The government should drop the link with the U.S. dollar and strengthen the currency by investing in the gold market, a leading economist has advised.
Gilbert Morris believes consumers would benefit from a stronger Bahamian dollar and that a rise in the currency would open up new revenue streams in the local banking sector.
“I have always advocated that what we ought to be doing is using our special drawing rights with the IMF (International Monetary Fund) which is convertible to any currency. And we ought to use 10 per cent of our reserves,” he told The Nassau Guardian.
“We ought to buy gold and we ought to unhook ourselves from the U.S. currency and float the Bahamian currency backed by gold,” he further suggested.
That, he said, would give The Bahamas its own currency with the benefit of transferability. Using China as an example, he said it would accept our currency if it was backed by gold.
“If The Bahamas had taken 10 per cent of its reserve from 1996 to 2003, the value of the gold we would have bought with that would be almost doubled,” he said. But it is wishful thinking that that action would have made the currency more valuable.
If The Bahamas included such practices in its fiscal policy, a strengthened Bahamian dollar would mean lowered costs of goods and services to Bahamian consumers. “Because we’re not a trading nation, that’s fine for us. What it would mean is that the purchasing power would have been greater in Florida,” Mr Morris said.
The Landfall Centre economist also believes banking opportunities would abound because local banks could operate branches in Florida to accept deposits from American businesses that bank in Bahamian currency.
But, overall Mr Morris said, it would be very feasible for The Bahamas to take this route. “It’s not a stroke of genius at all. In fact I think it’s textbook,” he said matter-of-factly. “We could put ourselves in an amazing position if we cared to try.”
Allowing that it is a risk financial commanders are unwilling to take, Mr Morris said The Bahamas would most likely continue to tread on safe ground. “We have a nobody move, nobody gets hurt position,” he added.
He also suggested that The Bahamas could copy more progressive markets. “In The Bahamas we tend to look at ideas as merely theoretical. In the U.S. and in Europe there is machinery that searches for ideas and then there’s an entire class of persons and professionals whose mastery is in implementation of ideas and to identify the advantages which that implementation brings.”
Ideas that could boost the Bahamian market are treated like homeless people said Mr Morris. “They don’t have any place to go. There’s no place where you can put them where somebody begins to wash them down, feed them, clothe them and get them ready for work.”
The Bahamas upholds its status quo for the way it operates the economy, he opined. But he believes sooner than later the country would have to cast its safety net. “We will not be able to provide for our people by continuing to do things the old way,” he said. Some analysts say The Bahamas’ non-action when it comes to diversification is strongly driven by politics.
By Barry Williams, Nassau Guardian Staff Reporter
