Consequences of manipulation
THE EDITOR, Sir:
The current economic crisis is the result of decades of political gerrymandering with the Jamaican economy from a macroeconomic and fiscal policy perspective. Currency devaluation over the years has demonstrated the simple fact that successive governments in Jamaica were never serious about negotiating the best outcomes for the Jamaican people when dealing with the International Monetary Fund. It is clear from the policy choices that they have made, that it was easier to devalue the Jamaican currency and tax the people instead of increasing the nation's productive capacity by the efficient deployment of economic resources.
Our closed foreign exchange market allows for insider trading and market manipulation. Government supports only two industries: tourism and financial services, through its exchange rate manipulations.
As long as investors can make significant returns in a closed foreign exchange market like Jamaica's, the US$10 billion in annual trading will not be invested in the economy for growth. This type of intervention is the cornerstone of our no-growth economy.
An intervention on the premise of exchange rate stability should be viewed with suspicion, since short-term rate stability has consistently resulted in sharp depreciation of the Jamaican dollar since the early 1990s when the dollar was allowed to float. This type of intervention by the government represents a continuous transfer of wealth to the rich by creating a speculative market environment in which the exchanged value write-off is transferred to the national debt. Government intervention may unintentionally provide an incentive for investors to make millions in Jamaica's foreign exchange market through speculation which, after a short period of stability, creates a prolonged period of market devaluation of the Jamaican dollar against the US dollar.