EDITOR, The Tribune
Since September 2019, the Federal Reserve has been buying 80% of US Treasury debt. The US is borrowing from itself – unprecedented. The attack on the Abqaiq oil facility in Saudi Arabia in September 2019 that affected global oil supplies significantly barely increased oil prices. The killing of the Iran general by the US on January 3, 2020 barely influenced oil prices. The markets are not being influenced by threat to Middle Eastern oil.
Since the global financial crisis of 2008, central banks globally have been buying their government debt and this exceeds the total global growth. A growing economy has been bought by monetizing debt which was not bought by real buyers. It’s like paying off a credit card with a credit card.
The world economy is not normal. Japan, the European Union, Sweden and Denmark have experimented with negative interest rates which is unprecedented. According to the World Bank, the world economy will grow by 2.5%, up from 2.4% in 2019 the weakest since the global financial crisis in 2008-2009.
The Central Bank of the Bahamas kept its interest rate at 4% (historic low). A low interest rate environment improves financing capacity for all. Low interest rates encourage both consumption and investment and offset a drop in imports caused by a depreciating foreign exchange rate. Why is the Bahamas’ and the global growth rate so low? This defies logic. Something is not right.
BRIAN E PLUMMER
January 13, 2020