Dear Editor,
The worldwide monetary system is characterized by the use of fiat currency since 1971, and undue delays in, and costs of, international transactions. In addition, because the US Dollar is accepted as countries’ foreign reserve currency, it can and has been “weaponized” to sanction countries which policies are disagreeable to the United States and its allies. Due to this hegemony, the status of the US Dollar is under challenge from countries with significant contributions to the World’s Gross Domestic Product such as the BRICS countries, originally comprising Brazil, Russia, India, China and South Africa, but now expanded to many more. The US currency domination is rapidly dissipating, which process is known as de-dollarization, by this new multi-polar alliance, and because of the large supply of dollars in the system, will likely cause monetary shocks to all countries holding US dollar-denominated assets. To avoid the resulting disruptions, Countries need to start putting measures in place to limit these effects when they occur.
The major problem is the use of fiat or unbacked-paper currency, a currency with no intrinsic value and which has, since first used by the Chinese in the 13th Century, always ended in hyperinflation. This prompted Voltaire, the 18th Century eminent French Writer, to observe that “Paper money eventually returns to its intrinsic value: Zero.” Fiat currency is currently on this path and this recognition is causing major countries to start preparation for its demise. India, China, Russia, UAE and others are buying gold at record levels, as this commodity, historically, has been the fallback to save paper currency from overindulgence and indiscipline.
The second problem is that cash is no longer an acceptable form of currency. Some countries, like China and Sweden, have largely abandoned cash because of the high cost of storage and transport, and its role as an agent in spreading contagion. It is not uncommon in China to make donations to alms-recipients by scanning a QR Code-tag hanging around their necks. So, cash is fast becoming obsolete to be replaced by digital currencies generally referred to as Central Bank Digital Currencies (CBDCs). A regional example is the SandDollar, the Bahamian CBDC. When implemented, transactions would take place at the speed of Wi-Fi instead of a day or two presently, and at low costs replacing the current average fees of 7%.
Monetary changes are imminent, but it doesn’t seem that Guyana is planning for them? For, instead of storing gold to back the Guyanese dollar in the future, the country seems obsessed with tax avoidance on gold exports and to a country, interestingly, buying gold for currency support. And instead of developing a Guyana Dollar CBDC and preparing commercial banks for the new digital currency dispensation, the country’s Central Bank is allowing horrendous charges for digital transfers by commercial banks it supposedly regulates. This obvious lack of perspicacity with respect to monetary changes, and thus the absence of preparation needed, will have serious consequences to the Guyanese economy down the road.
Sincerely,
Louis Holder
