January 30, 2013 at 5:54 p.m.
The coming economic hurricane
Government’s $200 million to the Bank of Butterfield is just the first breaker
The only bad winds that we will feel will be the winds from what Minister Paula Cox called a 'perfect economic storm'. Like the winds of a hurricane, we know that those high winds and big breakers are coming.
The $200 million to the Bank of Butterfield is just a first big breaker.
One of the strongest winds still coming will be from what Americans are calling the 'AIG Effect'. Recall that just as AIG was filling its first beggar's bucket with $85 billion dollars of bailout money, a bunch of AIG executives were reported to be having a 'convention' or something at an expensive California resort.
They were getting spa treatments, guzzling fine wines, and gobbling fine foods. AIG felt that these executives deserved this reward.
U.S. Congressmen howled. They were horrified that AIG'ers should be cavorting like that while they were begging for and receiving taxpayer dollars.
The repentant AIG'ers bailed out of their next convention and retreated to the opulence of their corner offices.
Congressmen, Senators, and even the newest denizen of the White House then began berating all business executives for receiving vast sums of money in the form of pay and bonuses. This started a bailout backlash amongst many businesses.
Corporations began terminating leases on their corporate jets. CEO's began travelling by commercial airlines - some even went by road.
No more business trips to Las Vegas. No more hacking at the greens on very expensive golf courses. No more $250 bottles of wine at 'business lunches'.
Corporate America cut right back on style. And that's where the winds of this style change start blowing in our direction.
Bermuda's tourism has far fewer 'moped riding' visitors. There are far more business visitors. More business conventions, seminars, and workshops. Less people looking for 'typical island' entertainment.
More people killing time between business assignments. So this 'AIG effect' will hit us in the same way that Las Vegas is being hit. Fewer business trips to Vegas. Fewer business trips to Bermuda.
Bermuda will have a very quiet summer tourist season. Damn few cruise ships - but their cruise passengers, if they choose to come off their floating resorts, spend only 16 cents for every $1 that a hotel-staying visitor spends. So cruisers won't boost us.
The economic slowdown combining with the general corporate cutback means that there'll be far fewer air arrivals occupying hotel beds.
Bermuda's historic tourist market was the well-to-do Easterner who could afford to 'pop' down to Bermuda for a short but refreshing 'sizzle'.
Their incomes came from the world of investment banking and the mélange of services that supported Wall Street.
That world has been damaged. Bernie Madoff made off with $50 billion. Allen Stanford snuck away with $8 billion.
A now wide-awake SEC has discovered even more Ponzi schemes that have slammed into the world of the well-heeled. So the USA's economic woes affect even wealthy places like Darien, Connecticut and Park Avenue.
Those slams join up with the fact that fewer of those people had been coming to Bermuda anyhow.
As well, their on-island spending has changed. Visitors who now come to chill in their newly built fractional units will not - and do not - spend in the same way as those free-spending tourists of the 1980s.
When our shortened tourist season ends, there will be far fewer tourist dollars transferred into our pockets.
As well, we will still be getting the steady barrage of hits in our on-island International Business base. Job losses - where they occur - will likely increase from mid-season on.
By November, when Christmas is almost upon us, we will be feeling the real impact of Minister Cox's 'perfect economic storm'.
Our relative isolation combining with our national business model and its unique rhythms helps foster this delayed impact. So Bermudians will not feel the strongest winds of this economic storm until about October/November of this year.
My storm forecast? In Spring, we'll see the 'breakers' building. In Summer, we'll feel the wind at gale force.
In Autumn, the winds will be at storm force. Winter - hurricane!
So enjoy this spring. Splash in this summer's warm waters. Pray that those windy hurricanes stay away. We've a lot of other stuff to deal with, and we need to batten down for that approaching winter.
On the other hand, a Fabian type hit followed by a necessary and insurance funded re-build ..... h'mmm?[[In-content Ad]]
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