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Minnis: Financial Sector Is 'Dying'

Prime Minister Dr Hubert Minnis.

Prime Minister Dr Hubert Minnis.

By RASHAD ROLLE

Tribune Staff Reporter

rrolle@tribunemedia.net

THE financial services sector is “dying,” Prime Minister Dr Hubert Minnis said Saturday while stressing the importance of creating new economic pillars.

He was speaking about the Commercial Enterprises Bill, which passed the House of Assembly Wednesday evening with full support of the Free National Movement but none from the Progressive Liberal Party. The bill would liberalise the granting of work permits to enterprises that wish to establish themselves in the Bahamas in niche sectors and require work permits for management and key personnel. The government has said the legislation will attract new industries and create jobs and training opportunities for Bahamians.

“If we want to grow this economy then we must think outside the box and we must create new pillars,” Dr Minnis said. “We have tourism, yes; we have a financial sector, yes, but the financial sector is dying. The middle class is dying, so it’s our job to expand the middle class and move [people] from the poverty level into the middle class and the middle class into the wealthy class; that’s our job, that’s our goal, and we will do that.”

On the Commercial Enterprises Bill, which critics claim would allow foreigners to get preferential treatment over Bahamians, Dr Minnis said: “I think it will move forward but we cannot continue to live in a bubble; the world is now digital, the Bahamas cannot remain analog.”

Financial Services Minister Brent Symonette yesterday echoed Dr Minnis’ take on the health of the financial services industry, a sector that has traditionally comprised a significant percentage of the country’s GDP.

“Over the last 15 to 20 years there has been a decrease in financial services,” Mr Symonette said.

“Domestic banks such as Royal Bank of Canada (RBC), Bank of the Bahamas (BOB) and CIBC and others have been consolidating operations in Barbados and Trinidad and you’ve seen layoffs by those banks and also the closing of branches. This is because of decisions in Canada and head offices as businesses are moving towards computerisation and modernisation.

“The offshore banking sector has seen change with regard to the OECD and tax reporting and you’ve seen several banks are no longer here; a couple are open. There has been a change in the financial services industry and change in employment in that area. That’s the drift behind what the prime minister said and we debate the Commercial Enterprises Bill and other matters coming to Parliament so we can provide other means of employment and other avenues to cause the economy to come back up.”

Last month, the Bank of the Bahamas announced 30 job losses following recent branch closures. There have also been several instances of Royal Bank of the Canada (RBC) closing branches.

Former Prime Minister Hubert Ingraham last year said the condition of the financial sector will worsen. And although she didn’t rebut him directly, former Financial Services Minister Hope Strachan appeared to target his commentary during a House of Assembly session soon after his remarks, accusing people of having “foot in mouth disease” when it comes to the sector.

“Sufferers of this disease are prone to making fatalistic statements about the financial services industry without regard for the potential harm caused by such statements,” she said at the time.

“It could be anyone, but the opposition past and present is prone to suffer from this disease from time to time, and for obvious political reasons. Contrary to what some might believe, though challenged, the financial services industry in the Bahamas is not dead. There are literally thousands of Bahamian people employed in the sector, directly and indirectly. The suggestion that we should no longer place reliance on the survivability of the industry should be rejected outright. These statements, when reduced to writing, articulated on the airwaves and blasted on social media, are damaging to the sector.”

Mr Ingraham had told The Nassau Guardian that because of de-risking, the number of banks capable of authorising wire transfers and accepting deposits would be “reduced, and reduced, and reduced” until only several big banks remain with the ability to engage in domestic banking, “but nothing overseas.”

“We have lost international private banking,” he said last year. “What hasn’t left yet will leave. So the full downsizing of that sector has not yet taken place. That’s a reality. We wish it was otherwise, but it ain’t gonna be otherwise. The developed world is determined to squeeze small places like the Bahamas where they claim their tax dollars are hidden, and we need to find something else.”

On whether the country has seen the worst of financial services decline, Mr Ingraham said previously: “No we have not. It’s just a matter of time.”

The financial services sector is the country’s second largest industry.

Comments

observer2 2 weeks, 2 days ago

The FNM should hold their heads in shame for passing the Commercial Enterprises Bill.

This bill will greatly benefit foreigners with only a "trickle down" impact for Bahamians. It may benefits the blue collar trades but professionals will be negatively impacted.

