It's Time To Kill The Barbados Dollar

Grantley, Barrow and friends will forgive you for it.

Mar 20, 2025

Show notes

We’re back and this time from sunny Panama, with a familiar message: The Barbados Dollar needs to go! We sit down during the 3rd day of the CPSI Panama Progress Tour (the first of its kind) to discuss the merits of dollarization for the Barbados economy. It’s no coincidence we chose Panama, a country which itself has been dollarized since 1904! Financial integration with the global community, freedom to conduct business abroad, and much tighter fiscal responsibility on the part of local government are just a few of the benefits the isthmus enjoys. Barbados too could experience the advantages of switching to a globally recognized and accepted currency.

Full Transcript

This transcript was automatically generated by AI and lightly edited by our team. We don’t catch every error, so if you spot one, send us a message/email via shem@cpsi.org.

Shem: Rasheed.

Rasheed: Hi Shem.

Shem: Before me, I have two currencies: one internationally accepted and one stranded within the 166 square miles of Barbados. Which one would you like?

Rasheed: Is that a trick question?

Shem: Yes.

Rasheed: US Dollar..

Shem: You would've been insane if you had picked the Barbados dollar, but today we're here to discuss a topic that is pretty much integral to the CPSI, which is dollarization.

Yeah, we've already covered the dollarization of Trinidad and Tobago and the objections, and we're gonna do something very similar for Barbados. Namely, we're gonna tackle the objections that people both within the island and more, how do you say, educated individuals might have against abandoning the Barbados dollar and just fully switching over to the United States dollar, the greenback.

One of the first objections people have is it's gonna give the United States too much power.

What do you have to say to that?

Rasheed: That is, I think, maybe the most common objection we hear. Right. I think that's one of the most, yeah. Yeah. One of the most. Honestly, I am not sure why people believe this.

I ask them "Exactly what mechanisms do you think change it to give you more power if we are dollarized?" Of course, no one has the answer. I think it should probably be the answer itself. If you can't respond to the question, means it's probably not relevant. I will try to answer the point somehow to explain why people think that. So the basic idea is people believe that currency equals power. There's some truth to that. However, as you mentioned Barbados' currency is only valuable within the geographical, not even larger, but just the geographical confines of Barbados where as the USD has a global reach.

But here's the question. If you are in Barbados and you also send money to Canada or the US people don't know how it works. So if you're sending money from Barbados to New York, you are actually using US banking channels. Barbados banks don't have any reach outside of Barbados whereas US banks do.

So right now, given that you require what we call correspondent banks in the US, to handle any transaction you want to do, your company, or your government wants to do outside of Barbados, there's already substantial linkage. That's why when we talk about Dollarization, we don't mean going from 0% dollarization to 100% dollarization.

It's more like 95% dollarization to 100% dollarization. That 5% gap is just essentially the thing in your bank account you call dollars. Just don't call it the Barbados dollar, just call it US dollars. So it's divided by two, done. So having dollarization from 95% to 100 percent doesn't give the US any more power than it already has.

Maybe we say, "Oh, the US shouldn't have that kind of power now." But that's the world we live in. We don't, we don't have some fantasy world apart from where we are now. So right now the US can have substantial leverage over Barbados or any economy in the world by blocking a bank's access to its US domestic banks right now. You don't need to have a US dollar to do that because you have to access the US market right now through any kind of global transaction as a person or a company.

So no, dollarization doesn't give the US any more power than it already has.

Shem: One of the tie-in fears to the whole US power thing is that the US can weaponize the dollar. And to be honest, the conversation around the BRICS has finally reached the Caribbean with people going, "Maybe we could escape US influence and the US' ability to manipulate your economy by switching to a currency that everybody else is using like the BRICS."

Rasheed: But everyone else isn't using it. Because guess what? A BRICS currency doesn't exist. There's no BRICS currency. Never happened. It will never happen in any concrete way. And that's why the BRICS discussion is always so odd to me. There literally, literally, Shem is no BRICS currency.

What are we even talking about when people ask this question? It's a complete "Imagine if the world was-" Okay, but it isn't. As a Barbadian enterprise, your invoices for international trade are priced in US dollars. Your exports, and imports are priced in USD, and the correspondent banking you use to get money out of Barbados and any anywhere in the World is in US jurisdiction via US dollars. The reserve account of the Barbados Central Bank and the Barbados government is in Bank of America in US Dollars, in the US. This idea that you can somehow absolve yourself of US interaction is just a fairy tale. And the BRICS is just a new version of the fairytale.

