Today’s Editorial for October 8: Time to trim the fat

Watch any channel of television news or flip through a newspaper from anyplace in the world and you’re bound to read about the growing financial crisis.

People around the world no longer just worry about a global economic recession, they fear a global depression.

In fact, a US Today/Gallup poll taken last week showed one-third of the respondents already thought America was in a depression and 73 per cent of them thought the economy would get worse before it got better.

This week in a CNN/Opinion Research Corp. poll in the US, 59 per cent of respondents thought a depression was likely or very likely.

Consumer confidence in the US is low and American retailers are bracing for what many think will be the worst holiday shopping season in recent memory.

None of this bodes well for the Cayman Islands.

Although Cayman’s political leadership tried to assuage fears and discount the impact of the economic crisis a few weeks ago, much has happened since then in the financial world. To believe Cayman will not be significantly affected by what is happening all around the globe and particular in the United States, is na├»ve at best.

American investments are not only a critical part of our financial services industry, but American tourists make up more then 80 per cent of our stay-over tourists and an even larger percentage of our cruise shop passengers. Americans also make the bulk of investment real estate purchases.

The fallout from the US economic woes will undoubtedly reduce the Cayman government’s revenues.

It is true that in a financial crisis, some opportunities will arise. For instance, in a world where people are scrambling to find investment safe havens, tangible assets like real estate can become popular. This is especially true in a destination place like Cayman with a historic record of appreciating property values.

However, if the US were to actually enter into an economic downturn similar to the Great Depression of the 1920s and 1930s, the overall negative impact would certainly far outweigh the positive ones.

Our government has a huge budget that was already trimmed to the point where it is probably unworkable. If revenues aren’t what were projected, the government will have to cut spending if it’s to balance its budget.

It’s time, right now, for the government to reassess the necessity of its spending plans in light of all the global economic uncertainty. It’s time for the government to start saving for a rainy day because the black clouds of a financial storm are now on everyone’s radar screen.