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It’s about quick returns, says Stephen

Barbadian residents and other investors looking for a quick return on their investment were the main reason why the Central Bank’s $10 million savings bonds issue was so quickly snapped up.

This assessment from president of the Barbados Economic Society, Jeremy Stephen, who insisted the sell-out, within three days of the financial instruments coming on to the market, was not necessarily a reflection of renewed confidence in the Government.

Speaking to Barbados TODAY in a telephone interview, Stephen said while he always expected the Central Bank’s re-launched programme to garner much attention, he believed it was more a case of persons “chasing liquid benefits”.

Stephen, an economist, saw this resulting directly from the Central Bank’s recent removal of the minimum savings rate on deposits with commercial banks and other deposit-taking institutions, and its offer of an interest rate of 5.5 per cent over a five-year period on the savings bonds.

Jeremy Stephen

Jeremy Stephen

“I’m not surprised,” he said. “I always believed that you would find larger institutions, larger businesses and wealthier individuals making a mad grab for Government debt. I don’t necessarily believe, however, that it is an indicator that people think Government paper is safer.”

Stephen added: “I don’t believe that it is an indicator of increased confidence in our Government as yet . . . just one of people chasing yields in the short term and people being educated as to the pure benefits at this time and not necessarily the risks.”

The Central Bank is set to release another $10 million in savings bonds next Monday. Stephen expects them to go just as fast as the first batch.

While he said it would be interesting to find out who the main buyers were, he suggested it may have been mostly private businesses.

“It’s a matter of the lesser of two evils. People aren’t seeing Government in a different light to how they saw them before, but they are thinking that they can’t get a certain amount of money on the bank from their fixed deposits. Therefore, they have to find something that replicates a fixed deposit that they can get even more interest from holding these instruments.

“What would be of interest though, is how much of that allotment was taken up by smaller private interests and corporate interests. I would imagine, not really looking at this point to make any wholesale judgements, that a significant portion would have been taken up by private interests . . . and probably not wealthier individuals and not necessarily the average person,” Stephen noted.

“When all is said and done, it is a viable tool, but what, at least for myself personally, should have been pushed, was more so the weaknesses of investing in savings bonds, particularly in this environment, ” he added.

3 Responses to It’s about quick returns, says Stephen

  1. Patrick Blackman June 5, 2015 at 2:14 am

    I do agree, it is not necessarily an indication of confidence but where else can the people put their money? I am more of the opinion this was a ploy by the CBB more than anything else why not just put out one issue of $20-30M instead of this piece meal stuff.

  2. Charles Worrell June 5, 2015 at 1:09 pm

    Stephen, I am not sure where you are going here. Perhaps, you will elaborate at some time in the future.
    The Central Bank issued those bonds primarily to attract investment funds. Your concerned about the lower classes not being involved is a curious concern largely because one is hard press to recalled many investments being offered in the past that were eaten up by the lower classes. Given the thinking of an Errol Barrow, if this were done today, it would have been so structured as to appeal and make some way for lesser mortals to be involved but you and I know this has not been the emphasis in the country since 1994. Sadly, it is that very path that confuses you and others today as Barbados rocks too and fro, in a wave that she has no real competing power.
    You and your associates are currently advocating for the Government to rid itself of its holdings and become a full fledged landlord, the only one of its kind in the world. Associating with this idea the last government sold off much of Barbados and now we are back begging businesses to come and enjoy what we have and in the process offer us a few jobs for the time being; an invitation to colonization all over again.
    With the disposal of our bank, our rum, our tourism, our lands and on and on we can go, it appears the only persons in this country that will have a life will be people like you all who unabashedly play the tune of the International Capitalist, while cutting a cut. How people like you and your profession can look on and urged government (like Mr. Jordan did) to sell it all off, then the hospital and on and on, what is the state you are placing this country in? Please explain who we would be then. You people heard Mr. Arthur years ago talked about privatizing schools etc. and not a word but it was clear you shared the view.
    WHO then will make sure our people are taken care of? The wealthy who have but one interest, the BOTTOM LINE? And what of our organizations which have been practically taken over by ‘others’, is this ok too?
    FACT IS, all of you economists, many lawyers, hotel owners would do us a favor if you can board a plane and come back for a visit to Barbados every ten years. Right now, you represent everything that our FOUNDING FATHERS FOUGHT SO HARD TO ACHIEVE FOR BARBADOS AND BARBADIANS. Contrary to the game you are selling us here, the International community is not giving up everything on some notion to technological advancement.

  3. Patrick Blackman June 5, 2015 at 1:50 pm

    @Charles Worrell: Well said chap.


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