October 15, 2012Dear Sir,The government keeps trying to comfort Bermudians that our debt as a percentage of economic output (GDP) is much lower than the US and UK. Yes, it is. But it is dangerously arrogant and foolish to take comfort from that. The US and UK are huge and diversified economies that are far less vulnerable to shocks than Bermuda. Their economies provide goods and services that are not so easily re-domiciled elsewhere. A large percentage of Bermuda’s GDP (business as well as people) could leave the Island fairly swiftly, as we have seen since 2008. Our debt to GDP levels would then rise significantly and our credit ratings would slide.The US and UK governments have diversified sources of funding, the confidence of investors and the ability to print their own hard currency. Bermuda is not a place investors have to invest in. Global investors will only lend to Bermuda if we pay a high enough interest rate and offer security. Ireland, Greece and even Spain (which had a top AAA credit rating) offer a frightening lesson in how funding can dry up virtually overnight or become ruinously expensive for much stronger and diversified economies. Bermuda should never fool itself that it can take its debt levels anywhere near as high as the major developed economies.A better comparison would be to similar offshore jurisdictions.Jersey has a similar population and similar offshore business and tourism economy. It also suffered economically following the 2008 financial crisis as offshore finance and tourism turned down. However, it managed its economy well in the good years and used a rainy-day fund (created back in 2006) to maintain public services in the tough times. As well as dipping into its rainy day fund, it also managed through the crisis by careful husbandry of revenues and expenditure. Jersey still has a strategic reserve fund which by itself could support all government spending for a whole year! As for future liabilities, it has fully invested pension funds for all public sector workers, whereas Bermuda’s is woefully underfunded. And the real punch line: Jersey has significant assets where Bermuda has debts. That means that the island of Jersey is in a much better shape than Bermuda to handle the demands of an ageing population and an uncertain global economic environment.Confidence breeds confidence. If citizens have confidence in their government’s ability to manage the economy, they have confidence in their future and spend more willingly knowing that they are not going to be paying for government fecklessness and mismanagement later in their lives. Walking down the main — pedestrianised — shopping street in Jersey this summer that confidence was clear.A BORDERWarwick