The Swiss franc, the currency of a country that has a few things in
common with the Cayman Islands, shot up from $1.082 (USD/CHF) on 5 April
of this year to $1.375 on 10 August, an increase of 27 per cent in four
months.
Governments the
world over are faced with the challenge of a growing imbalance between public
spending and revenues.
The global financial crisis, Cayman’s struggles to
balance its budget, the sequential financial meltdowns among Europe’s PIIGS,
and the turmoil in the Middle East’s impact on energy prices (let alone the
question of whether countries like Egypt will end up better off or not) could
all make one gloomy about the future.
The last couple of years have left people in a depressed mood. But if
one looks at the world as a glass half full rather than half empty,
there is reason for optimism. The fact is the world economy is growing
and in some important places, China, India, Brazil, Egypt, Turkey,
Indonesia, Chile, etc, at very substantial rates.
Crystal ball gazing is precarious at the best of times, but especially so in the current world economic environment. This does not stop people predicting the timing of the global economic recovery.
A popular TV show in the early nineties was “Short Attention Span
Theater”. The title itself neatly parodied the growing culture of clips
and sound bites to convey both news and entertainment and, sadly, this
trend has continued. One result is that today many people obtain nearly
all their financial information from television and internet sources,
which deal with complex economic issues in a thirty second burst or a
couple of pithy headlines.
In many ways, some of our states are like General Motors before its
bankruptcy, suffering from falling revenue, borrowing money to cover
operating expenses and operating under crushing legacy health and
pension liabilities.
The year 2009 delivered a surprisingly strong recovery as equity markets rebounded from the historic financial crisis seen in the second half 2008. The remarkable levels of government investment into the global financial system seem to have rescued the world’s economy from a potential disaster that could have taken decades to recover from.
Both the US Congress and most of Europe took vacations at the end of the summer,
bringing a temporary respite in most of the efforts by the American government,
EU, OECD and many European governments; although American efforts to breach
Swiss banking secrecy continued despite the August heat. Nonetheless, when congressmen and senators stagger back this fall from
their mauling at the hands of constituents angry over soaring deficits
and the proposed health care ‘reforms’, the proposed Stop Tax Haven
Abuse Act, anti-offshore budget provisions...
If the Cayman financial industry were faced with extinction or only the potential of a diminished role, we would not bother providing you with the third edition of the Cayman Financial Review, which you are now reading. Cayman can continue to grow as a financial centre, provided both the new government and the financial industry do more to protect it from the financial imperialism of foreign governments, and provided the private sector – with the support of government – develops new products and continues to improve existing financial services.
We are in probably the most turbulent times the offshore financial industry has ever seen. Almost daily, new events come to light and new initiatives are unveiled. The pen is no sooner dry, than the commentary is out of date, so I apologise if that is the case here. I hope not, as I have tried to look over the horizon.