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This global shutdown is unprecedented and will have unprecedented consequences

Jul 08, 2020 Letters

Dear Editor,

The Treasury Yield Curve went negative at the end of June 2020. The Treasury Yield Curve is a benchmark for other debt such as bank lending rates and mortgage rate and is used to predict economic output and growth. This indicates that the United States economy is contracting. Forty percent of the US is either halting reopening or shutting back down. Guyana’s number one trading partner is the US and the majority of tourists and remittance to Guyana comes from the US. This mean Guyana must innovate to thrive in the global recession.

US Presidential Election is in November 2020 and whoever wins will have to increase taxes to mitigate the economic haemorrhage the US is experiencing. The US is borrowing 51 cents for every dollar it spends. Its debt is 26.5 trillion dollars or 133% of GDP. This means US citizens will have less disposable income as their government increase taxes. Along with the economic recession, the reduced real net income will reduce tourism and remittance from the US. All other economic activity even the consumption of oil will decrease.

More inter-regional trade and a more robust internal economy need to develop. Import substitution to reduce the need for US dollars must become a priority. The US has the most cases and debt of COVID-19 and will likely take the longest to recover. Their chaotic political situation will not help. This is a lean time where the fundamentals such as food, shelter and clothing will be become modal and premium commodities. There is precedent in human history where more than half of the global economy shut down and only essential services were allowed to function. This means there will be unprecedented consequences and no amount of monetary policy will increase production and consumption. People are scared and scared people consume less; focusing on essentials.

Yours truly,

Brian Ellis Plummer

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