Dear Editor,

For everything you have missed, you have gained something else, and for everything you gain, you lose something else. — Ralph Waldo Emerson.

This year promises to be even more interesting than 2020 — the year of perfect vision. Last year was challenging for Jamaica with some 12,915 cases of COVID-19 and 303 deaths. The whole country has been transformed by the novel coronavirus crisis.

The tourism industry usually earns over 50 per cent of the country’s total foreign exchange earnings and provides about one-fourth of all jobs in Jamaica. Tourism is down more than 50 per cent; therefore, Jamaica overall economic activities have decrease by approximately 10 per cent. It appears that a new economic order is materialising with over US$18 trillion debt, as well as central banks at negative interest rates and near zero interest rates. Jamaica interest rate is 0.5 per cent, according to the Bank of Jamaica.

Interest rates and money creation are the tools used to manage the economy. Since global debt is at US$277 trillion (over 322 per cent of global gross domestic product [GDP]), money creation will have little effect. GDP is impacted by money supply and money velocity. Increasing money velocity has been a futile effort because of the fear of further job losses related to the 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, so most of the foreign exchange earned eventually leaves the country. Small businesses are mostly locally owned and therefore the much-needed foreign exchange will stay at home.

According to the Bank for International Settlements, as a digital liability of the central bank, wholesale central bank digital currencies (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 to be done 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 International Monetary Fund (IMF) and the World Economic Forum have 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 rates are near zero because of huge debt. There is no way for interest rates to normalise to around 10 per cent without crashing the economic system. The United States, with the world reserve currency, and view by many that it is the world’s strongest economy, tried to raise interest rates to 2.5 per cent in December 2018, and the stock market crashed. They had to take interest rate to near 0.25 per cent.

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 wallets 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,” said Maxwell Maltz, late scientist. Things will never get back to the old normal. We had better call the present situation due to COVID-19 the new normal.

I am optimistic, because I surmise that human beings 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. So, we say, Happy New Year!

Brian Ellis Plummer

brianplummer@yahoo.com