It will allow in much more well capitalized foreign competition for Bahamian small businesses. Already I am seeing foreigners buying up middle class homes and putting them on rent with Air B&B, I thought the guest house industry was reserved for Bahamians. They are even renting cars connected with their real estate investments. The foreign yachts are for all intensive purposes fishing vessels competing with local fishermen. There are few properties left for Bahamians to rent and the banks are not lending for purchases. Foreigners are also in most blue collar trades where ever you look in the Bahamas.

Due to our poor education system Bahamian are not even educated enough to be competitive. The government is clueless and being lead by foreign interests. What ever happened to the economic impowerment zones for Grant's Town that was promised by the FNM. What ever happened to free University of the Bahamas education? What ever happened to universal healthcare?

Through antiquated exchange control laws Bahamian businesses and investors are essentially shut out of the international capital markets (be it for loans or investing in the greatest global bull market which is currently ongoing).

Don't be fooled. There is lots of money and capital in the Bahamas, if only because of our proximity to the US. Its just that little of it is going to the middle class. The current beneficiaries are the Bahamian Government (through taxes and work permits), the Chinese through capital investments (Baha Mar, Container Port, Freeport Hotels), the Webshops (praying on false promises to those most at risk), the Bay Street boys, independent Churches (no accountability), liquor houses and the oil import monopolist.

No use changing back to the PLP. They are even worse than the FNM as they sold out completely to the Chinese and the webshops (against the will of the people). The government is basically self serving and doesn't care for its people.

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OldFort2012 2 weeks, 2 days ago

Yes, you ARE SOOOO RIGHT!! The foreigners are a huuuuge problem. They are all queuing up to swamp a market of 300,000 people with an average wage of $21,000, as opposed to staying in US or Canada, with a combined market of 400 million and twice the income. How is it that Minnis can't see that? It is obvious! Must be the bad Bahamian education system. He never learnt the maths.

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Well_mudda_take_sic 2 weeks, 2 days ago

Foreigners, perhaps like yourself, have a keen interest in all of our natural resources except our people.

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Greentea 2 weeks, 2 days ago

Ouch! Mudda you went for the jugular.

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OldFort2012 2 weeks, 1 day ago

Mudda, you have to be a politician (or a lawyer, which is the same). When you have no counter argument, you shift the rhetoric to xenophobia and popular myth, then get a paid alter ego to support you to show how "clever" you are. Contemptible. For your information: the Bahamas has no natural resources. A few fish and a bit of salt is not something anyone is interested in nowadays. If it were different, you could have forgotten about Independence, the Brits would have killed us all and kept the loot. What they did is run away as fast as they could, which indicates that there is nothing of any interest to anyone here.

No one is interested in the people of the Bahamas, least of all Bahamians. It is not foreigners killing us in record numbers, it is not foreigners dealing drugs, it is not foreigners running numbers houses, it is not foreigners stealing and corrupting at every opportunity. No, it is all Bahamians. Until you and the rest of the "it is all a conspiracy to do us down" mob realise that the problem is with US and not some mythical THEM, there is no hope here. I realise you are beyond help...maybe your great grandchildren?

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BahamaPundit 2 weeks, 2 days ago

What a load of crock observer2. The Bill is no big deal and nothing very new has changed. The only thing of note is that the 500K threshold has been reduced to 250K for international investment. All of these sectors were open to international investment previously. What is all the fuss about? I can only imagine it is due to Bahamians not having read or understood the previous laws in place.

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observer2 2 weeks, 2 days ago

BahamaPundit, my points are valid and not a pile of crock. Please read the comments from the Bahamas Chamber of Commerce published in the Nassau Guardian this morning. Small mutual fund administrators, specialty healthcare, import/export clearing companies, equipment rental can now all be "automatically" work permitted after 14 days of not hearing from the Immigration Department.

Bahamapundit, you also don't seem to care that Bahamians are hamstrung from unencumbered access to global capital markets in order to even compete with the foreigners who are not impacted by exchange controls. But then again, like a said....the bill is made by a self serving government. The PLP is no different.

https://thenassauguardian.com/2017/11/27/chamber-expresses-concern-parts-commercial-enterprises-bill/

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TheMadHatter 2 weeks, 2 days ago

BahamaPundit...you are correct about people not reading the Bill.

It is a good Act of law and everything Minnis said about it and our shrinking banking sector is correct. This law will help Bahamians more than a lot of their Pindling-programmed brains can comprehend.

