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Do what’s right, not what’s easy

Saturday, October 7, 2017

I hate to be the bearer of bad tidings. Comprehend the message. Do not shoot the messenger.

The voicing of opinions between the economist and the minister a la WWF is just that. The Rock could not have done a better job.

I have one question for the economist, no disrespect intended. I love your hair, it looks marvellous, who does it?

The WTI CRUDE OIL PRICE is $50 USD a barrel. The USD to the TTD is 6.75. T&T’s economy is dependant on our domestic energy industry and global oil and gas prices.

Reductions in gas output and exports over the past few years have inflicted significant pressure on our fiscal account and international reserves all of which have materially increased the chances of further weakening of the TTD. BPTT’s Juniper platform can only do so much.

Here are our options. At least we have a choice. If we devalue, we can combat trade imbalances.

Devaluation will cause our exports to be less expensive, making them more competitive in the global market.

Higher exports relative to imports can also increase aggregate demand which can lead to inflation.

If T&T devalues the dollar, here are some positives:

• Boosting of export;

• Shrinking trade deficits;

• Reducing sovereign debt burdens.

As with every choice, it cannot be all good, it cannot be all gravy.

Here are some of the negative effects of devaluation of the TTD.

• They create uncertainty in global markets that can cause asset markets to fall or spur recessions.

• Countries might be tempted to enter a tit-for-tat currency war, devaluing their own currency back and forth in a race to the bottom.

This cycle does more harm than good.

My fellow Trinbagonians, let us do what is right not what is easy.




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