Amazing what one can do if you are
(I) not prosecuted for an illegal activity that you operated for years;
(ii) had your illegal activity legalized and,
(iii) are allowed to keep all your ill gotten gains tax and, virtually, penalty free.

Co-sign.

Yes

As an actual economist I place no value judgement on it and do not fault those that do. But for those who do place such judgements, you may call it what you like but while you're at it please name the other Bahamian entrepreneurs driving similar economic activity?

I have never been impressed by exaggerated and tortured hyperbole in debates and by the way nor is it a substitution for facts or logical reasoning. Please read the nonsense you just wrote. When you have a legitimate response that begins to make any kind of sense I will engage you.

I understand. Even my 10 year old grandson knows that the messenger gets attacked whenever the weaker minded recipient of the message is somehow offended and incapable of formulating any kind of meaningful response. It must be lonely up there on that high perch of yours where the air is very rarified.

BOL!!! You sure know how to use the soft touch when laying someone out in lavender. You're truly cruel @Mudder.

There is economic activity and there is economic activity. In Economics 101, I learned about primary, secondary and tertiary economic activity. In the example given in the textbook, a woodcutter engages in primary activity. He cuts down the trees. He is the resource exploiter. So are mining companies, oil companies etc. The woodcutter sells the tree to the lumber mill. The lumber mill makes lumber and sells it to the carpenter. The carpenter makes furniture. The lumber mill and the carpenter are secondary industries. They utilise the outputs of primary industries. The furniture is sold by the wholesaler to the salesman who hires the adman to create ads and then sells it to the consumer that the ad attracts. The wholesaler, ad agencies and salespeople are the tertiary economic industries. They use the outputs of the secondary industry to derive economic benefit. The chain of economic activity is diverse, logical and backed by things of intrinsic value.

Is it possible that the webshops create economic activity that is toxic? I don't have the background to know the answer, but intuitively, I would think so. Most people spend money on nothing -- a hope that they will cash in. I have to do some research on the economic benefits or lack-of in gambling, but I would appreciate your views on how you see web shops as entrepreneurial and contributing in a good way to economic viability of this nation.

mudda does make a point of saying that the web shops do suck out capital from legitimate economic activity, and accepting the webshops as legitimate businesses endangers our banking infrastructure. The webshops respond to this by saying let us do the banking, and as mudda points out, that is the road to a failed state. The webshops will isolate us by not having correspondent banking privileges that one needs to operate in the global village.

The story above is not about webshops directly but about economic activity related to physical infrastructural real estate investment and property development, construction activity, the utilization and employment of local professional services expertise, the utilization of other construction related labor resources and expertise, the procurement of building materials locally, FDI from foreigners investing in and purchasing finished condo units, the activation of domestic savings and investments from local who have purchased finished condo units and property management...... etc. Mudda has conveniently conflated the two to support his argument. However, in conflating the two he has inadvertently repudiated his own argument that Webshops suck capital from legitimate economic activity. I don't want to get too technical but in a very simplified form, to put the flow of money in an economy into an overall macroeconomic context, economist often use a tool called the national savings and investment identity which essentially states that the total quantity of financial capital demanded in a closed economy must equal the total quantity of financial capital supplied. The demand of financial capital in a closed economy comes from either government borrowing or domestic physical capital investments from businesses, similar to the above. The supply of capital in a closed economy comes from domestic savings and in an open economy it will also flow from foreign financial capital inflows. So in the example above you have a business making a physical capital investment in property development etc. Where is that supply of financial capital coming from? Based on the national savings and investment identity it must come from domestic savings. In this case it is the domestic savings of the webshops. I have simplified this example significantly and there are indeed other policy implications but I will leave that for another day. I too voted no in the referendum, but that does not give me or anyone a license to their own facts nor do I make any value judgement one way or the other. The real discussion should be about our abysmal domestic savings rate and about the failure of our legal and market institutions and intermediaries to facilitate transparent and fair access to capital and opportunities.

OK, I buy that about the sources of the capital, but you premise that in a closed economy, it comes from savings. I rather suspect that you don't mean that literally, because savings in terms of bank deposits in (supposedly) interest-bearing accounts are at their lowest level in years.

Ergo, one would presume that it comes from using operating capital (ie grocery money, extra cash left over after the bills, etc) rather than actual bank deposits.

Could not one argue then that the source of the capital might be toxic in that it would be spent on other consumer items? However, in typing this, I realised that the argument might be moot, because we import everything anyway.

