I'm planning on tracking a few of the indicators. But I'm confused about a few things. Here's a link to some info from the Central Bank:

http://www.centralbankbahamas.com/policy_mnc.lasso

Can someone explain M3. Why is the Central Bank using M3 as the Money Supply??

If you go back a few months, I hope everyone can see the money supply - whether M3 is the appropriate measure or not - continues to grow. Yall should be a little scared.

Check out NY Fed Banks Money Stock numbers:

http://www.federalreserve.gov/releases/H6/Current/

Notice that M1 and M2, adjusted and unadjusted, are relatively stable. In fact, the money stock is declining. They might using debt to fudge the numbers, but then again debt isn't money. Either way it looks like someone, somewhere in the Bahamian government is pulling a trigger with the barrel aimed at the bahamian economy.

If you go back a few months, I hope everyone can see the money supply - whether M3 is the appropriate measure or not - continues to grow. Yall should be a little scared.
Check out NY Fed Banks Money Stock numbers:
http://www.federalreserve.gov/releases/H6/Current/
Notice that M1 and M2, adjusted and unadjusted, are relatively stable. In fact, the money stock is declining. They might using debt to fudge the numbers, but then again debt isn't money. Either way it looks like someone, somewhere in the Bahamian government is pulling a trigger with the barrel aimed at the bahamian economy.


Debt is money if its deposited in a bank and turns into a demand deposit account it expands the money supply. I reviewed the numbers and I don't see any jacking up of numbers or the money stock. The Central Bank of the Bahamas is a very prudent group of money managers, some seasonal increases in December 06 but thats meaningless. :hammer: Now that the US double agent and informant is no longer there things are going smashingly well!

I was being sarcastic about the jacking up of numbers using debt. The money stock is not demand deposits. Its currency, reserves and vault holdings. That's where I'm confused by the Bahamas' numbers. Are they using M3 as the money supply to determine inflation and adjusting the discount rate accordingly?? If so, that is far from prudent.

I was being sarcastic about the jacking up of numbers using debt. The money stock is not demand deposits. Its currency, reserves and vault holdings. That's where I'm confused by the Bahamas' numbers. Are they using M3 as the money supply to determine inflation and adjusting the discount rate accordingly?? If so, that is far from prudent.


I have no clue...maybe ask Lurker.

I was being sarcastic about the jacking up of numbers using debt. The money stock is not demand deposits. Its currency, reserves and vault holdings. That's where I'm confused by the Bahamas' numbers. Are they using M3 as the money supply to determine inflation and adjusting the discount rate accordingly?? If so, that is far from prudent.


In spite of Kareem's idiotic partisan reply, you are wise to question M3 as a money supply indicator. The US Federal Reserve has stopped gathering M3 stats as a cost cutting measure, because in a normal free-market economy, M3 tells you very little. In the case of the US, M3 is M2 + various foreign holdings + eurodollars, which by their definition, never see the light of day in greasing the engine of the North American economy, except in a very indirect way. Remember, money has to be in motion to be economically productive.

So why does the Central Bank in all it's infinite wisdom choose to monitor M3. Because in the Bahamian context, M3 is a component of our 'unnatural' US dollar peg.

Money Supply refers to the legal tender of the Bahamas, the Bahamian dollar, yet it is propped up with reserves, and M3 in the Bahamian context defines reserves and other monies that will not be equilbrated at any given time to the Bahamian dollar. In other words, the excess liquidity will not become truly denominated in Bahamian dollars, because it props up the peg to the American Greenback.

In an economy such as ours where the currency is inconvertible on a free basis on any forex, then M3 becomes a meaningful gauge of money supply.

In spite of Kareem's idiotic partisan reply, you are wise to question M3 as a money supply indicator. The US Federal Reserve has stopped gathering M3 stats as a cost cutting measure, because in a normal free-market economy, M3 tells you very little. In the case of the US, M3 is M2 + various foreign holdings + eurodollars, which by their definition, never see the light of day in greasing the engine of the North American economy, except in a very indirect way. Remember, money has to be in motion to be economically productive.
So why does the Central Bank in all it's infinite wisdom choose to monitor M3. Because in the Bahamian context, M3 is a component of our 'unnatural' US dollar peg.
Money Supply refers to the legal tender of the Bahamas, the Bahamian dollar, yet it is propped up with reserves, and M3 in the Bahamian context defines reserves and other monies that will not be equilbrated at any given time to the Bahamian dollar. In other words, the excess liquidity will not become truly denominated in Bahamian dollars, because it props up the peg to the American Greenback.
In an economy such as ours where the currency is inconvertible on a free basis on any forex, then M3 because a meaningful gauge of money supply.


How do you feel about our money being pegged to the US dollar? Are we really at a 1:1 ratio or are we just fooling ourselves?

Are the powers that be keeping the dollar peg to pacify the masses?

~~

How do you feel about our money being pegged to the US dollar? Are we really at a 1:1 ratio or are we just fooling ourselves?
Are the powers that be keeping the dollar peg to pacify the masses?
~~


We never were at a 1:1 ratio.

The reserves were as high as $800 million during the PLP reign, but that doesn't mean much, because most of it was government debt. The Central Bank by law must buy government debt, and on the balance sheet, because it is eventually money that the government must pay back, those notes are deemed real money. So as domestic debt rises, so do the reserves.

