Posted by: nastylittletruths | March 5, 2009

And So It Begins…

Rumours have been circulating some time now about a pending ‘devaluation’ of the TT$ against the US$ and my argument has been that we can’t devalue a ‘floating’ currency. Manipulate, yes, but not devalue. As most people will know, especially those with an economics background, we have what is commonly known as a ‘dirty’ or ‘managed’ float. Whereas in a true float the value of a currency is determined by supply and demand, our currency is kept at a pre-determined level by the Central bank releasing US$ into the system when demand peaks.

Monday’s lead story in the Trinidad Express can be construed as a first step in preparing the population for a slide in the TT$ value. DOMA’s President, Gregory Aboud, was dead on when he expressed surprise that there was a shortage of US$. He was correct in that there shouldn’t be much of a demand for dollars to pay import bills as it is a slow time of the year, plus we should have considerable funds as a result of Carnival visitors. Richard Young of Scotiabank I believe was playing the part of a responsible banker when he said that there was some capital ‘movement’ (as opposed to flight) since some monies were being used to take advantage of low property prices in the US.

All good arguments, but what if the merchant class and the affleunt are in fact making a run for it? (Poor and struggling middle class don’t have money to move anywhere…) Will we be heading quickly to the edge as Carnival is over, or will we  be held back until after the April summit for appearances sake? I personally believe that we are going to see a turn for the worse in this country by May/June that will spin us on our heads. The die-hard supporters of the party in power will be the first to feel the pinch and they will lash out at their employers first instead of the Government that they elected and never holds responsible.

Be on your guard. It’s going to get rough… and dangerous.

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