Economic Forecast

Monday, June 18, 2012

Anonymous said...: http://www.tribune242.com/news/2012/jun/18/stimulus-spending-would-never-work/

Mr Smith said.

#"I never believed stimulus spending worked in a small country like the Bahamas," he told Tribune Business. "You are already running down the reserves, or borrowing foreign currency and deferring the rundown in reserves until you pay it. It doesn't work in a developing country."

#Mr Smith, a former Central Bank governor, said conventional economic theory suggested capital works and infrastructure projects, financed by increased government spending, acted as a 'stimulus' by expanding total demand within a nation's economy.

#But, even in countries with "a lot of domestic production", such projects inevitably needed to import large quantities of construction materials and related equipment, leading to considerable foreign exchange outflows.

#"Any time you increase GDP through expenditure in a developing country, it either increases imports of capital equipment or financial goods," Mr Smith told Tribune Business.

#He added that this needed to be counterbalanced by "strong foreign exchange earnings", which in the Bahamas' case was tourism and foreign direct investment (FDI), neither of which was well-placed to oblige since 2008.; June 18, 2012 at 3:01 PM
Anonymous said...: Mr. Max,
How about you not sharing with us your thoughts and expectations anymore?; June 24, 2012 at 5:44 PM