It's not a valid argument at all.

Shem: So what about a regional currency? People don't seem to realize that even within the Caribbean trade with Trinidad and Tobago Jamaica, they're still using the US dollar. But sometimes they'll look at an example of a smaller block within the region, such as the EC, to justify us moving to something like a Caribbean dollar.

What's your opposition to that?

Rasheed: So when you are importing things into the Caribbean. Which you still have to do because unfortunately, small countries can't produce everything they need to survive. If you want salmon from Norway, you can't get it from Saint Lucia. If you want French wine you can't get it from Saint Vincent. You'll have to import, and the majority of imports are still going from outside the Caribbean and they'll be priced in US dollars.

So even if you have a regional currency like the Eastern Caribbean Currency Union, they still need to use USD for most of their goods. When they're buying goods from Panama, buying from the US, from China, no one in China wants Eastern Caribbean dollars. They want USD. So it is not actually a feasible option.

Many years ago, back in the 1990s, there was a plan to have a Caribbean currency, but that was just based on bad economics and it failed, you know? Many of the economists at that time actually have given up on that idea. Because they realised, "oh, you know what? "We actually have a common currency. It's called the US dollar."

Why create some new abstraction? That's all it would be. It's an abstraction of the USD. With some extra Central Bank layers and different regulations, it's not useful. So a common Caribbean currency or a common Caribbean sub-currency has no real practicality in the world.

Shem: And what about the cultural argument? We grew up with seeing Grantley Adams, Errol Barrow, all these icons of Barbadian history on the money. What happens to them? Some people think we lose a bit of our heritage if we give up the images of history, the images of culture that we have in the form of our money.

What do you think about that one?

Rasheed: When you go to Courts (a local furniture store) to buy a sofa and use your CIBC credit card, which national hero are you portraying?

Shem: Visa.

Rasheed: That's the answer. People make this argument, but they themselves primarily use debit cards or credit card bank transfers. So I'm like, okay. It's not a bad thing to say, but look into yourself, and tell me which currency or which form of money you use.

You use your credit card. So you already say "Grantley good luck, peace". Okay, let's just give some more freedom. Let's tell Grantley "Time well spent. I see your name on the airport as I leave to go to Miami. But we don't need to have it on a paper currency that we masquerade in the country. No, I think people make that point, but they themselves don't agree with what they're saying,

Shem: Rasheed, your answer was literally "Just search your heart. You know it means nothing. The same look that Barrow's giving you constantly when you spend that 50. That's what we're giving you right now."

Now finally let's look into how Barbados would undertake such a conversion.

How long would it take? How hard would it be? Would there be chaos? So if tomorrow we decided, "Right, let's pull the trigger on this. Let's go ahead and switch to the USD." What is the process?

Rasheed: Okay. People think it will take a long time or years. I think it'll take two days.

The government of Barbados in conjunction with the commercial bank and Central Bank will say, "Hey, on this particular day at midnight, we will divide all the bank accounts in the country by two." Why? Because Barbados has a fixed exchange rate for many years with the USD.

Legally speaking as per the Central Bank Act it's actually fixed to USD. Before it was actually fixed to gold. But they reformed the act under Auntie Mia, and it's 50 US cents to one Barbados dollar officially speaking.

So the Barbados Dollar only exists as a clone of the USD, even in our laws also. So what you do, you divide all the accounts in the country by two, and you are again 95% dollarized, and that's one computer operation, database operation. We are done, primarily speaking. The small extra percentage will be things like cash.

How would that happen? So Barbados has something called reserves.

Shem: It's the pile of US dollars that the government is sitting on, like the dragon in the Hobbit.

Rasheed: People think that. There is no pile because there are no dollars. It's just an account in a US Bank. So it's a number on a screen in Bank of America in the US that correlates to something called treasury bills from the US Treasury.

I think when the calculation was done, Barbados has about 300 million US dollars worth of bills, cash bills in the country at any moment in time. And our reserves in the US are about what, 2 billion or so?

A bit too high actually, but different conversation. So what you do, you just convert 300 or so million of that reserves into cash in the US and then have that cash shipped to Barbados. The same way you ship any kind of Barbados bills from Canada or England. And then you give it to the banks and as you go and deposit your USD cash into a bank account, the cash goes into the bank account as Barbados currency.

Again, it just is a number on the screen, so we're done. But if you go pull the cash out again, instead of giving you a Grantley or Errol, they'll give you a US 20 or whatever.