However, there are other differences besides the dollar investment threshold. They can setup their physical enterprise before the clock starts ticking on their work permits. Also if approved by the investments board then immigration must come up with a reason to deny the work permit within 14 days or else it is effectively granted. This prevents immigration from "losing files" which is about the only thing they know how to do on Hawkins Hill besides give "papers" to Haitians (you know, the set with no photo what they is take to the copy machine and then you got 250 of them named Alphonse Pierre).

Our country is very very sick but Dr. Minnis ga stick one big needle in it boongie. It ga sting bad - but after a while the country will be healthy again. I hate a tetanus shot, but man it is much better than lockjaw.

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observer2 2 weeks, 2 days ago

MadHatter, to the contrary. Once the bill passes even more files will be lost. In that way even more foreigners will be allowed in the Country without a formal work permit and compete against Bahamians in industries that were previously reserved for them. What makes you think that the PLP has a monopoly on lost Immigration Files or the FNM is as clean as the driven snow?

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Clamshell 2 weeks, 2 days ago

You deposit a check from an outside bank in any bank in the Bahamas ... and you see on your online banking site that your check has cleared the next day ... but your Bahamian bank “freezes” the deposit for 30 days before you actually have access to the funds ... for no good reason ... and then people wonder why the Bahamian financial sector is dying. They are operating in the 19th century while the rest of the world is in the 21st century.

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OMG 2 weeks, 2 days ago

Of course there is a good reason. Think that if a bank receives say $ 500,000 in foreign cheques every month and withholds payment for this ridiculous 30 days then its free money for them. Absolutely no reason otherwise why a cheque takes 30 days to clear with modern computerized systems.

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Clamshell 2 weeks, 2 days ago

Yup ... exactly, they earn interest on all that money for 30 days. The term for it is “float”, and banks make tons of money on it while they screw you and me. Honest banks in First World countries no longer do this, since near-immediate, electronic clearance is in effect. Bahamian banks cheat, and wonder why they are losing business. Ridiculous.

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BahamaPundit 2 weeks, 2 days ago

Agreed. Some slight changes with fast tracking the application process, but these changes should have been made years ago to the existing application process. This Bill is a no brainer and anyone against it needs to use their brain more.

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sheeprunner12 2 weeks, 2 days ago

Minnis needs to repeal and replace the Gambling Bill (for webshops) and set up a National Lottery and get rid of the lawless webshop cartel .......... then offshore banking will return.

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realfreethinker 2 weeks, 2 days ago

The "Bahamianization" policy and our strict immigration laws has completly destroyed our attractiveness in investments. I hope this bill is the start of giving our country a chance to survive. We ought to be giving out at least five thousand work permits to investors and their families to attract real money to the country.

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TalRussell 2 weeks, 2 days ago

Comrades, my reading of the Commercial Enterprises Bill (Commercial Immigration Bill), which passed the House of Assembly on Wednesday - reads that the Natives will pay Business License Taxes but the Expats will be exempt? The natives pay taxes on their Fish Fry and the Expat sells they Fish, all tax free?

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observer2 2 weeks, 2 days ago

Tal you are spot on. Foreigner's will now be able to come into the Country without expressly issued work permits just because the Ministry of Immigration will never be able to issue anything in 14 days. No need for business licenses either.

Insanity is doing the same thing over and over and expecting a different result. When was the last time a foreign investment made the Bahamas better? Freeport? Baha Mar? Our Lucaya? Container Port?

Letting in thousands of foreigners will only increase the deficit because we don't have income tax. The foreigner will be using more BEC, more Water and Sewerage, more government services, more PMH for their servants (no need for them to get health insurance - PMH is free to all), more roads, more Haitians, more Bahamasair....all of which will blow the deficit wide open.

In case anyone is keeping track the deficit is increasing at a rate of $1 billion a year.

If I were a foreigner I would come to the Bahamas as well. With no income tax and subsidized electricity, water, no licenses, no regulation, open up whatever business I like, take all the fish from the ocean and have utter contempt for Bahamians.

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TalRussell 2 weeks, 2 days ago

Comrade Observer2, an open invite Expat's invest a pittance $250,000 and then open a "cash business' to laundry their dirty money. I'm still sticking with my original statement that Expat's will not be required to pay the public purse business license tax...but natives must pay business licence tax.

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BahamaPundit 2 weeks, 2 days ago

No. Read it again. What you should read is The Bahamas is broke with next to zero economic activity and seeks to increase said activity or the entire sorry ship will go bankrupt.

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birdiestrachan 2 weeks, 2 days ago

it is doc's own papa Hubert A Ingraham and the FNM Government who passed the laws to kill the financial service sector.

