TW is going to hate this one but here goes....
8. Bank interest rates take a leap
El Caribe newspaper reports that commercial bank rates have begun an
upwards trend. The interest rates have climbed four points in the
past two weeks. Economists had warned the government that one of the
negative consequences of borrowing from local commercial banks could
be an increase in interest rates. By borrowing on the local market,
the government uses up the banks' liquidity leaving less funds
available to loan to private companies.
so now when the DR can'tt pay the loans back the banks will go under too... these guys are setting themselves up for a major crash...
so now the gov has 2 Billion in debt, much of it foreign, and is currently taking out loans from local commercial banks to pay the debt to outside the country... All the cash borrowed is driving interest rates up for private companies, This slows down the economy because it increases the cost of doing business (same as the Fed adjusting the interest rate here).... Therefore revenue derived from taxes on businesses will go down and further reduce the govs ability to pay debt....
Also the loan is taken out in Dollars and has to be paid back in dollars... Think supply and demand.... now imagine what will happen to the exchange rate when the gov has to buy dollars with pesos...
If history repeats one of two things will happen:
A. the government will print peso notes with no backing, not tell anyone, dump them on the market and further degrade the value of the peso..
B. The government will default on the loans..
from part 7
Commenting on the exchange rate increase, he said it is cyclical and
normal during the first three months of the year.
cyclical is when it goes up AND down... when was the last time that happened....
again from part 7
The peso also slid more than usual given new players in the market,
such as the large foreign power companies that repatriate their
earnings.
now profits that used to stay in the country provide income to the government are being syphoned off out of the country. This sounds remarkable similar to another South American Country making headlines these days.... Again, income produced in pesos, converted to other currencies (spanish?) and moved out of the country..... Supply and demand..
intelligent comments and thoughts welcome!!!!
8. Bank interest rates take a leap
El Caribe newspaper reports that commercial bank rates have begun an
upwards trend. The interest rates have climbed four points in the
past two weeks. Economists had warned the government that one of the
negative consequences of borrowing from local commercial banks could
be an increase in interest rates. By borrowing on the local market,
the government uses up the banks' liquidity leaving less funds
available to loan to private companies.
so now when the DR can'tt pay the loans back the banks will go under too... these guys are setting themselves up for a major crash...
so now the gov has 2 Billion in debt, much of it foreign, and is currently taking out loans from local commercial banks to pay the debt to outside the country... All the cash borrowed is driving interest rates up for private companies, This slows down the economy because it increases the cost of doing business (same as the Fed adjusting the interest rate here).... Therefore revenue derived from taxes on businesses will go down and further reduce the govs ability to pay debt....
Also the loan is taken out in Dollars and has to be paid back in dollars... Think supply and demand.... now imagine what will happen to the exchange rate when the gov has to buy dollars with pesos...
If history repeats one of two things will happen:
A. the government will print peso notes with no backing, not tell anyone, dump them on the market and further degrade the value of the peso..
B. The government will default on the loans..
from part 7
Commenting on the exchange rate increase, he said it is cyclical and
normal during the first three months of the year.
cyclical is when it goes up AND down... when was the last time that happened....
again from part 7
The peso also slid more than usual given new players in the market,
such as the large foreign power companies that repatriate their
earnings.
now profits that used to stay in the country provide income to the government are being syphoned off out of the country. This sounds remarkable similar to another South American Country making headlines these days.... Again, income produced in pesos, converted to other currencies (spanish?) and moved out of the country..... Supply and demand..
intelligent comments and thoughts welcome!!!!