Dickson Igwe. Photo: Provided

Economic recovery will cost billions of dollars in the medium to long term. This is cash that could have been borrowed very cheaply on global money markets. However, it appears that access to global sources of funding is blocked owing to a Virgin Islands political culture that has lacked transparency and accountability.

UK financial overseers are reluctant to give the country the leeway to access global financial sources. The ability to borrow up to 3 billion dollars, over a period of say 5 years, would have offered a recessed and contracting economy the cash required for an appropriate and sufficient jumpstart out of recession.

But that political culture of a lack of transparency, accountability, and completely ignoring public feedback, has been the country's undoing. Add to the preceding, no clear long term economic plan, and a lack of direction of where the country is headed. There is no concise answer to the question: where do you see the Virgin Islands in 20 years? This writer will offer a visionary prototype in a proceeding article.

Now, The Federal Reserve in the US, The Bank of England, and Germany’s Deutsche Bundesbank, are three of the most powerful central banks in the west. And after these colossal banks pumped over a trillion dollars into the global financial system- quantitative easing- to offset the effects of the Great Recession 2007-09, inflation was expected to grow modestly, along with economic growth.

However, economic growth post 2009 was modest. Inflation was nonexistent. Consequently, quantitative easing and monetary stimulus was regenerated after 2012, with hundreds of billions of dollars put into money markets by the sale of US treasury bonds and various mechanisms of fiscal stimulus. This financial stimulus continued for years until very recently.

But the rate at which currency was exchanged in western markets also termed the velocity of currency exchange was disappointing. Consumer demand remained anemic, especially in Europe. This was a puzzle to economists. Why did consumer demand remain flat after so much cash was essentially given away?

The answer lay in consumer behaviour. Putting extra cash into the pockets of Joe Plumber by government stimulus, in the form monetary stimulus, tax breaks, or spending to create jobs, does not mean Joe will go out and buy that speed boat or take that cruise.

Instead, what happened was that consumers used the cash to pay off debt, and then after paying off debt, they put the rest of their cash in the bank. Consumer weariness to go out and spend is one factor in deflation. Deflation is the stagnation or contraction of consumer demand.

Austerity lovers argue the case for the opposite to the type of fiscal and monetary stimulus stated in the preceding. For Jack Austere, government spending leading to deficits is bad for business, and therefore society as a whole. Why: because Jack asserts that unsustainable government borrowing destroys business confidence. It creates a debt trap where the interest rates paid to banks by government eventually swallows up government revenues and taxpayer cash.

Government is burdened by this huge debt and unable to carry out its role as provider of public safety and national security. 90% of GDP and higher is stated to be an unsustainable annual deficit.

However, this idea of unsustainable debt has proven to be a red herring. In the era of deflation and year after year of near zero rates of interest, brought about by contracting consumer demand, governments were never strapped for cash after 2009.

And apart from the Greek crisis, which seasoned economists describe as an anomaly, stimulus spending in western developed economies has not created unsustainable national debt.

In fact, there is evidence of the reverse. Countries where stimulus is practiced have actual reduced annual deficits through economic growth. On the other hand, a country like the UK suffered increasing annual deficits as it cut public spending with a Conservative Government love affair with Austerity.

The preceding has been one of the mysteries of economics. Austerity can actually create higher deficits while government spending in the form of stimulus reduces deficits by generating greater demand and market activity in an economy.

Consequently, 7 months after Irma, the lack of any aggressive economic stimulus may actually worsen the Virgin Island's economic woes.

Connect with Dickson Igwe on Facebook and Twitter