14 September 2023

Another reform

Unfortunately, economists' forecasts do not inspire optimism. Taking into account global trends and the interests of the residents of Drakonberg, a meeting of the Board of the Central Bank was held today, at which it was decided to change the composition of the ergid.

The full text of the Central Bank Decision is presented on the official website of the state in the "Government" section. And here we will briefly express our ideas and hypotheses about the future of the world economy and the benefits of the measures taken by our Central Bank.

First of all, it should be noted that despite the growth of the US dollar against most other currencies, according to many economists, this currency will face serious problems in the near future. And it is logical to look for other instruments for the accumulation and storage of capital.

However, the most obvious alternative instrument (the euro) is in an even more difficult position due to the war between Russia and Ukraine, sanctions and the breakdown of economic ties.

As for other convertible currencies, their prospects also look doubtful. Against this background, it seems that it makes sense to completely abandon the link between the ergid and world currencies and focus on the Azerbaijani manat. Moreover, it is in manats that the total size of the Drakonberg gold and foreign currency reserves is taken into account.

Alas, the manat is still tied to the US dollar, and in any case cannot become a world currency. In addition, its stability is highly dependent on oil prices.

As is known, since last year gold has been introduced into the composition of the ergid. But gold is not an absolute value, not to mention the fact that its liquidity is virtually reduced to zero. Yes, according to the Drakonberg Constitution, gold reserves cannot be reduced by selling its components. However, it is necessary to formally take liquidity into account.

Taking into account all of the above, the management of the Central Bank decided to change the composition of the ergid in favor of alternative investment instruments, as well as issue a certain amount of non-cash ergid in order to increase the flexibility of its use. After all, there are no smaller monetary units in the country.

Hopefully, the measures taken will improve the sustainability of the Drakonberg economy and ultimately the well-being of its citizens.

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