When a dollar is worth less than a penny
IMF chief Madam Christine Lagarde's visit came and went. According to Lagarde, our economy is on the right track and the Jamaican dollar should continue its devaluation until it settles at the true value — a painful but very necessary process.
We know constant devaluation significantly impedes economic progress, which adversely affects everyone and stifles the economy. It is difficult to plan and budget and can only hedge on the uncertainty of where the dollar will settle even for the next month. I have heard talks about controlling the rate of decline; I believe this is a must if we want more stability, even as we try to monitor the economy and fix what's wrong with it.
Our dollar will forever be devaluing if we don't take steps to halt the slide. Those who say we should not interfere don't understand our culture or reality, and the fact that the dollar has been sliding steadily for decades. Our imports are already excessive, which add unnecessary strain on the demand for limited US dollars, leading to ongoing devaluation of the Jamaican currency, and everyone is affected. We import far too much relative to what we produce and export to earn foreign exchange.
I read some time ago that Jamaica imported more fake hair/wigs than any other Caribbean island, as much as 7-14 times in some cases. These hair imports were valued over US$7 million in 2012. I wouldn't want to imagine the value of bleaching cream imports.
At the same time, our country received significant inflows of foreign currency remittances, as much as US$2 billion each year, which amount to at least 50 per cent of what is remitted to the entire Caribbean region each year, according to reports. Something is radically wrong with the equation; we definitely should be in a much better place by now. We need to control imports and we are too debt-ridden.
Since our dollar is now worth less than a US penny, in terms of value, we should also consider phasing out some coins less than a dollar; most are useless anyway. Rounding prices up or down to the nearest dollar would not affect the consumer or businesses at the end of the day. Eliminating coins would also save on minting costs and create less work and hassle for banks and businesses that have to count, sort, store, and exchange all these coins.
Years ago, I recall Canada phased out their smallest unit, the penny, the transition was simple and virtually unnoticeable and prices were rounded to the nearest five cents for making change. We should look into this. For starters, the smaller units which are now worthless, 25 cents, 10 cents, and 1 cent coins, could be phased out and exchanged per dollar at banks until they are no longer used.
And, while we focus on economic recovery, we cannot ignore economic growth. Yes, it is easier said than done, but not even an individual can thrive for long living way above his means and relying forever on credit, all while spending most of his earnings on debt repayment. At some point something must give. The bottom is bound to fall out.