There has been a hue and cry from certain sections of the society concerning speculative investments in the local economy. With the trending down of interest rates has come a decline of the Jamaican dollar against its US counterpart. Also, and no unrelated to the foregoing, is the strong investment in Olint, the Turks and Caicos-based foreign-exchange trading entity.

Olint is in fact seen as the "chief publican" in the speculative run on the US dollar. The corporation has received a great deal of pressure from government agencies ever since it began activities in Jamaica. Such pressures eventually forced it to relocate to the Turks and Caicos Islands. One prominent member of government, Mr Errol Ennis, who is himself a former junior minister in the Ministry of Finance, characterised the government's action as Gestapo-like. Sad indeed.

It is predictable in the Jamaican economy that the lowering of interest rates results in a run on the US dollar. This has been the case ever since we began the policy of "mopping up" liquidity (excess funds) in the economy. This has not worked beneficially for the economy because the experts have discovered that the more they mop up within a given quarter or year, the more they have to mop up in the succeeding quarter or year. There does not seem to be any end to all this. There is no indication that the present attempts at macroeconomic stability will be met with the desired results either.

So speculative investment in the economy is not anything new. It is generated by government policy. Speculation is by its very nature an exploitation of the loopholes in these policies, but "exploitation" need not be seen as a negative word in this context. Neither is it to be assumed that speculative investing is itself an inherently evil or illegal activity. Money is like water - it flows to where there is an opening. Speculative investing is just a function of money seeking advantages for maximum gain. So long as this is kept within legal boundaries, it is disingenuous of policy makers to denigrate those who take advantage of these openings.

There has never been a time in the history of any economy when speculative investments have not played a prominent role. Investors are always seeking ways in which they can increase their gains. If this were not so, where would be the appetite to invest? This is true of real estate investments in its varied forms. For example, there was recently a housing boom in the US market. Many speculative investors went into the market to buy and flip houses. Some made a killing. Now that the market has re-adjusted the speculation has almost died. As the market corrects itself, players have to adjust accordingly. The market is indeed the final arbiter.

It is the market that will temper the euphoria or ecstasy that is experienced by players in the economy, whether big or small. For speculative investing is not unlike the euphoric feeling that people addicted to drugs and gambling experience. Those who go on speculative "binges" often get a long hangover when the euphoria dissipates.

So speculative investing is never for the faint of heart or for those who know they cannot afford to lose their investment. This kind of investment carries great risks, but with the risks there is the expectation of great reward, and rightly so. Not everyone has the capacity or the mindset to take these risks. This is also true of mountain climbing. There are some people who have gone to Mount Everest more than once. Yet, there are people like myself who would not take the first step to ascend that peak.

So we need to get real and put this matter of speculation in its proper perspective. There are things that the government can do to minimise the intensity of speculation in the local economy. It should never labour under the delusion that it can stamp out speculation as some have foolishly argued.
Knee-jerk reactions to speculative interests by investors that seek to radically restrict their activities hardly work. It should close loopholes where this can be done. It should create policies that will bring people more in line with long-term investment in the economy. This will lead to more predictable growth in the economy over the long run. Lastly, it should not treat with envy those who take the risks with these kinds of investments. It should get its fair take by taxation, duties and other things that go to government in the execution of normal business activities. But it should not assume the posture of the highway brigand.

Trousers in Denim

Cream of the 'Crop'

Cheeky's World