I understand the use of the capital and the contribution of the construction of buildings, jobs, etc, but from the side of economics that deals with human behaviour, would not those individuals be better off spending the money they gamble, on their own lives in the form of consumer products? Or does the collective accumulation of capital from small amounts does not matter until it is aggregated to be a tipping point for economic impact?

My issue with gambling is that it is abhorrent to me that the politicos let private individuals prey on the people, rather than having a national lottery and let the government assume their natural role of preying economically on their citizens. The money would be a lot more useful to the treasury and the country, if it didn't go into Craig Flowers pocket.

Excellent observations Banker. Just got in from the Icon awards and the wife would kill me if I stay on this computer. Will try to respond to your observations tomorrow.

1 of 2
From the perspective of the whole economy, the macro-economic context, savings refers to national savings which is merely national income less Household sector consumption/spending plus Government spending. When we earn income we can either consume/spend it or save it. From a macroeconomic perspective whether we consume or save is very important and, as you astutely noted above, there is a difference between domestic consumption/spending and imported consumption/spending. The distinction between current consumption/spending and savings is also important because a low national savings rate often precedes the requirement for inflows of foreign financial capital for business investments and government borrowings.

People often asks why does the Bahamas have to rely on FDI to finance business physical infrastructural investment and why is our government now having to borrow foreign financial capital. The answer is that because of our low national savings rate we just do not have the supply of capital domestically. This is not sustainable for us as a country and this does not even take into account the fact that even when we save our money in one of these Canadian banks they only want to lend it back to average Bahamians to buy imported consumer goods from abroad.

GDP or national income is Household consumption + Business physical investment + Government spending + Exports – Imports. Consumption includes spending on both goods and services. From a GDP perspective, Gaming is just another entertainment service similar to buying a ticket to go and see a play. So at the macro-economic level let’s examine and compare what happens when $1 is spent on gambling and a similar $1 is spent on buying grocery. When $1 is spent on gaming, between 75 – 80 cents is returned or re-distributed to other domestic gaming customers as customer winnings.

These customers can use those winnings to buy grocery, pay bills or do whatever they want to do with it. Another X cents is used to pay operating costs of the webshops, including taxes, salaries, charitable donations, local purchases and rent etc.

Finally, Y cents is profit for the webshop owners. It has already been established above that the webshop owners are re-investing these profits/savings in physical infrastructural investments that provides a secondary expansion of domestic GDP growth and also creates secondary local employment. So the webshops are creating direct employment and the investment of their profits/savings is creating secondary domestic GDP growth and local employment.

2 of 2

Comparatively, when we spend $1 say in Super Value about 50 cents or more is sent to the USA to import the good we are purchasing. What happens with those 50 cents? That 50 cents is sucked, no pun intended, from our economy and is gone forever to benefit the economy of the USA as exports for them. It provides zero secondary GDP growth or employment creation for the Bahamas because as noted in the above GDP equation, imports decrease GDP.

Now, to be clear I am not advocating that one should consume gaming services over groceries, the only point I am trying to illustrate is that the argument makes no economic sense. As you have rightly pointed out, there are other socio-economic policy issues associated with gaming including its potential social negative externalities, the role of government and the optimal nature and extent of regulation and taxation and that is what we should be discussing instead of some made-up anecdotal fallacies and misinformation.

The other glaring implication here is that we need to take a serious look at producing and manufacturing more goods and services here domestically in the Bahamas to minimize our need to import necessary and basic bread basket and other items.

Absolutely right about what the story should be about.
In my mind, there are only 2 ways we can proceed.
One is to nationalise the web shops. This basically would mean 1000s more civil servants and a poor service for the gambler. This would probably result in new underground web shops.
The second alternative is to force the web shops to place a very high % of their profits into a form of Venture Capital fund which would invest in Bahamian businesses. The money can still be theirs, but then they would have a direct interest in the success of the country.

We don't know where his money came from that's the biggest problem in all of this. Everyone is upset about a 400,000 contract but this man gets a 1 million no bid rental agreement for 10 years. I don't have your economics but something is wrong with that picture.

Is it merely a cake decoration as Sebas is planning an IPO? So the offering will be highly overpriced, based on a level of profits that definitely not sustainable.

I agree. It is a way to get his original money that he spent, back from the public. It is a smart business move, and more legit than how he got his money in first place.

...his development out west looks like a pimp designed it.

