Then double interest rates.
:jawdroop:

Unspeakable. Then again, what do we have to lose?

:dgi:

:dgi:


Unpeg the BSD from the USD.

Unpeg the BSD from the USD.

you mean make it lower or higher ..?

Appreciate it over the USD.

I think that it is a capital idea, YK.

It would bring untold benefits to the Bahamas.
For one, you would have a freely convertible currency. You wouldn't need Central Bank permission, intervention etc. You just go and open a US dollar account at your local bank (much like the Bank of Hong Kong in the US offers accounts in Euros, Pound Sterling, USD, Canadian Dollars etc).

You wouldn't need reserves by the Central Bank.

There would be an open economy and an international open economy.

Now the bad news -- it would be less than the USD for a long long time -- the optics of that are bad, but from a global perspective, you don't care. Canadians like their dollar at 85 cents US. It makes them more competitive for trade, and they start to worry when their dollar rises against the USD.

Sure the value of the Bahamian dollar would go down, but Bahamians would make a lot more of them for USD equivalency. And a move like decoupling the B$dollar from the US dollar, could make Bahamians have a higher standard of living.

One of the limiters is a lack of diversity in the economy, however it is a chicken and egg scenario -- if the B$dollar is lower, the Bahamas would be an attractive place to locate pharmaceutical companies and high tech companies and such, and that would lead to economic diversification.

I don't think that the idea would fly, because Bahamians would recoil in horror and think that somehow the country is cheapened with a dollar less than the American dollar.

I think that it is a capital idea, YK.
It would bring untold benefits to the Bahamas.
For one, you would have a freely convertible currency. You wouldn't need Central Bank permission, intervention etc. You just go and open a US dollar account at your local bank (much like the Bank of Hong Kong in the US offers accounts in Euros, Pound Sterling, USD, Canadian Dollars etc).
You wouldn't need reserves by the Central Bank.
There would be an open economy and an international open economy.
Now the bad news -- it would be less than the USD for a long long time -- the optics of that are bad, but from a global perspective, you don't care. Canadians like their dollar at 85 cents US. It makes them more competitive for trade, and they start to worry when their dollar rises against the USD.
Sure the value of the Bahamian dollar would go down, but Bahamians would make a lot more of them for USD equivalency. And a move like decoupling the B$dollar from the US dollar, could make Bahamians have a higher standard of living.
One of the limiters is a lack of diversity in the economy, however it is a chicken and egg scenario -- if the B$dollar is lower, the Bahamas would be an attractive place to locate pharmaceutical companies and high tech companies and such, and that would lead to economic diversification.
I don't think that the idea would fly, because Bahamians would recoil in horror and think that somehow the country is cheapened with a dollar less than the American dollar.


Ah my. The part in bold is the only stumbling block to any move.
UNSPEAKABLE I SAY...
:taped2:

But, what if we go the other direction. And make the BSD stronger, raise interest rates and see what happens.

I think that it is a capital idea, YK.
It would bring untold benefits to the Bahamas.
For one, you would have a freely convertible currency. You wouldn't need Central Bank permission, intervention etc. You just go and open a US dollar account at your local bank (much like the Bank of Hong Kong in the US offers accounts in Euros, Pound Sterling, USD, Canadian Dollars etc).
You wouldn't need reserves by the Central Bank.
There would be an open economy and an international open economy.
Now the bad news -- it would be less than the USD for a long long time -- the optics of that are bad, but from a global perspective, you don't care. Canadians like their dollar at 85 cents US. It makes them more competitive for trade, and they start to worry when their dollar rises against the USD.
Sure the value of the Bahamian dollar would go down, but Bahamians would make a lot more of them for USD equivalency. And a move like decoupling the B$dollar from the US dollar, could make Bahamians have a higher standard of living.
One of the limiters is a lack of diversity in the economy, however it is a chicken and egg scenario -- if the B$dollar is lower, the Bahamas would be an attractive place to locate pharmaceutical companies and high tech companies and such, and that would lead to economic diversification.
I don't think that the idea would fly, because Bahamians would recoil in horror and think that somehow the country is cheapened with a dollar less than the American dollar.

