Since the March of 2020 we have been in the grips of covid-19 induced pandemic. The governments have had to bailout out the economy, because of the economic shock coming from the lockdown measures put in place to protect the healthcare systems and the society at large. And even with all the right intentions, most governments have not been able to get a good grip on the virus. Therefore, the virus has continued to spread. And as a consequence, the economy has started to struggle.
By most accounts, the real economy seems to be in a dire state, and most people in the market know that. And in order to sustain the economy during the lockdowns also to fund the disease-fighting measures, most governments have had to borrow colossal amount of money.
According to the IMF’s latest fiscal monitor report published in September of 2020, the estimated global fiscal expenditures related to the pandemic amounts to $11.7 trillion and growing. This basically translate to the total public worldwide debt reaching a record level of 100% of the global GDP in the year 2020. And it looks like the only way to get the economic growth back is to create more debt, so the debt binge will continue into 2021. And therefore, the total market borrowing is expected to reach around USD 28.8 trillion in 2020. So quite likely the record low interest rates are going to continue for a good few years to come, in order to keep the market sustainable.
This is more or less the big picture. With millions of people losing their livelihoods and unable to pay the bills, and no prospect of a job. People are really becoming the collateral damage along with the real economy, and it is one of the reasons why most investors are reluctant to invest in the real economy, because they aren’t sure how much of the real economy is left. And thus, they are putting capital in ideas like Bitcoins etc instead. Because investors believe assets like bitcoin have almost no connection with the real economy. Therefore, gambling and speculating in bitcoins is the name of the game. In some ways you conclude that, this is investment one on one for you in the year 2020.
So even when the real economy seems to be in dire streets, investors have found ways to keep pushing the markets to record highs, because that is the new normal for them. And that’s why markets are becoming increasingly disconnected with the real economy and what goes inside the society. Having said that, nothing lasts forever, so while the markets have found a way to create new record high valuation for ideas and assets as “ things “ it likes. The path to delivering that reality looks quite unsustainable. And that’s why I fear, that a lot of capital will be destroyed in the process, which will cause more harm to the real economy as well as the society at large. Which translate to people being the collateral damage.
I do hope that, maybe one day people will realise that the way we have designed our modern economy, money is now an essential resource. And the markets have perhaps lost the ability to allocate the vital resource wisely ? Because investment or the idea of investment is now more about gambling than creating value. But there is nothing wrong in that per say. The markets are undergoing a change, and the new generation of investors probably have a different view or perspective on what is value and the idea of value creation. It is interesting phase, and we will see how things pan out.
But in the meantime, the question that I ask myself is ? It is probably time for us to collective conclude that money is now in fact an important resource. Also, if without people money has no intrinsic value then, why markets decides how that vital resources is allocated ? So maybe there needs to be some changes ? That said, I know changing the status quo isn’t possible.
And that’s why I continue to believe that, the society and the governments at large should a take leaf out of bitcoins success and appeal to create a new way to fund the annual cost of living of people within a society. So in my view, it is the right time for the formation of a digital universal citizens credit “ UCC” created by enacting a universal citizens charter, whereby, people agree to give each other a value sufficient enough to cover their annual cost of living.
Under the universal citizens charter each member of the society could agree to allocate each other a sum of money annually in the form of a universal digital credit, an amount that will be enough to fully cover the yearly cost of living of a person in a specific society.
The central bank acting on behalf of the people and the government could allocate the annual universal digital credit to people every first day of the year or in other words 1st of January of every year. This digital credit could be converted into money by the nominated commercial banks holding people bank accounts for a small fee. And governments could be allowed to deduct a fixed amount from the money every year to pay for the healthcare costs as well as other public services including of basic education.
So universal credit will not be a government’s fiscal responsibility unlike a universal basic income structure, in this case people will be guaranteeing each other and allocating each other enough credit as resource to fund the basic annual cost of living of an individual. And to avoid any confusion, the universal credit that I am talking about under Universal Citizens charter is simply an allocation of resources termed as credit that will be converted by the central banks into regular money to help people fund their annual cost of living. It is not a credit or loan. This is not a liability, it is simply an allocation of resources by the society. So the central banks will basically issue to different type of currencies, the regular currency that they issued and then a digital UCC that will be the new bitcoin backed by people and the larger general well-being and productivity of the society ( GWPS) instead of GDP. And governments could then withdraw their inefficient social security spending obviously.
The digital universal citizens credit “ UCC” issued by various central banks could possibly become the new crypto currencies like a bitcoin. So everyone will be issued their own universal citizens credit by the central banks in their own dedicated digital wallet under control and supervision of the central banks, and linked to a nominated commercial bank account. People will be free to save that universal digital credit, or use it to pay for good and services. A secure digital wallet managed by the central banks attached to people’s national identity cards, passport or driving license linked to their nominated bank account and their unique taxpayer number could become a must. And for a fee regular high street banks could convert that credit instantly into money that markets trades in.
Also the markets may learn to trade and speculate in different types of UCC issued by various central banks probably benchmarked against GWPS, linked to the annual improvements in the general well-being and overall productivity of the society at larger. So people could pay for their cost of living, and let the market speculate and gamble their fortune. But under this arrangement, there be a firewall that protects people from the markets.
I believe it is time that we create and conceive an economy that works for people, and most important of all, people are not the collateral damage of bad investment decisions made by the markets.