Question

1. Do you agree with the statement below? Why or why not?

“Given the inflation in Venezuela was well above 80,000% in 2018, Venezuela should adopt a cryptocurrency such as Bitcoin as a national currency?”

2. What would be the impact of the COVID-19 on the balance of payments of a country?

Please can pick ONE specific country to discuss

3. If you are hired as an advisor for the government in the country of your choice in Q3, what advice would you give to the government to deal with the positive/negative impact of the COVID-19 on the balance of payments of the country? Your advice/solutions should be tailored to the impact you discussed in Question 2

Answer 1

1. Crypto currency in Venezuela.

Crypto currency like bitcoin or other altcoins are unregulated entities and can never be used to replace the original currency of the country.

Even if Venezuela is facing very high inflation along with devaluation of native Venezuela bolivar, crypto currency such as Petro should not be used official.

Economic problems in Venezuela

The Venezuelan government would allow free elections, and the newly established opposition government would pursue a more orthodox and aggressive economic reform package. This could include restructuring Venezuela's external debt with the help of institutions such as the International Monetary Fund. In this case, the economic recession would worsen in the short term, but allow for a stronger recovery in early 2020 on the back of the investment recovery. In this scenario, multinationals would be advised to take a more proactive approach and resume investments as soon as possible, while simultaneously negotiating outstanding receivables and recovering expropriated assets with the government.

Problems of using petro as a permanent crypto currency

1. These currencies are generally used in unaccounted transaction and traded across unregulated crypto exchanges.
2. The currency demand and supply for cryptos are highly speculative and not as per the real economic scenario.
3. Transactions are unaccounted in BOP ledger .
4. Capital inflows and outflow of country cannot be regulated.
5. May promote complete disturbance in financial stability of country.
6. Are generally not backed by any real asset class although govt claims petro tobe a backed crypto.
7. Monetary sovereignty of the country may collapse.

So these are the cited critis for using a crypto currency as a national currency.

The updated policy allows us to answer first question in case of descriptive question. Please post remaining questions as seperate entry. Thanks.