Conflicting Signals on Inflation
Posted: Saturday, November 4, 2006
By Stephen Kangal
Last year, National Security Minister Joseph assured us that crime would get worse before it got better. Crime has intensified. Last week, Junior Finance Minister Enill, following in the same vein of PNM spin doctors assured that inflation would get worse (more than 10%) before it got better (single digit). Meanwhile, while POS is overheating and being ghettoised by the skyscraper landscape, we, the 300,000 poor, must lose the purchasing power of our scarce hard-earned dollars and await the effects of this over-used worse-better syndrome.
On the other hand, the Governor of the Central Bank, Mr. Ewart Williams lamented the fact that current inflation, due mainly to a 27% increase in food prices since September 2005 and government's wild spending spree, had reached the edge of a worrisome 9.6%. Basing his prediction on his 30 years experience at the IMF, he said that unless tight fiscal and monetary measures and reduction in the government spending spree were instituted to arrest the decline into the " slippery slope" of double digit inflation, then even stronger and more dislocating, havoc-creating fiscal and monetary measures would be necessary. That is what is called the bitter pill, or the return to the austerity measures of the 1980's in the face of declining oil and gas revenues and domestic oil production.
Prime Minister Manning during Thursday's post-Cabinet press briefing indicated, quite casually and with that trade mark deceptive smile, that were T&T to experience an inflation rate in excess of 10%, that was no big thing. According to him, "The sky will not fall down". For him, T&T had been there before and could go there again to justify his profligate spending continues its downward path of driving that inflationary spiral. All is honky-donky in T&T. We must not worry because his government, consisting of "little boys", thoroughly and carefully examines and analyses every mega-project. It cannot be proved wrong because it (the PNM Government) built, inter alia, the Brian Lara Promenade in the face of protests. Brian Lara Promenade is elevated to the level of double-digit inflation.
This in the face of the TT dollar having lost its purchasing power by 28% over the last three years. The PM assured us, contrary to Mr. Williams, that in fiscal 2007 it would easily get back to 7% ("no slippery slope"), while the Governor has a target of 5%. Minister Enill had in fact said that the economy would attain the said 7% inflation rate in fiscal 2008 and not in 2007 as suggested by Manning. All they have to do is flick the inflation switch that is held in the Twin Towers/Whitehall.
Must we be lulled into a false sense of monetary security and condone this cancer of runaway inflation? Inflation is eating away at our savings, fixed pensions, pension plans and decimated stock market values while the Manning administration deceives us into believing that nothing is amiss in an economy that is losing its competitiveness owing to an expansionnary fiscal policy and declining productivity. Is the tight monetary policy (repo rate increases and secondary rate requirement) of the Central Bank being compromised by the fiscal indiscipline of a wayward government that appears to have lost its way?
Does Manning know something that Governor Williams, who has placed his 30 year IMF experience on the line, does not? Is it deception, pure and simple, aka as spin from the Prime Minster, in the build up to the 2007 general elections? Must we trust the process and the people behind it? Methinks not!
Must not the Governor of the Central Bank, as his Bank of England counterpart, now assume exclusive and primary control of the anti-inflation agenda and be held responsible to Parliament and Ministry of Finance for any upward deviations?
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