Go Lean Commentary
Money is more important in society than people are willing to accept. Though some critics say that love, family, faith, country and other principles are more important. But an obscure Murphy’s Law states (and is quoted in the book Go Lean…Caribbean at Page 32) this ironic truth:
“When people claim that it’s the principle, and not the money, chances are, it’s the money”.
There are indeed more important things in life than money, but somehow all these things can be bought/sold … for money. The strategy in this Go Lean book is to optimize money issues: consolidate monetary reserves for the region into a Single Currency, the Caribbean Dollar (C$), managed by the technocratic Caribbean Central Bank (CCB). The C$ will be based on a mixed-basket of foreign reserves (US dollars, Euros, British pounds & Yens).
This is a simple but effective plan – a best practice: introduce the Caribbean Central Bank (CCB) and Caribbean Dollar as a Single Currency for the region’s 30 member-states.
Huge benefits abound! And so this economic initiative is important for Caribbean elevation. The rationale is that this strategy “enables economies to be more resilient to exogenous shocks”.
exogenous shocks – In economics, a shock is an unexpected or unpredictable event that affects an economy, either positively or negatively. Technically, it refers to an unpredictable change in exogenous factors — that is, factors unexplained by economics — which may influence endogenous economic variables. – Wikipedia.
This benefit is so obvious that others have thought of this before …
Yet there has consistently been a Failure to Launch this economic initiative; or to do so successfully. Consider the historicity of the CariCom Multilateral Clearing Facility (CMCF) in Appendix A below – a normal functionality of regional Central Banks.
Currently, the Caribbean has no regional Central Bank, so safety-net, no shock absorption, and no integration. This is the quest of the book Go Lean…Caribbean; it urges the introduction and implementation of the Caribbean Union Trade Federation (CU) and the Caribbean Central Bank (CCB). The book serves as a roadmap for this goal, with turn-by-turn directions to integrate the 30 member-states of the region and forge an $800 Billion economy.
We have the great models of the United States and Europe to consider how a Single Currency can positively impact a consolidated regional economy; see VIDEOs in the Appendices below. We do not have to invent innovative solutions on our own; we can simply model the best-practices of these other communities. This is the familiar advocacy for the movement behind the book Go Lean…Caribbean. In a previous blog-commentary from May 10, 2014 the merits of Single Market and Single Currency economic integrations were related as follows:
Europe has the safety net of the economies-of-scale of 508 million people and a GDP of $15 Trillion in 28 member-states in the EU; (the Eurozone subset is 18 states, 333 million people and $13.1 Trillion GDP). The US has 50 states and 320 million people. Shocks and dips can therefore be absorbed and leveraged across the entire region .The EU is still the #1 economy in the world; the US is #2. – [See related VIDEO here: https://youtu.be/vRzFAvgBhU0.]
The Go Lean roadmap signals change for the region. It introduces new measures, new opportunities and new recoveries. Exogenous shocks are a reality. Economies will rise and fall; the recovery is key. Prices will inflate and deflate; there are very effective measures – at the regional level – for managing all these indices. The Go Lean book serves as a roadmap for the establishment of the Caribbean Union Trade Federation (CU), and the allied Caribbean Central Bank (CCB) to manage the monetary-currency affairs of this region. The book describes the breath-and-width of the CCB and the Caribbean Dollar Single Currency.
