July 2, 2021
Someone in the region finally mentioned the dreaded inflation dangers for the Caribbean and Central America. I understand why most central bankers in the Caribbean and Central America don’t talk about inflation, because they can’t control it and they import it to a great extent. But, we still have to talk about it.
For some Central American countries, they can control their monetary policy and cause for more money supply or seize up money supply, but it does not really stop high prices coming from large exporting countries like the US, Canada and some parts of Europe. But we still have to warn residents about the rising prices that are expected to come before the end of this year and are already here in many respects.
For starters, prices in building materials are through the roof. Some estimates have plywood and shingles up by 40 percent over 2019 levels. Analysts have said that this rise in building materials has to do with more people being home and wanting to do home repairs, coupled with factories being hit hard by the COVID-19 pandemic so they are not producing as much so supply is short. To add to all of this, it is also understood that shipping lanes between the US and China are blocked up, causing ripples around the world- with 75 percent of the world’s containers passing through these two countries, it is hard to believe that shipping is not putting a hurting on building materials.
Secondly, the price of food is also set to rise. Analysts have said already to be prepared to sharp rises in food, this is being driven by the also rising prices in oil and as people go back to work they all interlock. People are working more, they need food, and they need transportation to get to work and to get food, we need oil to help produce that food for machinery and also to transport of goods.
But at least someone has brought up the idea of inflationary pressure. With that said, what could stop governments from trying to print money carte blanche? Digital currency, or course.
A whole new world has opened up over the last three years and more importantly we are seeing during the COVID-19 pandemic how important it is and it is the need for electronic communications and trading.
Digital currency has the potential for cutting the cost of printing money, at least. Representing a savings for central banks.
Also, while digital currencies will still be under the control of central banks in terms of rate setting mechanisms, the fact of the matter is it can be easily tradable and not cluttering the streets and cash registers taking up space and becoming worthless at the end of the day.
While digital currencies is not a panacea for inflationary ills, however it can help to manage the impact of high inflation is central banks act on it and do so quickly.