TT economy can’t avoid devaluation

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Enclaving of sectors of the economy is Chicago School thought on economics. This school’s pricing model is the basic proposition and is about the maximisation of profits; it is not about optimising the common good or the national interest.

The pricing model can be used to defend the enclave interests on a broad format of enclaves which at the same time act as net collectors of “prices” from those not deemed part of the pricing circle. A look at exchange rates reveals how this works.

Since the times when Chile explicitly adopted Chicago School thinking, its exchange rate has gone from below 350 peso to US$1, in 1992, to past 900:1, September 2022.

A similar pattern can be seen in Greece where, according to the Bank of England underlying valuations (apart from the euro), the Greek drachma went from 35:1, 1975, to very near to 400:1, 2020. This got worked through accession to the EU.

The Bolivarian regime since Chavez has acted as a net transferer of prices to foreigners over the whole period to the present, practically serving enclave interests without obvious connections; and the disaster is reflected in its bolivar.

Here in TT, the PNM Government has set up an enclaving pattern. Foreign firms control the energy well-heads, deliveries and resales. They will reap enormous benefits hedging in the volatile markets and selling on to TT and elsewhere.

The stage is set for devaluation as it will be necessary to prop up the local energy industry, which is now totally dependent on received inputs and decisions.

E GALY