Vexed Bermoothes

Blustery Opinions From Bermuda

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How Broke Are We? Pt 5

June 21st, 2012 · No Comments · Bermuda Politics, Economy

So, Government has been forced to admit that they are out scrounging for loans again.

Bermuda’s public debt already stands at $1,230,000,000, largely racked up over the past 5 years.  Think of it:  we are a village of only 60,000 people paying more than $115 million in interest fees alone each year!  That’s batshit crazy insane!

Larry Burchall provides a clear dissection of the politicians’ fibs about the debt.  Most of it was not spent on capital projects.  It was wasted.

So how deep will they go this time?  The deficit this year – depending on who you ask – will be around $200,000,000.  So that’s a starting point for the new borrowings … but it’s an election year so they will probably go for gusto.

This is a noose around each and every one of our necks.  Hoping that the economy will get a magic bullet is not realistic.  It won’t.  Our Government has driven out thousands of our big spenders and taxpayers. We have a 15-20% gap every year between what Government spends and what it earns.  You can’t borrow forever to bridge that gap!  Someone has to pay … and that someone is us.  It is you, my fellow Bermudian.

Literally, we have over 1 billion reasons and counting not to trust the PLP, and not to vote them back in.  It would be a vote for terminal Bermuda’s decline.

Here’s the list of outstanding debt (care of the Royal Gazette):

Snapshot of Government borrowing

  • $75 million of Senior Notes at 5.4% due 2014
  • $45 million of Senior Notes at 6.5% due 2014
  • $390 million of Senior Notes at 7% due 2016
  • $60 million of Senior Notes at 5.3% due 2016
  • $100 million of Senior Notes at 7.4% due 2019
  • $80 million of Senior Notes at 5.9% due 2019
  • $500 million bonds at 5.6% due 2020
  • $140 million Senior Notes at 5.7% due in 2022
  • $200 million from Butterfield Bank at 4.95% due 2014

Whenever anyone complains, the PLP loyal sycophants bray “well what’s your plan to get out of it?”  Sorry Charlie (or Laverne or Betty or Christopher as the case may be), that’s not how it works.  You are the ones digging the hole and it’s your duty to explain how you intend to fill it back in!

Let’s start here:  how does the PLP — which in recent years has operated in deficit by hundreds of millions every year — intend to hit these payback dates?  We are already struggling to pay the interest on the debt – and I don’t see the Sinking Fund being prepared to pay back the principal.

Year Amount Due
2014 $320,000,000
2016 $90,000,000
2019 $180,000,000
2020 $500,000,000
2022 $140,000,000

Thanks to the PLP’s mismanagement, we are now stuck with the unenviable position that both the ailment and the cure will be very painful.

UPDATE 1:  On Facebook’s PLP “Bermuda Elections” page, Mr Famouss gives “the party line” that the humungous debt is like a house mortgage where you borrow a $1 in the hope that your house will be worth $1.20 down the road.  Sorry, bad analogy:

1.  Thanks to the PLP’s bad management, your house is now actually worth 60 cents.

2.  Most of the debt is not being spent on capital projects – i.e., there is no house anyway (read Larry Burchall’s excellent article here).  The debt is mostly going on current account spending to support along the massive growth in the civil service as well as unrestrained pet projects over the past few years.  In short, the debt is not a mortgage it’s paying off the credit card for that wild weekend in Vegas.

UPDATE 2:  Ooops.  The discussion wasn’t going their way, so they nuked it.  Committed to transparency and dialogue.  Except when it’s embarrassing.

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