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BahamaPundit 2 weeks, 2 days ago

Ok. I will give you that one. The end of privacy was the death of financial services in this country.

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Dawes 2 weeks, 2 days ago

The end of privacy did not have to be the death of financial services, but we allowed it to be. We needed to step up our game. Up till then our marketing was we are tax free and won't talk about your money thats here. That has changed and we needed to become financial advisers, giving sound advice for people. As it is we still talk about being tax free when that boat has sailed.

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BahamaPundit 2 weeks, 2 days ago

Maybe Dawes. But I never understood, as a soveriegn nation, why we were the first to give up secrecy. We were so aftaid of blacklisting. I think if we had been more confident in ourselves and ignored the blacklisting for a couple years, we would have ended up in a much better position.

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Dawes 2 weeks, 2 days ago

We didn't have the protection of the UK (for Cayman, Bermuda and Turks), and were afraid of the ramifications of blacklisting.. It would have happened one day no matter what, but the shortsightedness was not trying to change the product we offered (and for this the private sector is to blame as well).

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Regardless 2 weeks, 2 days ago

.....this is what happens when there are no small business loans for decades save the politically connected and the masses only receive high interest consumer loans. The destruction of paradise continues due to the greed and lack of vision by the political elite.

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sheeprunner12 2 weeks, 2 days ago

Ask the Chinese, Jews and Haitians how they build investment capital ......... It is called SAVINGS ............ a word that most Bahamians do not know about.

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TalRussell 2 weeks, 2 days ago

Comrades! Imagine if both former law partners Christie and Papa Hubert had blocked the directors over at the Bank of Bahamaland - from loaning (handing out) 100 to 200 million dollars to their politically connected Comrades - and if instead they had loaned those millions to 100 honest and 'not politically connected' small and medium-sized native business startups? Now, you really don't honestly think those politically connected bad loans have stopped since May 10, 2017?

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BahamaPundit 2 weeks, 2 days ago

Re Dawes. I''m going to call a spade a spade, a bluff a bluff, and call you out on the statement that The Bahamas could have still thrived in financial services after compliance legislation. In my opinion, The Bahamas' entire offshore product was privacy and secrecy, nothing more or less. In order to have flourished after compliance, The Bahamas would have had to fling its doors open to all UK law firms. Further, it would have had to hire swiss and/or signapore companies to provide essential services at the Company Registry, International PR etc.

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Dawes 2 weeks, 1 day ago

You may be right that it would not have worked. But once the dice was rolled on agreeing to give up our secrecy we needed to change the way we operated. We didn't, we just continued to spout tax free, which was no use once the secrecy was gone. now we rely on any growth to come from latin America as they just want their money in a safe country. People in the west not only want to keep their money safe, they want sound financial planning to go with it which is something we do not do. Governments have known that they needed to upgrade what we offered for a long time, if you were able to see the news reports from when the ministers spoke at BFSB or other entities they all said this. but as always they just talked and never did anything. Here we are 15-20 years later and no change has been done and our 2nd industry is like a ship without an engine, and no one knows where it will end up.

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BahamaPundit 2 weeks, 2 days ago

Even after all of the above, The Bahamas would have still likely lost its FS industry. Secrecy was our golden goose. Without it, our FS industry was doomed.

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ThisIsOurs 2 weeks, 1 day ago

You are correct. It shows once again that the govt continues to shoot from the hip without understanding either the problem or the ramifications of their actions. It's like proclaiming that the way to revive the tourism industry is to buy/build a mega resort..oh they did that already. #lucayan.

But I don't know if they believe this either, they keep changing the justifications for this bill hoping to find an argument that sticks, WM revival, ICT, jobs, training, new sectors, bring trained Bahamians back home, ease of business, boost the middle class. The other day the minister actually said "there are NO Bahamians in these sectors". Any buzz word that makes the bill palatable. Then ice cream in the cake, it says the minister can change the rules at any time.

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Socrates 2 weeks, 1 day ago

death of the financial services industry has long been coming.. dont know how so many still dont see it. the 'big boys' want their citizens' money and they will mash up anybody who gets in the way of them, by whatever name you call the industry.. we need to be more pragmatic, accept that the game is over and move on...