The PLP were deathly afraid of international debt (ie borrowing money from entities like the Royal Bank) so they issued bonds and notes and made the Central Bank, and NIB buy them. In a strange turnaround, the Central Bank decided to offload some of them, and offered them commercially at a discounted rate.

However, the peg relies on about a $250 million kitty to maintain the peg. This usually held in some variety of financial instruments, and excess liquidity -- actual cash on hand should be around that figure. Last December, during the liquidity crisis, we were down to just $9 million in excess liquidity, and that was the bloggy boyz indicator that tourism figures were being fudged. (We knew this because tourists bring in American dollars, and the banks use what they need and sell the rest to the Central bank. That figure is about $50 million a month, but in December 2006, it was a mere pittance).

If we drop the peg, our dollar would be worth about 30 cents US. That wouldn't be a bad thing (Canada's dollar was around 65 cents and now rose to about 90 cents) but it would be a hard sell to the general populace.

The peg is what holds us back. If I were a large company who settled here, I would have to beg the Central Bank to repatriate large sums as profits because huge outflows would affect the peg. That is why there is currency controls. The FNM is abolishing these, which is a good thing for international business.

...
If we drop the peg, our dollar would be worth about 30 cents US. That wouldn't be a bad thing (Canada's dollar was around 65 cents and now rose to about 90 cents) but it would be a hard sell to the general populace.
Yes, paycheck would be worth less. I can almost hear the crying now. Is their any way the idea could be sold?


The peg is what holds us back. If I were a large company who settled here, I would have to beg the Central Bank to repatriate large sums as profits because huge outflows would affect the peg. That is why there is currency controls. The FNM is abolishing these, which is a good thing for international business.


So technically a company operating in the Bahamas can't move their profits to a Swiss or Us account at will? Do they just have amount paid directly into their overseas accounts? How does Kerzner do it?

*Sunny with her notebook open*

Yes, paycheck would be worth less. I can almost hear the crying now. Is their any way the idea could be sold?




So technically a company operating in the Bahamas can't move their profits to a Swiss or Us account at will? Do they just have amount paid directly into their overseas accounts? How does Kerzner do it?

*Sunny with her notebook open*



Actually, if the B$ dollar would float, and you got $400 a week when it was pegged, you would roughly $1200 a week at the low rate. In other words, we have a $6 billion US GDP or economy. If the B$ dollar was a third, we would have a $18 billion (cheapo dollar) economy. So you would get a lot more money, but it would be worth less.

There are a few f ways that Kerzner and the big boyz do it. The first is as you mention not have the money enter the domestic system. Have it paid to Geneva or Lichtenstein or the Caymans. Cross the Atlantis bridge and look at all of the yachts in Kerzner's harbour. They are flying the flag of the Cayman Islands (Union Jack with the thingie in the bottom corner). The second way, is to have a special US dollar account with a financial services provider that operates these things under the sanction of the Central Bank. The money is never co-mingled domestically and not liable to currency restrictions. And the third way, is to operate under the rules and aegis of the central bank, and pay them their friggin commission every time that you want to move money. And it is always "by yer leave" if it is a very large amount.

This seems backasswards to me.

If the Bahamian dollar was allowed to float, then we would liquidate foreign reserves. Wouldn't such a liquidation create a demand for the Bahamian dollar, lower inflation and subsequently raise the value of Bahamian currency??

This seems backasswards to me.
If the Bahamian dollar was allowed to float, then we would liquidate foreign reserves. Wouldn't such a liquidation create a demand for the Bahamian dollar, lower inflation and subsequently raise the value of Bahamian currency??


If the dollar floated, then the value would be determined by the free market on a fundamental or technical fashion. For example, since tourism is number one, if tourism would be real strong, then the B$ dollar would rise. If tourism fell, then our dollar would fall too.

Since we don't own the means to our own economic production, even if the B$ dollar floated, it would be wise to maintain reserves.

PS -- there was a time when our dollar did float. We had a currency board instead of a Central Bank. It was run by the UBP.

This is a good thread. Please keep posting.

*Sunny scribbling away in her notebook*

...Actually, if the B$ dollar would float, and you got $400 a week when it was pegged, you would roughly $1200 a week at the low rate. In other words, we have a $6 billion US GDP or economy. If the B$ dollar was a third, we would have a $18 billion (cheapo dollar) economy. So you would get a lot more money, but it would be worth less....


That would be the hard sell. How do you explain to a worker that to a worker?

It would cheapen labour costs though. Perhaps even attract companies looking to set up shop in a English speaking, politically stable environ. Hi tech manufacturing US jobs maybe?

That would be the hard sell. How do you explain to a worker that to a worker?

It would cheapen labour costs though. Perhaps even attract companies looking to set up shop in a English speaking, politically stable environ. Hi tech manufacturing US jobs maybe?


Bingo. It would make Bahamian goods & labour more attractive. The Bahamas is losing market share, because our vacations are so bloody expensive. See the Guardian article today about Cuba. If we dropped restrictions, made a freely convertible currency, have the omnibus business license (like the FNM is enacting) , then we would be a very attractive place to do business. Do you remember the FNM third pillar plan from pre-2002? This was their plan to diversify from tourism. And removing currency restrictions is a good start.

There is no reason why Bahamians cannot compete on the international stage using technology like the internet. I am so sick of us begging for crumbs that fall off the table of tourism and financial services.