The SEVEN numbers houses generated $135 million last year .......... In comparison, how much does the top SEVEN achieving business in other commercial sectors produce in this depressed economy ......... foodstore chains, gas stations, wholesalers, electrical, plumbing, auto supplies, hardware, clothing chains, beauty supplies/salons, car sales,fish-houses, farms etc..................... Just asking

Then these "parasites of the working class" are going to take the "clean numbers money" (along with their other dirty money) and reinvest in real estate and condos for their rich clients out east & west ............. smdh ............ That was the PLP model under SLOP and Vomit

Why of course you can, when you have thousands of people going into your shops, giving you money, and coming out with a piece of paper in their hand! Its not like going to the Mall and walking around for a few minutes and walking out with bag in your hand with some kind of merchandise in it!

Dr. Minnis,

I am proposing an opportunity to make your first bold action in the leadership of this nation.
The subject of this proposal is the issue of gaming in The Bahamas.
The proposal is this:
Nationalize ALL of the web shops, effective September, 2017.
The reasons for doing so are as follows:
Many of us see the results of the recent referendum, whereby the people of The Bahamas spoke in no uncertain terms, as the highest priority regarding the most basic tenants of democracy. Nothing has changed since this referendum. The people spoke.
Why are you willing to ignore the voice of the people? This question must be answered by you.
The present dangers of the web shops to the country of The Bahamas are as follows:
National Security – subversion of democracy. It is speculated that the owners of the web shops have influenced our political process by making campaign contributions in amounts that very few Bahamians can match. By doing so, they are putting our democracy at stake. These campaign contributions make a mockery of the idea of equality in representation. They make all politicians who accept this money corrupt. That you have not recognized and addressed the obvious great harm that the web shops are causing to our country leave either your intelligence, your honesty, or your integrity suspect.
As a medical doctor, you must be well aware of the undeniable links between poverty and health. There can be no legitimate discussion contrary to all the reports of these connections. Web shops are directly contributng to the growing impoverishment of this nation. Please address this issue honestly and directly.
Crime – It is undeniable that the rise of the web shops has directly contributed to the escalating crime in our country. Many business owners have publically spoken about their having to fire managers and employees due to stealing as a result of their gambling habits. One can only imagine the other unspoken elements of crime that come directly from the web shops.
It is an established fact that domestic violence is often a direct result of poverty and economic hardship.
How can this fact escape you as a medical professional?
On many of the Family Islands, what we are witnessing can be called nothing short of devastating, directly due to the presence of web shops. Perhaps it is more difficult to make the connection in Nassau, but any honest Family Islander who is not in the grips of a gambling addiction must acknowledge the devasting economic and social consequences of the web shops. Can you argue this point?

While I understand the economic contributions in taxes paid by the web shops, let me offer a very clear and succinct solution. Nationalize the web shops. They will now be owned by the PEOPLE, which is the government of The Bahamas. Instead of just a small share of takings in the form of taxes going into the general fund, many multiples of this current amount will now be available to help run the government and reduce our national debt. The web shop owners have already been made richer than most Bahamians could ever dream of. I recently read where the web shop owners are increasing their property acquisitons in The Bahamas by tens of millions of dollars annually. Dr. Minnis, please specifically state your position on this? How do you feel about the web shop owners owning more and more valuable property in The Bahamas?
I am not against hard work being rewarded, however, I have a strong moral objection to the treasures of this great country being shifted to those who really contribute so little to the welfare of this country.
Dr. Minnis, please give us your views on this matter.
Increase the level of winnings, if you must, until we can get this national vice under some type of control and have the opportunity to improve the lives of our poorest so that they do not find it necessary to take their hard earned little money and gamble it away. Use a portion of the funds to educate and help people break free of this deadly vice. Can you, Dr. Minnis, not see this gambling epidemic here as a deadly vice? What would you call it?
I believe the epidemic of gambling here in The Bahamas is a syptom of the inability to make a living wage from an average job. Let me repeat this, Dr. Minnis. I believe that the epidemic of gambling here in The Bahamas is the direct result of not being able to make a living wage from an average job. I am trying to be charitable and Christian in my thinking. What do you say about this epidemic, Dr. Minnis? If you are unwilling to call this an epidemic, what would you call it? Do you not see a direct causal relationship between our anemic economy and the escalation of gambling?
I suspect that your political campaign was influenced by the web shop owners money. If not, what objections do you have with this proposal?
Is there a point made here that you disagree with?
Could these massive amounts of money being spent in the web shops not be used for the betterment of our nation?

