Hope for 2021 after a challenging 2020

Jan 04, 2021 Letters

DEAR EDITOR,

For everything you have missed, you have gained something else, and for everything you gain, you lose something else.” — Ralph Waldo Emerson. 21st year in the 21st century will be even more interesting than 2020, the year of perfect vision. This year was a challenging year for Guyana with 6332 cases of COVID-19 and 164 deaths, Guyana has been transformed by the COVID-19 crisis. The border closure and shutdown of non-essential activities have decrease GDP from an expected growth of 86 percent to 26.2 percent. It appears that a new economic order is materializing with over US$18 trillion debt at negative interest and central banks at negative interest rate and near zero interest rate. Guyana interest rate is 5.0 percent, according to the Bank of Guyana Interest rate and money creation are the tools used to manage the economy. Since global debt is at US$277 trillion (over 322 percent of global GDP), money creation will have little effect. Gross domestic product = Money supply x money velocity. Increasing money velocity has been futile because of the fear of job loss, and tough economic times triggered by COVID-19. The most effective vehicle to increase money velocity is employment creation and small businesses. Big businesses are usually subsidiaries of foreign company. Most of the foreign exchange earned eventually leaves the country. Small businesses are local owned and therefore the much-needed foreign exchange will stay at home.
According to the Bank of international settlement, as a digital liability of the central bank, wholesale CBDCs could become a new instrument for settlement between financial institutions, while retail (or general purpose) CBDCs would be a central bank liability accessible to all. There is also work on policy design frameworks (Davoodalhosseini and Rivadeneyra (2020), Agur et al (2019), Allen et al (2020)), their implications for cross-country payments (Milkau (2019)), implications for the international role of currencies (Ferrari et al (2020) and legal aspects of their issuance (Hess (2020), Duque (2020), Nabilou (2020), Belke and Beretta (2019)).
The US dollar standard started in August 1971 when US President Nixon took the US dollar off the Gold standard; it will be 50 years old. The IMF and the World Economic Forum has called for a new Bretton woods or a reset. This will happen within the next 10 years because the present system is no longer sustainable. Interest rate near zero because of huge debt. There is no way for interest rate to normalize to around 10 percent without crashing the economic system. The United States with the World reserve currency and view by many as the world strongest economy tried to raise interest rate to 2.5 percent in December 2018 and the stock market crashed. They had to take interest rate to near zero – 0.25 percent. It is my view that the end game of the COVID-19 crisis is the central bank digital currency which will likely be backed by contracts. The Federal Deposit Insurance Corporation (FDIC) mandates that banks open digital wallet in January 2021 for all its customers to receive stimulus money, in the US.
“Close scrutiny will show that most ‘crisis situations’ are opportunities to either advance or stay where you are.” – Maxwell Maltz. Things will never get back to the old normal. We call the present situation due to COVID-19 the new normal. I am optimistic because I surmise that human being will inevitably move to freedom and prosperity, no matter how long it takes. The end of Feudalism, slavery and tyrannical government supports that hypothesis. History illustrates the inexorability of human property. Happy new year – 2021.

Yours truly,
Brian Ellis Plummer

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