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BUSINESS GUARDIAN guardian.co.tt MARCH 9 • 2017
Real benefits of
The issue of legalised gambling should be of great
national concern. Not only does it have considerable
relevance for the crucial issues of tax generation, and
control of money laundering, but also because of its
potential impact on the tourism industry.
As the law stands today, gaming is hidden in the
shadow world of private members clubs and, there-
fore, largely inaccessible to visitors. Being remote in
this way it also makes it much more difficult to reg-
ulate and police.
There will always be questions about the morality of
gambling, and there are a host of horrendous stories
about gambling addicts who have lost everything they
own simply because they were unable to stop it. But,
with off-track betting, clubs with private casinos, and
the national lottery already legalised and operating,
morality should cease to be an issue. The only real
concern is, therefore, how to manage it properly to
the best advantage of the country and the people.
Gambling is broadly established across the Car-
ibbean so there are multiple examples to guide us
in establishing this bill. It is legal in the Netherland
Antilles, the French West Indies, the Bahamas, the
DR, Puerto Rico, Antigua, and St Vincent & the Gren-
adines, and on cruise ships, where it plays a major
role in a thriving tourism industry. It is also currently
under active consideration in several other territories
across the region.
Just to keep it all in perspective, international visi-
tors rarely come down to the Caribbean just to gamble.
Those who are obsessed with it go to Vegas, Reno
or Atlantic City where the whole process is rigidly
controlled and institutionalised.
In the Caribbean, casinos are incorporated in ho-
tels where they become a major additional visitor
attraction; something to do after dinner, or maybe
on a rainy afternoon.
The real benefit of legalised casinos is their ability
to significantly enhance the investment potential of
resort hotels. Having a casino license changes the
investment paradigm for a developer from marginal
to something much more attractive. Governments
can also use a casino license to leverage the size and
quality of the resort to their advantage.
The legitimate tax revenues to be derived from gam-
bling can be considerable, but the role that legalised
casinos would have on the development of tourism in
the form of new luxury resorts and increased tourism
would be much more significant. As the visitor flows
into the country increase, so will the tax revenues
from casinos, and indeed the wider tourism industry.
former director general and CEO of the
Caribbean Hotel Association from 1974 to 2002.
When printing money
An article in the March 2,
Business Guardian warned
of the evils of a country
printing money (increas-
ing the money supply,
liquidity, in the country)
and spoke about Barbados that had used
this process to fund in part its fiscal deficit.
As the commercial banks reduced their
lending, this was done by the Barbados
Central Bank; on-lending to the govern-
ment two thirds of this fiscal requirement
from the commercial banks' reserves held
at the Central Bank (CB), and the rest by the
creation of new money.
This approach was in response to the
Barbados Government's bi-weekly issue of
treasury bills, which was purchased by the
CB, effectively "creating" new money for the
government to meet its fiscal expenditure.
The major problem with this creation of
money is that in a small, open economy that
depends for its livelihood on earning foreign
exchange to fund its necessary imports, this
creation of money to meet the government
fiscal requirements also increases the de-
mand for imports in this recession of reduced
earnings of foreign exchange.
However, recently the Minister of Finance
Chris Sinckler, said that he expects to sell
some more assets (Barbados National Termi-
nal Company) and is expecting some foreign
exchange loans (for Sam Lord Castle's draw-
down from the Chinese Exim Bank and the
bridging loan from FCB for upgrades to the
Customs and Revenue Authority) that will
raise some US$100millon, and temporarily
reduce the pressure on the exchange rate.
This phenomenon of creating money also
applies to T&T where the law allows the T&T
Central Bank to afford the government an
overdraft of 15 per cent of the estimated an-
nual revenue of the government.
These advances are to be repaid as soon as
possible and if they span more than one year
at no time should the outstanding amount
be greater than 15 per cent of the fiscal esti-
mated annual revenue for the current year.
However, this power to create money in
the economy by the local commercial banks
is an everyday occurrence.
The normal view of a commercial bank's
business is that it takes in depositor's money
on which it pays interest and on-lends this
money to borrowers, again with interest.
What happens is a bit more complex. The
banks appreciate that the depositors as a
whole will not demand all of their deposits
at the bank in cash at any one time unless
there is a run on the bank.
Hence the bank will decide on a loan port-
folio, given the state of the economy and
go looking for or encouraging deposits. The
commercial bank is allowed to create credit
to the value of its deposits (minus that held
as reserves by the CB) multiplied by a Central
Bank advised factor.
What happens is this.
A person may come into the bank looking
for $X. If this is within the portfolio along
with other conditions (credit worthiness
of the person etc.) the bank creates a debit
account for the client of $X, from which she
can write cheques etc, and another credit
account of $X plus interest, which the client
agrees to repay the bank over time.
The fact that much of the business in the
economy is done via instruments other than
cash, the increase in the money supply in
the economy will not require a comparable
increase in government money, coins and
What is interesting though is that by
creating these loans, which end up in other
banks, they indeed become deposits! What is
worth noting is that this new money depends
on the ability of the economy to increase
Hence, the creation of money, the printing
of money, is seen in one case a bad thing for a
government and a Central Bank, but is usual
business for a commercial bank.
Consider again that the T&T government
receives income from the energy sector in
US$. It does not sell these to the population
for TT$s so that they can purchase imports.
If this sale had taken place the liquidity in
the economy would have dipped and then
regain its level after the government spends
the money from the sale. Instead the gov-
ernment, via the Central Bank, prints money
using the exchange rate, which it spends in
the local economy, increasing the liquidity
in doing so.
The Central Bank may then sell some
of the US$s (the rest stays in the reserves)
collected by the government, for TT$s and
takes these (TT$s) out of circulation, ie
reducing the liquidity (to the pre-printing
stage if all of the US$s were sold). Hence the
T&T government, given its income from the
energy sector, is continually printing money
as allowed by the law!
Hence printing or creating money does
not necessarily harm the economy; see the
everyday practice of banks and T&T's gov-
ernment being allowed by law to do so via
It causes harm when its impact on the
economy is negative, when for example it
exacerbates the very failures that, say, caused
a recession as in the case of Barbados or T&T
running up its Central Bank overdraft when
a recession is on (instead of decreasing ag-
The interested reader may wish to check
out the following: quantitative easing, hel-
icopter money and social credit, where the
last two methods of creating money are of
importance in an economy that will abound
MARY K KING
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