Ever since the beginning Panama has used the USD as it's currency. This has helped Panama become an international banking center and has added stability to it's economy. The downside is that if the US has bad monetary policy then Panamanians suffer as a result. This includes expats who live here. In recent years the Fed has kept interest rates near zero and greatly expanded the money supply. Now we are suffering price increases as a result. When the dollar is inflated it is actually a tax because the US government gets to spend the new money it creates while the money in your pocket loses value, It is not only Americans who pay this tax. It is anybody world-wide who uses dollars including everybody here in Panama. At the present time the US Federal Reserve is between a rock and a hard place. If they raise the interest rates they risk popping the bubble they have created in the Real Estate and Stock Market. If they don't raise them they risk inflation getting out of control which it already is starting to do. Yesterday I was talking to a Costa Rican friend of mine about prices in Costa Rica. For a long time Costa Rica has been quite a bit more expensive than Panama. However, my friend has been telling me that because of recent price increases here in Panama that we are catching up to Costa Rica with our prices. When I first came to Panama I bought a CD in Banco Nacional for 100 k as part of the residency process. They paid me 8% interest monthly and prices here in Panama were low. Now they pay almost nothing in interest on a CD and prices are high. So is the Fed going to raise interest rates and crash the markets or are they going to keep them low and allow inflation to get out of control???
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