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Porcupine 2 weeks, 1 day ago

As to the privacy issue and the financial services "industry", my take is this; . My first concern is as a global citizen. Worldwide, the rich are getting richer, and the middle class and poor are getting poorer. This is almost entirely based on the fact that the game is rigged. It is rigged to the point where gaming the system is now accepted by most people, and almost all rich people. "Behind every great fortune, is a great crime". To paraphrase. This increasing economic inequality has immense consequences for our health and well being as a society. This is not conjecture. The facts and findings support these facts. Instead of being proud to pay our taxes so that we can have a better world to live in, we have managed to justify avoiding taxes as if this is the ONLY smart thing to do. The rich, through their ownership of nearly every speck of mass media, sports and entertainment, and the educational curriculum globally, have managed to convince us that the rich are rich because they are more efficient and hard working than the rest of us. And we bought it. Taxation must be global issue so that there isn't a trillion dollar industry revolving around just hiding rich people's money from reasonable taxation. Presently, the tax rate must be artificially high, just like prices for consumer goods in The Bahamas are artificially high due to theft, because so many rich people have their money stashed away from the real economy. Money only has value when it is being used. Called the multiplier effect, it is the idea that if you give a poor person a dollar they will spend it into the economy by nightfall, whereby if you give a dollar to a rich person that dollar is effectively gone from the real economy.

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Porcupine 2 weeks, 1 day ago

So, I am saying that there is an inordinate amount of money in offshore accounts, shielded from rightful taxation. If we didn't have the many offshore tax havens, our economy would be doing much much better, globally. The Bahamas doesn't need to be in the race to the bottom. Secrecy is fine in the bedroom, in one's private life. However, to use this secrecy argument to distort what our financial obligations are to our society is dishonest. The Bahamas has enough resources to create things, to innovate, to entertain, to provide a reasonable amount of economic activity to sustain a very high quality of life for ALL its' people, without catering to those who have come to believe that they are self made people who have no responsibility to the places where they come from, or choose to reside, for tax reasons alone. I don't accept this. The US and Britain are the two major tax havens in the world. They will ultimately profit from The Bahamas and other off shore tax havens loss of this status. It was very likely planned this way. We cannot fight it. We need to quit looking over our shoulder, worrying about who might be getting ahead. Get over it. Let us recognize our unique qualities and attributes, and truly profit from these things. As to the financial services industry collapsing in The Bahamas. Let it happen. We have a lot of bright talented people in this industry, because of the money, whose best efforts need to go into creating something worthwhile for all Bahamians.

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BahamaPundit 2 weeks, 1 day ago

Face it. Our form of offshore services was equivalent to rum running during prohibition or drug running in go fast boats during the 80s.

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diaspore 2 weeks, 1 day ago

To say that the only way to generate economic activity in our current environment is to appease and give concessions to foreigners, so that they may in turn employ us, is quite frankly the most absurd, intellectually bankrupt proposition I have ever heard. Underlying this, subtly, is the quiet belief that the Bahamian people ain't worth sh#t, and underlying this, deeper still, is a belief that Africans ain't worth sh#t. Got to call folks in to get us into order...because clearly we can't manage our own affairs. I REJECT IT! If, after 44 years of independence, the best idea you can come up with is to go back to the apartheid era policies around skilled labour immigration, it is clearly time to demit your post be it a position of power and impact.

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vegy 2 weeks, 1 day ago

It feels like we are mourning the loss of a golden age rather than focusing on how we can gain an advantage for the future. Sure, the secrecy aspect as gone and was inevitable that the Bahamas had to comply but are there not companies setting up offshore that need banking - genuine offshore resident clients? How many online tech companies, for example, could be encouraged to start up in the Bahamas to take advantage of our good connectivity, proximity to major markets and good lifestyle as well as being tax efficient? Isn't it time we stopped being concerned about someone taking our jobs and started to focus on making the jurisdiction attractive for business which in turn would provide more jobs as well as the indirect trickle-down effect of money being spent in the Bahamas. Seems like Singapore and Hong Kong, as well as other jurisdictions that have targeted a niche startup such as Isle of Man, have done quite nicely from being open for business, why should we not take advantage of our geography, climate and stable government structure to make ourselves the chosen offshore destination rather than complain about missed opportunity and mistakes that may have been made.

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TheMadHatter 2 weeks, 1 day ago

realfreethinker, porcupine, and vegy clearly see and understand the big picture here.

We are looking at better times ahead - more money in 2018.

Just when yall get those better high paying jobs - don't let the banks fool you into financial slavery by tying some balloons on cars and parking them in the middle of the mall.

Them balloons you will discover wind up being very expensive. Cheaper you get them from the party supply store.

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