Is It Time To Change Rufiyaa To Dollar? Dollar To Gold? Gold To Cattle?
05 MAY 2020BLOG
The coronavirus pandemic has caused chaos across the globe and millions of people have become jobless, governments are running out of cashflow and seeking is to borrow funds. When the majority of countries seek to borrow funds within the same period is it logical to believe it would be a tight situation for the lenders. All these are leading to havoc.
Maldives is an economy that is largely dependent imported goods, I would say more than 95% of products are imported. What does this mean? Maldives needs lot of foreign currency to pay for all these imports and USD is the most popular foreign currency followed by EURO.
The media sources are reporting that the Maldives government is also borrowing funds, that is predicable. What caught my attention was the headline that states about an overdraft of 4 billion Rufiyaa while some people on social media speculated the government is planning to print money. What I understand and believe is if there is more Rufiyaa in the circulation to chase USD the price of USD will increase. In that case, is it time to change your savings into US dollar?
A media source I stumbled upon says there are 20 million Americans applied for unemployment benefit and President Donald Trump has signed stimulus package amounting to 2.2 trillion dollars. World’s biggest economy has everything in high numbers, in Maldives we literally need fingers to count. Anyway, the big question now is where does this 2.2 trillion USD come from? Is US Federal Reserve printing money? Nobody seems to have a clear digestible answer, but many speculate it is coming from thin air. If the United States prints money, then it is only logical to believe it would affect the exchange rates. The proportion of the effect may be lesser as USD is pooled all over the globe and exchange rate change could be proportionately absorbed into countries in the pool depending on how much USD is held by each country. So, it seems to me that USD is not a reliable currency either. So, what?
Gold is a precious metal that is limited in supply and most countries keep some of their reserves in gold. Because Donald Trump just cant go out, dig a hole and take out gold as much as he wants. Gold is mainly used for jewelry. Even though the price of gold is more stable than printed money there are also risks. One main concern for me is that it may be difficult to sell or exchange easily. After all you can’t eat gold. So, gold is not at all appealing for me.
How about cattle? You can eat it and easily exchange it, but is not practical in city life. If you don’t look after well the cattle may get sick or die of starvation. It is difficult to store. Don’t get me wrong. Gold and printed notes also have risks, they can get stollen but we are quite used to safe keeping. If you are living in the outskirts of the city and have adequate land it seems to be that cattle could ideal currency at least to store some of the savings. Along with cattle there can be farms and other assets too, basically it is the approach of barter system. I am not exploring the idea that you should not have any cash. Keeping cash in the cashflow and storing savings in form of cattle could be less risky in a pandemic.
Printing or borrowing money leads to more currency in circulation, that would affect exchange rates. While I have $100 in my pocket the governments can choose and change the actual value of that money. One day I may able to buy 100 apples, on another just 80. So, the number of the note is just a number, real value of the money is how much it is worth when buying things. Governments having total control of the money in my pocket is kind of a joke, to be honest. Individual people have been trying to push their inventions to tackle this problem and what recently came up was digital currency, most popular was Bitcoin. It has been a while the Bitcoin has been around but we have not embraced to the new system, it seems crypto currency is also not suitable for today’s challenges. Can you be a person who comes up with a great invention that will change the world? A change that will end governments stealing from our pockets? Share on your social media with your comments and let the ball go rolling.
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