Free float of dollar slippery slope

THE EDITOR: Letting the TT dollar free-float is being bandied about by some economists. This is a slippery slope with lots of empirical evidence to suggest it will not improve our situation, but only go towards higher inflation (look at Venezuela, Ecuador, Zimbabwe and Argentina, which have adopted the US dollar, or in the case of the latter looking to adopt the US dollar, for stabilisation of hyperinflation).

Our economists, sharp in theories but many lacking business grit, are insisting that this will quell the black market and fix everything. Our own experience shows otherwise. The demand outstripped supply when the currency was at $2.40 to US$1, also at $3.60 to US$1, again at $4.25, also at $6.30, and now again at $6.79.

What we have is a confidence problem with holding TT dollars, which stems from an inherent lack of trust in our elected government officials (across the years and the political spectrum), who say one thing and then do another. Economists cannot use a mathematical model to track this sort of lack of confidence.

Possibly a complete removal of all currency restrictions, allowing the free buying and selling among individuals/companies might address the black market, or at least allow it be done in the light of day.

It’s a small step, but can restore some equity and confidence in the forex market, particularly for small and medium enterprises which have to struggle to find alternatives to overcome the forex squeeze to stay afloat, while the large corporations and banks continue to post record profits.

We cannot wait until we diversify the economy – something like this can be done now.

C ALEXANDER

Port of Spain

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