Wed | Sep 28, 2016

Legitimised pyramid scheme

Published:Tuesday | February 9, 2010 | 12:00 AM

THE EDITOR, Sir:

Economics was not one of my strong areas in university, but I nevertheless find it a stimulating subject area. In recent times, I've been toying with certain ideas as I try to make sense of the vicissitudes of economic activities taking place.

My first thought is that even though micro and macroeconomics are treated as separate studies, they are inseparably linked to each other, much like the egg and the chicken. This link is especially noticeable when governments issue government paper (GP).

The fact that GP interest rates are often so attractive, people find it more financially prudent to invest. But has been made plain in recent times, this success is not sustainable. At best, this is a legitimised pyramid scheme.

Interest payment

What is happening here is that the interest that the government is able to pay comes primarily from taxes collected. In other words, the money you pay as taxes comes back to you as interest payment on your investment in GP. This, of course, happens at the expense of necessary infrastructural developments that should make us a more advanced society, economic growth is nil, even though individuals may experience much improved personal fortunes; monies are just changing hands, or going to a few hands.

The Jamaica Debt Exchange programme was inevitable or we'd have just another Cash Plus-like debacle, only at the macro level.

Pragmatic imperative

Second, it is a pragmatic imperative that new monies enter our economy, and better so when it is the result of productive activity than through loans.

Finally, it would be based on the above considerations that I, in theory, would agree with the stance of not negotiating with the Jamaica Airline Pilots Association in the sale of Air Jamaica - money would be coming primarily from local sources. That would hardly help our national operating capital plight.

In acknowledgement of the sentimental value of Air Jamaica though, I don't know how seriously we have looked at leasing for a fixed period, with a view to retaking full possession or to extending the lease based on our economic footing at the expiration date. This, doubtlessly, is easier said than done.

Charles Evans

charock01@yahoo.com