The book Go Lean…Caribbean also detailed previous (inadequate) attempts to integrate Caribbean currencies …
… this commentary is the 2nd of 4 parts in a series on the Caribbean’s Failure to Launch solutions to elevate the region’s societal engines. The full series is catalogued as follows:
- Failure to Launch – Past Failures for Integration
- Failure to Launch – Economics: Caribbean Central Banks and the Quest for a Single Currency
- Failure to Launch – Security: Caribbean Basin Security Dreams
- Failure to Launch – Governance: Assembling the Regional Alphabet Organizations
In the previous submission – Part 1 of 4 – the history of the failed West Indies Federation was detailed. This effort only related to the Anglophone countries but among its many initiatives was the plan to introduce a consolidated currency. This excerpt is derived from the Go Lean book’s Anecdote on Caribbean currencies relating English-speaking and other language groups:
Anecdote # 16 – Caribbean Currencies (Page 149)
In 1946, a West Indian Currency Conference saw Barbados, British Guiana, the Leeward Islands, Trinidad & Tobago and the Windward Islands agree to establish a unified decimal currency system based on a new West Indian dollar to replace the current arrangement of having three different Boards of Commissioners of Currency (for Barbados, British Guiana and Trinidad) manage monetary issues in the Eastern Caribbean. In 1949, the British government formalized the dollar system of accounts in British Guiana and the Eastern Caribbean territories by introducing the British West Indies dollar (BWI$) at the already existing conversion rate of $4.80 per pound sterling (or $1 = 4 shillings 2 pence). It was one of the many experimental political and economic ventures tested by the British government to form a uniform system within their British West Indies territories. The symbol “BWI$” was frequently used and the currency was known verbally as the “Beewee” (slang for British West Indies) dollar. Shortly thereafter in 1950, the British Caribbean Currency Board (BCCB) was set up in Trinidad with the sole right to issue notes and coins of the new unified currency and given the mandate of keeping full foreign exchange cover to ensure convertibility at $4.80 per pound sterling. In 1951, the British Virgin Islands joined the arrangement, but this led to discontent because that territory was more naturally drawn to the currency of the neighboring US Virgin Islands. In 1961, the British Virgin Islands withdrew from the arrangement and adopted the US dollar.
Until 1955, the BWI$ existed only as banknotes in conjunction with sterling fractional coinage. Decimal coins replaced the sterling coins in 1955. These decimal coins were denominated in cents, with each cent being worth one halfpenny in sterling.
In 1958, the West Indies Federation was established and the BWI$ was its currency. However, although Jamaica (including the Cayman Islands and the Turks and Caicos Islands) was part of the West Indies Federation, it retained the Jamaican pound, despite adopting the BWI$ as legal tender from 1954. Jamaica, the Cayman Islands, and the Turks and Caicos Islands were already long established users of the sterling accounts system of pounds, shillings, and pence.
In 1964 Jamaica ended their legal tender status of the BWI$ and Trinidad & Tobago withdrew from the currency union (adopting “dollars” representing their national currency: Jamaican and T&T Dollar – see Appendix ZB [on Page 316]). This forced the movement of the headquarters of the BCCB to Barbados and soon the “BWI$” dollar lost its regional support.
In 1965, the BWI dollar of the now defunct West Indies Federation was replaced at par by the East Caribbean dollar and the BCCB was replaced by the Eastern Caribbean Currency Authority or ECCA. Guyana withdrew from the currency union in 1966. Grenada rejoined the common currency arrangement in 1968 having utilized the Trinidad & Tobago dollar from 1964. Barbados withdrew from the currency union in 1972, following which the ECCA headquarters were moved to St. Kitts.
Between 1965 and 1983, the Eastern Caribbean Currency Authority issued the EC$, with banknotes from 1965 and coins from 1981. The EC$ is now issued by the Eastern Caribbean Central Bank, (Basseterre, Saint Kitts), established July 1983.
The exchange rate of $4.80 = £1 sterling (equivalent to the old $1 = 4s 2d) continued right into up until July 7, 1976 for the new Eastern Caribbean dollar, until it was pegged to the US dollar, at the exchange rate of US$1 = EC$2.70.
Today, the East Caribbean dollar (EC$) is the currency for eight of nine members of the Organization of Eastern Caribbean States (OECS), the one exception being the British Virgin Islands, which uses the United States dollar exclusively; so too does non-OECS member-state Turks and Caicos Islands.
The French franc was the former currency of France until the Euro was adopted in 1999 (by law, 2002 de facto). The name is said to derive from the Latin inscription francorum rex (“King of the Franks”) on early French coins, or from the French franc, meaning “free” (and “frank”). The franc was also used within the French Empire’s colonies, including the French West Indies or French Antilles, referring to the territories currently under French sovereignty in the Antilles islands of the Caribbean:
Dutch / Netherlands
The Dutch guilder was the national currency of the Netherlands until it was replaced by the Euro on 1 January 2002. The Netherlands Antillean guilder is currently the only guilder in use, which after the dissolution of the Netherlands Antilles remained the currency of the new countries Curaçao and Sint Maarten and (until 1 January 2011) the Caribbean Netherlands.
