Pressie had reason to chastise the local banking sector for not getting with the (developmental) programme. Now, to understand where he’s coming from, you gotta understand the role banks play in a country vis-a-vis a government’s mandate to deliver better living conditions and wealth to the citizenry. Banks in effect get a licence from the Government to create money when they’re allowed to collect deposits from citizens and corporations -and then offer loans to folks who wanna borrow money for all sorts of reasons – but ultimately to spend into the economy.
Hopefully, a goodly number of borrowers would’ve seen opportunities wherein they could satisfy needs in the society by opening businesses to supply the goods or services that would benefit the targeted consumers. Say, like satisfying the present need for construction of all manner of buildings and infrastructure by purchasing necessary machinery and becoming contractors. Now, banks make their money by paying depositors a SMALL interest and then charging borrowers a HIGHER rate. Hence in the annual reports we read about banks always making “billions and billions” in profits!!
What makes the game even more stacked in the banks’ favour is that, in our fractional reserve banking system, they’re allowed to lend more than the actual deposits on hand!! This leads to a money multiplier effect wherein, for example, if the amount of reserves held by a bank is 10%, then loans can multiply money by up to 10 times!! Banks are therefore literally creating money from thin air!! Regulated, of course, by the Bank of Guyana, where they have to park at least the required reserves. But in Guyana the banks always keep much more than their required reserves, and so have a failsafe means of earning interest without taking any risks.
That’s what Pressie meant when he said the banks are “risk” averse!! They don’t take the risk to actually lend money to entrepreneurs who’ve identified opportunities to make money – and to create employment etc. As such, they’re strangling development – while raking in massive profits by giving depositors peanuts – ¾% – and charging borrowers huge interest on loans – 8.5%!! What a racket!!
Another way the banks game the system is to use their branches in the countryside merely to trawl for deposits – but don’t lend a proportionate amount in those areas. Instead, they park the money in the BoG as described above – and lend to safe borrowers.
So, what’s the Government to do?? Well, they can ask the Bank of Guyana to lower their interest rates to banks for their reserves – presently around 5% – and Treasury Bills rates which banks can purchase for a risk-free investment.
The Government can also revisit the idea of a development bank!!
…and nature
Dubal’s widely regarded as a modern success story in which the rulers transformed their desert backwater since the 1960s into a First World economy – by investing their petrodollars wisely and strategically. Those who call us the “new Dubai” – Gubai??! – are hoping that we can replicate their success with our Government’s development plan. As some would say, “From their mouth to God’s ears!!”
Now, while we’re the “land of many waters”, because of their desert environment, Dubai has had to use all sorts of strategies to obtain fresh drinking water – from seeding clouds to desalination plants.
But climate change – which they helped bring about with their huge petroleum exports!! – might’ve just solved their water woes. As your Eyewitness pecks away at his keyboard, torrential rains have inundated the kingdom – flooding streets and the slick, fancy entrances to their skyscrapers. So maybe we’re helping them in a small way with their water challenge when we push our oil and gas extraction to the max!!
One man’s meat is another man’s poison??
…vs whining
While opportunities are abounding for ordinary citizens to get a piece of the action in our new expanding economy, there are those who prefer to gripe and moan about their “their condition”. Buxton Handout Proposal, anyone??
