The Gazette has a story today saying the Bermuda Omnibus Survey’s consumer confidence rating is on the rise – another sign the Bermuda economic recovery is taking hold.
The importance of confidence cannot be overstated. When people have confidence, they spend, invest and borrow more and given the right circumstances, this becomes a virtuous circle in which spending, investing and borrowing leads to more spending, investing and borrowing. The job then becomes ensuring that the economy doesn’t become too frothy or overheated, and ensuring that bubbles are not created. That’s what the PLP failed to do in the last decade.
The article also contains some useful insights from HSBC Bermuda chief executive officer Richard Moseley. Moseley again makes the case that banks are not lending because the demand is not here, and not as a result of tight credit policies.
He does admit that “lending standards have been brought back into the real world and are no longer at the exuberant levels where they were five or six years ago”. That would have been HSBC Bermuda offering 100 percent mortgages.
What Moseley does not acknowledge is that the banks are restricting lending by maintaining extremely high interest rates, thus restricting supply. There’s demand for mortgages and loans, just not at 6.5 percent when the rest of the world is lending at 3 or 4 percent. Lower the rate and people will borrow. Honestly.