Shem: A Jackson, a Benjamin.

Rasheed: There you go. That could be a very slow process.

You could always say, "Barbados' based currency will be legal forever." But if you want to get the USD cash all the time, go to the bank and get out. For example, in El Salvador a country that is dollarized since 2001, 2002. They technically still have the domestic currency as legal tender. But the people just decide, "I actually prefer to have USD in my hand because it's more useful outside the country. It's more stable. I have more trust in it."

And it's also a thing Barbadians do. A Barbadian would say, "You know, we shouldn't have US dollars, we should keep our local currency." At the same time, they would try to get USD and put it under the mattress to be safe. That's true. My mother did the same thing.

Shem: Mine did too.

Rasheed: Exactly. So we say one thing and we do something else. Over time, as you deposit your money out and withdrawal from the banks, it would just be USD filtering through the system.

It could be a few months or so on, but that's kind of irrelevant because the bulk of dollarization happened months ago by just defining all the accounts by two in the country.

Shem: And finally the last smaller concern. What if we need more bills? Is it easy for a country to go, "Hey, US mint or treasury, we kind of need some more bills? Can we have some more?" Is that a thing that we can do? Have more sent over in case we need more circulation?

Rasheed: You just convert some of your reserves into cash and send it back. There's no restriction. See, America does not have counter controls.

So there's nothing actually keeping the system stuck. You can always have new bills if you want. Panama, which we're in currently has been dollarized for over a hundred years. Panama has a bigger economy than Barbados, magnitudes, bigger, more trade, more commerce, more buildings, more construction, more everything.

They never had to issue dollars.

Shem: Alright, now that we've gotten the objections outta the way, let's talk about a few of the benefits. Let's really bring it home and give a reason why we would want Barbados dollarized, not simply out of ease of use because the dollar is so ubiquitous. But why would a country like Barbados switch to the US dollar in the first place?

Rasheed: Freedom. That's the answer. Freedom as a Barbadian citizen, after working very hard, earning money in Barbados. The government tells you, "You are not allowed to do with your money while you please legally." So you work in a bank, you work in a restaurant, in Barbados and you want to send some money overseas to your family.

You want to buy some Amazon goods because you can't buy them here in Barbados. The government tells you, "Okay, if you do that, we're gonna tax you an extra 2%, plus extra VAT, plus the conversion rate not in your favor.

Also, make you beg us. To submit an online form to get some permission to actually access the foreign exchange that you worked a whole month for. I don't really see the point of that. Barbadians don't understand. It's actually not a normal thing. Here in Panama, if you want to buy something from Miami, you just buy it.

There is no government interaction at all. Barbadians have stock call syndrome. They think this is normal behavior. This is not normal behavior at all. The idea you have a limit, of 10,000 in Barbados, begging the bank for some more money.

Those things don't exist in Panama. That's not a concept. You can send it in, and out. So freedom for your own hard-earned money is actually the basic premise now.

Shem: So freedom. I'm all about freedom. But what benefit does it bring to the country as a whole?

Because we know that the Barbados government can use the Barbados dollar to do things it really shouldn't. Such as, make more of it outta thin air. Would switching to the US dollar stop that?

Rasheed: So this is the idea of fiscal credibility, fiscal responsibility. So right now, Barbados Central Bank again, and the government, same thing.

They would just create money based on nothing, which, has pros and cons. But in this case, they would say, "Okay, well we want to spend some more money." Or the biggest issue. "We want to pay more public wages, although we aren't actually earning more money." But they just create the money out of nothing and just give it to the people.

And then those people want to go and access USD, so you have a crunch and so on. Then you have inflation. If the Barbados government does not have access to creating Barbados is currency that means they have to be forced to be more prudent when it comes to government spending. Which on a whole could even mean less taxes for Barbadians.

Shem: Alright then, so what you're telling me is switch to the US dollar, freedom from my spending, responsible restrictions on government spending ... profit.

Rasheed: I always say Dollarization is not panacea for like perfect economics, but it's a very, very crucial aspect of doing good policy if you're a small open economy.

Shem: Alright then I think we've just about covered everything of course in the comment section of this video. Feel free to leave your questions and your comments and your scathing remarks on why we should be keeping Barrow on our all of our bills. You know, 'cause people do tend to hold him in some very high regard.

Rasheed: My comment is that if your only objection to Dollarization based on all the banks we discuss, is that I want to see Barrow once a year, I think we've won the argument.

Shem: Freedom. (throws pile of US one-dollar bills into the air)

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