Columns

Withdrawal of 'red monies' a sign of the wrecked economy

Dr Patrick D Robinson

Monday, October 16, 2017

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The plan to withdraw the 10 and 25 coins, the so-called “red monies”, from circulation, is happily welcomed by most people because of today's near-zero purchasing power of the coins.

While we are happy to be rid of the coins, it would be sad if it escaped our understanding that the need to effect such a move comes as a result of the wrecking of the Jamaican economy — a tragedy presided over by our various governments since Independence. I will give a snapshot of the frightening picture of the extent of the wreckage.

To the young among us, it will come as a shock to learn that today's near-worthless 25 coin is the nominal equivalent of two shillings and six pence (2s 6d), which, in 1960, was a princely sum that could be used to pay bus fare to and from school, buy lunch (pint of milk, patty, coco bread, small spice bun, slice of cheese ), and be enough to sustain a grown 6 ft 1in athlete pursuing sixth-form studies.

Today's near-worthless 10 coin has the nominal value of one shilling, which, before Independence, could buy a tin of condensed milk. It would take nearly 2,500 of today's 10 cents to make the same purchase today.

It gets worse. Today, $150 will buy a single patty. It's nominal equivalent, 75, would in 1960 buy 3,000 patties (six pence each) — a virtual van load, enough to supply two patties a day, five days a week, for nearly seven years.

How about a six-year, high-school education for the cost of six patties — a patty per year? Of course, that could never be. But consider this, 75, when I attended Kingston College, would each year be able to pay school fees (22), buy uniforms and books, and provide bus fare and lunch money. Today's nominal equivalent of 75, ie $150, buys just a patty.

A single tankful of petrol (octane 87) for a mid-sized car (2000 cc engine) today costs approximately $6,000. You could buy a Mona Heights home in 1962 with its nominal equivalent of 3,000. Alternatively, you could purchase three cars, or enough petrol to propel three cars, each 10,000 miles/year for several years.

What you pay for a single Sunday newspaper today ($140), had there been no change in the value of our money over the years, the 70 equivalent, would in 1960 buy 5,600 Sunday newspapers (three pence each) — that's one a day for 15 years and 4 months.

Had I died in 1968, my wife would have collected 10,000 from two life insurance policies. She could then have purchased three Mona Heights houses and car. She could continue to live in the two-bedroom flat we rented, offer for rent the three Mona houses and, if she so chose, never work a day for the rest of her life — the rental money being sufficient to take care of her needs. Today's nominal equivalent, $20,000, won't buy a set of tyres for a mid-sized car.

With the passage of time, inflation seems inevitable in every economy. A view from the perspective of the American economy will give a better appreciation of the scale of the inflation problem in Jamaica. Vividly etched in my memory is the picture of the exciting, restyled, iconic Ford Mustang on show in the Miami Airport Terminal in 1972, with a price tag of US$2,500. A base model Mustang today, an infinitely more sophisticated car with computing power which exceeds that used to land a man on the moon in 1969, costs US$32,000 — a 13-fold price increase. Compare that to Jamaica's three, four, five thousand-fold price increases.

Granted, some inflation is imported, but that accounts for only a small fraction. The bulk of it is generated within our own borders from destructive forces of our own making. The fundamentals (self and party above country, corruption, bad management, incompetence), which have operated for decades and have led to the 'death' of the red monies are still in play, so the other coins, starting with the $1 coin, the very unit of our currency, had better watch it. The chopping block looms.

People of my age, after waiting 55 years, won't live to see Jamaica, blessed with enormous potential, become really prosperous. Bermuda, decidedly less well-endowed with natural resources and without Jamaica's geographical advantage, has long been prosperous, having the world's fourth-highest per capita income and little crime.

Unbeknownst to many, Jamaica featured in Bermuda's Independence Referendum campaign in 1995. The political party which advocated for Bermuda to reject Independence and remain a British Overseas Territory (like prosperous Cayman Islands and the British Virgin Islands) invited the voting population to take a good look at the Jamaican situation in making up their minds. One can never be certain what effect that had, but suffice it to say, 73.6 per cent voted for Bermuda to remain a British Dependent Territory.

We have waited far too long to see fulfilled the bright promise shown at Independence. The young among us could still see prosperity, but only if they are prepared to apply the fix. Will they? That is the question.

pdougrobins@gmail.com

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