The Caribbean guilder is the proposed currency of the Caribbean islands of Curaçao and Sint Maarten, which formed after the dissolution of the Netherlands Antilles in October 2010. The Netherlands Antillean guilder (NAg) is expected to continue to circulate until 2013 as the currency was not finalized in time for the islands’ separate autonomous status. The currency will be abbreviated CMg (for Curacao, Sint Maarten guilder) and will be pegged to the US dollar at the same exchange rate as the Netherlands Antillean Guilder (1 USD = 1.79 NAg = 1.79 CMg). Since, the islands of Bonaire, Sint Eustatius and Saba adopted the US dollar directly on 1 January 2011, the introduction of the CMg will mean the end of the circulation of NAg.
The diverse colonial Caribbean also had Spanish (Cuba, Dominican Republic and Puerto Rico) islands and Danish territories, as in today’s US Virgin Islands.
There would be many benefits if multiple countries come together and finally form a Single Market-Single Currency economy. This is the quest for the CU/Go Lean roadmap: to form a Single Market-Single Currency of the Caribbean Dollar (C$).
This CU/CCB/C$/Go Lean roadmap therefore urges this Single Market / Single Currency effort with these 3 prime directives:
- Optimization of the economic-banking engines in order to grow the regional economy and create 2.2 million new jobs.
- Establishment of a security apparatus to ensure public safety and protect the resultant economic engines.
- Improvement of Caribbean governance to support these engines, including a separation-of-powers between the member-states and CU federal agencies.
Central Banks are required to …
- facilitate monetary and currency policies,
- oversee bank regulations, and
- execute inter-bank financial transactions (like payment settlements described in the Appendix A below regarding the previous CMCF).
Presently, the Caribbean region has no integrated Central Bank, nor have we ever had one in the past. There has always been a Failure to Launch this needed solution. Even the Anglo-Caribbean’s previous offering of the CMCF only addressed one of these 3 central banking functionalities: payments. Unfortunately, we need them all! We need to launch a fitting solution to assuage all Caribbean’s monetary-currency deficiencies.
(Puerto Rico and the US Virgin Islands monetary needs are managed as a subset of the Federal Reserve Bank of New York; 2600 miles away from their territorial markets).
A Single Currency in the Caribbean – for the Caribbean – is a BIG idea for reforming and transforming the economic engines of the 42 million people among the 30 member-states (including Puerto Rico and the US Virgin Islands). The Go Lean book stresses that our effort must be a regional pursuit, and it must also optimize our currency landscape. This was an early motivation for the roadmap, as pronounced in the opening Declaration of Interdependence (Pages 12 – 13):
xi. Whereas all men are entitled to the benefits of good governance in a free society, “new guards” must be enacted to dissuade the emergence of incompetence, corruption, nepotism and cronyism at the peril of the people’s best interest. The Federation must guarantee the executions of a social contract between government and the governed.
xxiv. Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles. Thereby attracting direct foreign investment because of the stability and vibrancy of our economy.
The Go Lean book provides 370-pages of turn-by-turn instructions on “how” to adopt new community ethos, plus the strategies, tactics, implementations and advocacies to execute so as to reboot, reform and transform the societal engines of Caribbean society. There is a lot of consideration in the book for establishing the CCB and the Single Currency in the region. The Caribbean’s Failure to Launch this in the past is … inexcusable.
There have been a number of previous blog-commentaries by the Go Lean movement that have highlighted the eco-system of monetary, central banking and currency best practices. See a sample list here:
|http://www.goleancaribbean.com/blog/?p=13365||Case Study from West Africa: Single Currency for 8 Diverse Countries|
|http://www.goleancaribbean.com/blog/?p=10513||Case Study from India: Transforming Money Countrywide|
|http://www.goleancaribbean.com/blog/?p=8381||Case Study on Central Banking for Puerto Rico|
|http://www.goleancaribbean.com/blog/?p=7140||Case Study from Azerbaijan: Setting its currency on free float|
|http://www.goleancaribbean.com/blog/?p=6800||Case Study from Venezuela: Suing Black Market currency website|
|http://www.goleancaribbean.com/blog/?p=4166||Case Study from Panama: History of the Balboa Currency|
|http://www.goleancaribbean.com/blog/?p=3858||Case Study from ECB: Unveiling 1 trillion Euro stimulus program|
|http://www.goleancaribbean.com/blog/?p=3814||Case Study from Switzerland: Unpegging the franc|
|http://www.goleancaribbean.com/blog/?p=360||Case Study on Central Banks: Creating Money from ‘Thin Air’|
|http://www.goleancaribbean.com/blog/?p=833||Case Study from the Euro: One Currency, Diverse Economies|
In summary, shepherding the economy is no simple task; the regional economy, even harder still – described as heavy-lifting. It requires the best practices of skilled technocrats. But the benefits of the heavy-lifting are too alluring to ignore: growing the monetary supply, expanding the availability of investment capital and leveraging across a larger base to absorb the shocks naturally associated with a Free Market Economy.