Very good analogy!

i dont know much about econimcs to this extent but wouldnt this be a bad idea.

what i am trying to say is if a bahamain dollar is worth one us dollar right now, yet right now your bahamain and us dollar go half as far or buy half as much in the bahamas.

if the bahamian dollar is unpegged it will certainly decrease in value cuasing you to go from dealing with your dollar doing 50% less when buying products to doing 75% less or even less than that. which in turn brings demands for raises which in turn raises the price of products.

this is definately not a good idea.

i dont know much about econimcs to this extent but wouldnt this be a bad idea.
what i am trying to say is if a bahamain dollar is worth one us dollar right now, yet right now your bahamain and us dollar go half as far or buy half as much in the bahamas.
if the bahamian dollar is unpegged it will certainly decrease in value cuasing you to go from dealing with your dollar doing 50% less when buying products to doing 75% less or even less than that. which in turn brings demands for raises which in turn raises the price of products.
this is definately not a good idea.


And how we don't produce anything at the moment it would turn the economic situation here into a nightmare. Though on the contrary Iwas taught that our dollar is strong because of our offshore financial center status having many foriegn dollars here (even though we are not the leaders in the sector anymore :cry: ). I guess it is still not that strong to trump the American?

If our dollar currently is made to be less that the American dollar, perhaps we need to think about more diversification before some can even begin to dream about that.

I think that it is a capital idea, YK.
It would bring untold benefits to the Bahamas.
For one, you would have a freely convertible currency. You wouldn't need Central Bank permission, intervention etc. You just go and open a US dollar account at your local bank (much like the Bank of Hong Kong in the US offers accounts in Euros, Pound Sterling, USD, Canadian Dollars etc).
You wouldn't need reserves by the Central Bank.


Actually, you'll just be changing intermediaries. From the Central Bank to another bank. The Central bank is easier and smarter.

The Bank of Hong Kong still has to buy euros, sterling, and canadian dollars in order to offer such accounts to americans. Whose money do you think they use?? Theirs?? And the Bank of Hong Kong has to get permission from the Federal Reserve.

I haven't thought about this but here's what I think will happen..

The value of a particular currency is based on the interest and/or inflation of a particular country's market. With the Bahamian dollar pegged to the US dollar, the Central Bank didn't have to control inflation. If a house costs 300,000 in Bahamian, it costs the same in US. But if inflation in the Bahamas is higher than in the US and the house is suddenly worth 350,000 in Bahamian, it is still worth 350,000 in US. Americans can't come in and own the Bahamas with their cheaper currency.

But...unpegging the Bahamian dollar means that we have to control inflation ourselves. If inflation in the Bahamas rises faster than inflation in the US, then the value of the Bahamian dollar will drop much faster. Especially since so many american corporations use the Bahamian banking system. That means we get loanable funds denominated in US dollars. This money can be loaned to Bahamians. But with an unpegged Bahamian dollar, we'll be paying more back than we borrowed not including the interest rate. The only way an unpegged dollar works is if the Bahamas imports less and exports more. Since we import so much it means that we're buying from foreigners having to exchange our dollars for theirs creating a bigger demand for their currency and a smaller demand for ours. In other words, their currency increases and ours decreases.

Long story short - unpegging is a bad bad bad idea unless Bahamians stop importing or borrowing from foreigners.

Yes that's exactly what I though and what me and others were discussing.

You mean that you have no faith in the governing party responsibly managing fiscal policy and the Central Bank monitoring monetary policy? (I don't either, however when we talk about sovereignty issues, all politically and economically mature countries can handle Fiscal & Monetary issues without being tied to Uncle Sam's jockstrap).

My 2 American cents.

Thank you guys for you show of concern to our economy..we have to keep these guys, ALL OF THESE GUYS, honest!

Lurker has been complimenting me as of late, but, chancellor is the new guy to watch. Now THAT is a real turn around. For the reserved and unbiased better.

I just want to-since so many others are afraid to-tinker with a few ideas, just to see how things will play out in our mock planning.

Unorthodox, orthodox, we can postulate...nothing is wrong with that.
:hammer:

You mean that you have no faith in the governing party responsibly managing fiscal policy and the Central Bank monitoring monetary policy? (I don't either, however when we talk about sovereignty issues, all politically and economically mature countries can handle Fiscal & Monetary issues without being tied to Uncle Sam's jockstrap).
My 2 American cents.


LOL. No I don't. I also don't think Bahamians, in the short run, would be willing to radically change their consumption. There's always going to be a dominant currency, before it was Sterling now its Dollars and tomorrow most likely it'll be Euro or Yen. But the host countries for the euro and yen are too far from the Bahamas.