EDITOR, The Tribune
The Federal Reserve took its rate to zero and additional $700 billion in stimulus on March 15, 2020. The Federal Reserve balance sheet will be at its peak of $4.5 trillion. This will be done by purchasing assets – in this case, $500 billion in Treasury securities and $200 billion in mortgage-backed securities. The purchases will begin right away, with $40 billion in purchases set to take place on Monday, March 16, 2020.
About 40% of the world economy is at zero or a negative interest rate. That means money is like your septic tank of little value - interest rates tell the value of money. To understand how we got here I need to give a summary of global economic history.
From 1870 to World War 1 the gold standard was the prescription to facilitate global trade due to the Industrial Revolution. After the Great Depression in the 1930’s the creation of maximum employment or full employment was the prescription for the global economic ill.
The New Deal, where government creates employment for the populace, in the United States exemplifies this prescription. This created inflation around the world as the worker’s union pushed for higher wages. This created the global middle class as real wages increased globally. From 1980 to 2008 the prescription was to control inflation which was popularised by neo-liberalism. This made capital superior to labour because labour cost increase was seen as the main cause of inflation. Real income stagnate for growth was driven by debt. Credit cards became commonplace. This is not sustainable as the great Recession of 2008 proved. This crisis was a debt crisis triggered by subprime mortgage default. After 2008 to the present the prescription is low interest rates and creating liquidity by, for example, quantitative easing and other complex money creation. The ineffectiveness of this prescription will be proven as we are going into a global recession that the Covid 19 virus pricked the bubble.
I assert capitalism, socialism and communism are diluvian (outdated) – 80% of the world lives on less than $10 a day. The poorest half of the population lives on $2:50 a day. 1.3 billion people live on a $1.25 a day. The world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 percent of the planet’s population, reveals a recent report from Oxfam International. It is government policies that create inequality globally and locally. Taxation is “wealth favoured” globally and locally.
More than 49,425 people in the Bahamas live in poverty and thousands live in extreme poverty, that’s 12.5 percent of the country’s population who don’t have access to a decent way of survival. I am not concerned how rich the richest Bahamians are; I am concerned about the people who are living like sub human. This is immoral and must change. Crime and murder is a result of the oppressed trying to survive; turn the needy into the greedy. No justice, no peace.
BRIAN E PLUMMER
March 16, 2020