Lets think for a moment what life would be like in the event of a government debt default and economic failure. The government imposed VAT has not produced the promised revenues and prices for goods and services have gone through the roof. Economic growth has flattened and if were not for government's on going deficit spending, the GDP would be in negative figures. What would it be like to live the Bahamas as an economic collapse take hold of our country? First, think of what happened with the failure of City Market where generations of Bahamians once stocked their food shelves. When it went into bankruptcy, there was no money to pay the loyal and hardworking staff. The worker's pension funds were misappropriated and had no money to payout. To put it bluntly, the staff and workers were left high and dry with little legal recourse in the near future. If the country defaults or goes bankrupt like City Markets better check your bank accounts to see if your bank is financially liquid as their Bahamian government debt portfolio may force your bank to default on its customer liabilities. Just look at what happened to the banking institutions in Cyprus when that country defaulted on its debt in March of this year. Horror and shock prevailed in despair and disbelief as both citizens and foreign investors lined up around the block to withdraw their funds on deposit. One can only envision the famous bank failures in the United States during the early 1930's or the Gulf Union failure in the Bahamas to get an idea what can happen. In addition, shortage of vital food goods and other basic necessities immediately became apparent as food stores resemble our neighbors in Cuba. Better go fill up your car and extra gas tanks for soon there will be imposed government rationing and price controls which will encourage "underground markets" where locally produced food stuffs and necessary consumer goods will be sold at inflated prices. Don't believe me? Just check out Wage and Price controls under the Nixon Administration when he was President of the US. As for the power grid, hopefully government will have the necessary funding reserves to purchase fuel to run BEC's generating capacity. If not we will have no electric power, no water from electric pumps and darkness will prevail at night. The economy will almost come to a complete standstill. All in all it will be one heck of a mess that will take many month to years to restore economic normalcy.
What happens to the Bahamian dollar? Individual savings will be a disaster as National Insurance, like the rest of the economy, will be flat broke and the Bahamian dollar, our fiat currency of exchange, will be practically worthless. Zimbabwe is a recent example. However history is filled with government failures resulting in currency collapses. This is a rather scary situation but we can look to the recent crises in Iceland, Greece and Cyprus and events in Spain, Portugal and Ireland to get a better understanding of the possibility of default and and economic failure. A former close friend of mine encouraged me to read William Goldring's 1954 Nobel Prize winning novel, Lord of the Flies. This dystopian novel examines the inter-dynamics of individual behavior versus group behavior of a common pier group of English schoolboys who became stranded on an uninhabited island where discipline ultimately breaks down with disastrous consequences. This is constructive reading in group dynamic and an eye opener for those who dare ponder an Orwellian age and future.
What is most crucial for the Bahamas today is for government to make the right decisions as to how we will address our ever growing deficit crisis. Solutions of tax and spend has never worked throughout economic history. At best it is a short-term quick-fix solution with adverse long-term repercussions. VAT is an unworkable solution that will not only retard real economic growth but will increase the growth in our crippling financial deficit. If history proves to be correct, it will only further accelerate inflation and bring on dreaded stagflation. The Bahamian deficit could even double to over $10 billion in the next 10 to 12 years as debt service capacity will continue to eat up more and more payouts of scarcer revenues.
This can only usher in an era of forced but necessary budget cuts and sharper cuts in priority spending. There will be far less money to pay the bloated bureaucracy and no money for huge retirement payments. If we don't cut government spending now and begin to budget the downsizing of government. Even with the imposed VAT implementation and its subsequent failure, our economy will result only in the same future economic outcome and collapse only with more terrible consequences.
History must be our teacher and government had better learn well the economic lessons of history for we are at the pivotal Crossroads, and we must take the right course to avoid economic failure. We can only pray daily that wisdom and judgement will prevail, and that government acts in the National Interest for the greater future of our Bahama land. We are living in the most trying of times, and as free men and women we must have their voices heard. There is no room for bitter comments, cheap shots and foolish remarks by our so-called know it all's. Time for government to listen to the Bahamian people who in mass represent the true wisdom of the nation. For they are the National Interest of the Bahamas and not the self-serving interests of government or special interests which only think of themselves and not the more important greater interest of the Bahamian public.
We have the time to think and act in a rational manner, so lets us use this time wisely avoiding the hidden pitfalls of irrational economic thinking by moving ever forward for our Bahama land.