N Touch
Sunday 26 January 2020
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Letters to the Editor

Low TT growth rate not right

THE EDITOR: Since September 2019, the US Federal Reserve has been buying 80 per cent of US Treasury debt. The US is borrowing from itself – unprecedented.

The attack on the Abqaiq oil facility in Saudi Arabia last September that affected global oil supplies significantly, barely increased the oil price. The killing of the Iranian general by the US on January 3 barely influenced the oil price. 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 monetising 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 per cent, up from 2.4 per cent in 2019, the weakest since the global financial crisis in 2008-2009.

The Central Bank of TT kept its interest rate at five per cent in its December 27, 2019, announcement. 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.

So why is TT’s and the global growth rates so low? This defies logic. Something is not right.

BRIAN E PLUMMER

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