent could be one to watch.
In the meantime, most islands continue to binge on debt and ‘kick the can down the road’ as Americans say. That is, we defer having to deal with the underlying issues today. Rather we push them into the future while we hope and pray that the good old days of unbridled economic expansion will come back again.American Tax Singapore
My name is Derren Joseph and I love the Caribbean region. Despite our current challenges, I continue to have the audacity of hope that we will all enjoy a brighter tomorrow. Read more on derrenjoseph.blogspot.com