Do you honestly feel that the people presently being enriched by the web shops are entitled to continue enriching themselves at the expense of The Bahamas?
Do you believe that there is a moral issue with nationalizing the web shops, or is there a reason you cannot speak about as to your loyalty to the web shop owners?
Dr. Minnis, I believe it is time for the Bahamian people to throw the mace out the window. I believe this issue is strong enough on its own to warrant dramatic action. I believe that The Bahamas is in a fiscal and social crisis and that this move alone will help change the direction of our country, if only a little to begin with. Do you not agree that we are in a fiscal and social crisis?
If you agree, do you not agree that immediate, decisive and radical action must be taken?
I would suggest that all Bahamians, as well as, the future of this nation would benefit by nationalizing the web shops with no adverse effects to anyone.
The government would gain a huge share of the income and profits.
We could maintain the choice for the average Bahamian to gamble if they wish.
We could make it a national priority to help treat the existing, prevalent gamblng addiction and educate our people as to the real costs of gambling.
With this said Dr. Minnis, I would like to propose that the people of The Bahamas come together on this issue and give you no choice in the matter. I would propose massive demonstrations and the shutting down of the country if you choose to ignore the will of the people. I would further propose that you are physically carried from your office and deposited in the street if you contnue to side with the unfair enrichment of a few, instead of the betterment of the whole nation. If you can find fault with this proposal, let the people know. We elected a public servant, not a king. Please act on our behalf immediately. Or, suffer the consequences.

If anyone here agrees with my proposal, please print it and pass it along.
I cannot do this alone.
If this is the people's time, then we the people need to act.
We cannot sit back and wait.

Thanks.

Perhaps John Doe should read J is for Junk Economics, by Michael Hudson.
Michael Hudson's bio is on Wikipedia and many of his videos are on Youtube.
Judge for yourself before listening to John Doe

Despite the criticism I would bet you $1million, Seba's IPO will be sucked up like leaves in a tornado. Especially if if he is granted license for electronic "transfer" payments. And it may be favorably considered as his point that his web shops are present in many Family Island communities where commercial banking is non-existant. The people have no way of receiving money or cashing their checks, even old age pensions. Sebas is trying to solidify his presence in the market by going public. That way the government will not be negotiating will Sebas and Island luck, but with several thousand common shareholders. And they mosy all would be voters in general elections.

Probably an IPO because the company clearly needs cash, and BOB wont' be giving them anymore considering the change of government and other troubling matters the bank is faced with.

This article is missing comments on some significant red flags in their financial statements that would cause any investor to worry. The journalist should have commented on such if they actually took the time to read through it. I browsed just now and saw several worrying items (financials are available on their website):

[1] They have literally no cash when compared to the so called growth and the fact that a loan was taken from BOB of some 5 million in the last year. Cash is KING. Profit is vanity.

[2] Why such significant/material errors being corrected in the financial statements?!?!? I hope major changes were made to those in charge of reporting to ensure it doesn't happen again. Clearly they received an unqualified report after being forced to make those significant errors and restatement to previous years financials.

[3] The company has all of their liquid cash (which is very low) in ONE bank...Bank of the Bahamas (a troubled Bank). They previously had an account at Scotiabank but that was closed over the past year of the financials....again...worrying flag.

[4] The strength of the company's more liquid assets (receivables) is actually from a 'related party company' also majorly owned by Sebas...and ALSO with very little cash in the bank.

ALL of this I caught from a quick 5 minute browse of their financials. Listen...if an IPO is in the works, I would hope that the media is more objective in analyzing what's being put out there.

Obviously the company, like BPL and others, has a cash control problem. Money disappearing in the operation. If fact that was the reason suspected behind the resignation of a key person in the company. Major companies around the world are in great efforts to make their companies more cash-less as a way of gaining more control. Banks, most of them, have converted their clients cards to either debit or credit cards, again to reduce the amount of cash in their system and even to all customers to make cashless transactions with other institutions. A major setback here if if a cardholder travels abroad or makes transactions online the Bahamian dollar is no longer on par. And when you add transactions fees and VAT along with interest on unpaid balances, credit cards, especially can become very expensive. Sebastian is touting that the interest rates on his cards will be 7 percent compared to the 12-20% charged on traditional cards.

I agree with Porcupine that the government should nationalize the web shop gambling business so that the majority of the financial benefits accrue to the country and not to a few people who flaunted the criminal and gaming laws of this country to their personal benefit. If the government is going to continue to tax them, then the tax collected should be in the 75-80% margin and not whatever it is now. The operators should be allowed to keep a profit of not more than 5% of their income after payment of expenses including salaries, rent, payouts, etc. The current system is ridiculous and only benefits the owners and no one else.