We are past the time of needing this Caribbean Dollar Single Currency reform. We needed it 60 years ago, and even more now. We must not fail to launch …
We urge all Caribbean stakeholders – government officials, bankers and ordinary citizens – to lean-in for the innovations and empowerments detailed in this CU/CCB/Go Lean roadmap. It is so obvious; these are among the best practices of America and Europe! The successful delivery of this banking-economic-currency solution can make our homeland a better place to live, work and play. 🙂
Sign the petition to lean-in for this roadmap for the Caribbean Union Trade Federation.
Appendix A – Caricom Multilateral Clearing Facility: A Brief Note
Payments clearing and settlement in the Caribbean has historically been a battleground of discontent. There have been many attempts since the Colonial period to structure the payments landscape but none of these efforts have been successful. This blog will briefly outline one such effort — the Caricom Multilateral Clearing Facility.
The Caricom [Caribbean Community]Multilateral Clearing Facility (1977–1983) introduced a centralized accounting system for all eligible payments institutions within the region. The original agreement establishing the CMCF was signed by the Central Bank of Barbados, the Monetary Authority of Belize, the East Caribbean Currency Authority, the Bank of Guyana, the Bank of Jamaica, and the Central Bank of Trinidad and Tobago.
The Central Bank of Trinidad and Tobago (CBTT) acted as the agent bank for the CMCF. That is, the CBTT carried out the secretariat functions as well as being responsible for the accounting records and distribution of cash settlements.
The main objectives of the CMCF were to:
- facilitate settlement on a multilateral basis of eligible transactions between participating countries;
- promote the use of currencies of members in settling eligible transactions between the individual countries, thereby economizing on the use of foreign exchange; and,
- promote monetary co-operation among the participants, thereby contributing to the expansion of trade and economic activity within Caricom.
Advantages of multilateral clearing to regional banks:
- reduction of correspondent deposits in foreign exchange
- longer time for investment of deposits where drawn cheques are in circulation within the region
Disadvantages of multilateral clearing to regional banks:
- legal implications arising from fact that the CMCF was not established as a separate legal entity
- lack of formal enforcement mechanism in the event of debtor default
- need for an independent regulatory body
- technical and administrative complexities
The failure of the CMCF was caused by its abusive usage by some member countries. Instead of being used for its primary purpose of simply minimizing the foreign exchange requirement for intra-regional trade, some members saw it as a balance of payments support facility to allow them to continue purchasing goods which they otherwise would not have been able to. Thus the closing of the CMCF was only inevitable because of the overuse of its informal credit facility.
After the closing of the CMCF the region regressed to a costly nexus of bilateral agreements which offer far less efficiency than multilateral systems.
The demise of the CMCF was unfortunate because it was a clever device for effecting small but significant economies in the use of foreign exchange. In fact, the CMCF might have formed an institutional base for a federal system of Caricom central banks.
Source: CMCF and Caricom Trade. Ginne Lea Miller, 1993
Source: Retrieved December 11, 2017 from https://medium.com/@RJGriffith/caricom-multilateral-clearing-facility-a-brief-note-ab5085a9c8d1
Appendix B VIDEO – The U.S. Federal Reserve Bank – How it Works, and What it Does – Money, Dollars, & Currency – https://youtu.be/y1OJlJ9COg0
Published on Dec 25, 2012 – The U.S. Federal Reserve Bank – How it Works & What it Does – Money, Currency, & the Dollar
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Appendix C VIDEO – ECB and the Eurosystem explained in 3 min. – https://youtu.be/TAlcFwGIQBg
Published on Sep 26, 2013 – Who takes care of the “euro”? What is inflation ? Why is price stability important for you? Find the answers to these questions and more in this three-minute introduction to the ECB and the Eurosystem’s role and tasks. To discover more about the ECB, please visit http://www.ecb.europa.eu/ecb
- Category: News & Politics
- License: Standard YouTube License