How is COVID-19 affecting the local economy and local money?
As we drive slowly from recession to depression, we are urged to take action to rebuild our local economies. In this post, we'll provide an understanding of how our local economies are draining out of money and how we can retain and increase purchasing power with local payment systems that connect people and small businesses.
Where we are: Recession
The COVID-19 pandemic has had far-reaching economic consequences beyond the spread of the disease itself and efforts to quarantine it. COVID-19 has disrupted the global economy, local economies, and small businesses worldwide, causing the largest global recession in history.
Unusually high and rapid increases in unemployment and extreme poverty have been seen in many countries. Millions of small businesses around the globe ran out of cash and perspectives. Hundreds of thousands have already closed down permanently.
Around the world, companies are under intense strain, with more than half either in arrears or likely to fall into arrears shortly. World Bank
What is next: Depression
With the pandemic hitting its first anniversary, sales are still much below average in many sectors, while government aid is running to an end (if there was any). Cash is now a very scarce and limited commodity for most small businesses.
In an attempt to adapt to the new uncertain reality, reduce costs and survive, most businesses lay off more staff. With unemployment rising, purchasing power is further sucked out of the local economies.
If the economic climate worsens, businesses with high levels of debt run the risk of being unable to make their payments. At the same time, financial institutions become more reluctant to loan approvals due to high credit and failure risks. The local economy slowly dries out of money.
In this vicious circle, depression slowly takes over from recession. And as it took years to recover from the Great Depression or even the 2008 Financial Crisis, we better prepare for tough times!
What we can do: Plug the leaks
Plugging the leaks is about increasing local economic linkages to make maximum use out of all financial resources, whether its source is government spending, business spending, or consumer spending. Key strategies are:
- Promote and incentive local entrepreneurship. Give people an opportunity and assist them to set up their own small business or economic activity.
- Inject more resources into the local economy. Speed up the inflow of fiat money for economic activity through mobilizing savings, remittances, and loans. Create extra credit with local currencies.
- Prevent money from leaving the local economy prematurely. Take the most of every cent that enters your local economy, by creating local payment networks.
All solutions involving and maximizing the combined spending power of people and local businesses will definitely be much more effective.
'Money is round, and it rolls away.' Confucius
How we rebuild local economies
As digital currency and local payment architects, we design and build low-cost and high-impact digital payment solutions that incentivize entrepreneurship, increase purchasing power and ensure that it does not leave the local economy prematurely.
- For small businesses, we implement local payment platforms that drive sales and preserve cash: loyalty programs, barter networks, and prepaid vouchers.
- For local financial institutions, we deliver a low-cost mobile payment platform to connect businesses and foment trade. With our mobile banking app they can foment savings and transform them into micro-loans.
- For local economies, we connect small businesses and consumers with an easy-to-use e-commerce and local payment platform. We can add extra purchasing power with local currencies or remittance services.
With our vast experience as digital currency architects combined with Cyclos, the award-winning payment software, we create digital payment solutions for local economies that are unique, affordable, and easy to implement.
The future for local economies and money
We cooperate for an ecosystem of multiple sustainable digital and local currencies. They are not only very effective tools to (re)build vibrant and more sustainable local economies but also help us to be more resilient and resistant to future economic recessions.