I’m trying to observe personally the economic events in my
country through the online main stream news regarding the inflation of prices
in the country Philippines. This same
scenario of governance depicts the effect of the political and economic system
being followed by many countries around
the world that the economic system is squeezing the middle class and the lower
class to produce tax return to the government that in reality the public cannot
produce the required quota of wealth that the government is wanting to achieve.
I understand what the congress is doing in terms of the TRAIN law and other
scheme to elevate the tax rate in order to achieve the required wealth of the
nation and achieve the national dream of the nation example the infrastructure projects
of the country that as of today many entrepreneurs are being affected by the huge
tax rate increase. These affects the micro
entrepreneurs who are suffering with their daily financing in terms of their
small business.
IF these micro
businesses are exhausted financially and starting to withdraw their liquid assets
in the local banks and that is the start of the biggest problem of the
country. Every country must consider the
BALANCE OF PAYMENT or what we common call the BOP. In a Macro national level if BOP is not well
manage by the national economist one country will possibly experience a
financial Bubble just what happened during the 1997 crisis in Asia and other ASEAN
countries. What other country leaders at
that time are doing is they try to apply FIXED RATE of their currency in the
world market considering their accounts in World Bank and IMF will look good
and stable but in reality their currency value is already a “bubble” it means
that the paper money that every citizen are holding are actuality depreciating
in value. Currently in the Philippine
market the prices are so high that the middle class and the lower class has no
capacity to sustain their day to day needs.
THE BIG MISTAKE:
Most of the countries that experienced inflation of economy
are unanimously doing the same economic and financial moves by way of injecting
huge amount of cash borrowed from WORLD BANK or other countries. What the Philippines is wrongly doing at the
moment is that by borrowing money from China for example is not a good idea.
First, the products of the country or the GDP are decreasing and if the government
starts to inject CASH the parity of the GDP and the amount of cash in the
country will increase that by then the price of the real products and
commodities will INCREASE RAPIDLY.
In other words, MORE CASH AND LESS PRODUCT OUTPUT OF THE COUNTRY will cause inflation. And that is the main reason why United States has the problem of housing market crunch around 2003. Going back to the borrowing of cash from China, let us always remember that there is no free lunch. Everything has an equivalent value that in ACCOUNTING we call that DOUBLE-ENTRY BOOKKEEPING. Double-entry bookkeeping as defined as the accounting methodology where each transaction gives rise to both a debit and credit of the same currency amount. And this old and basic theory is used in achieving balance of payment. Less we forget that the BOP as a flow statement must consider the real assets and the financial assets.
In other words, MORE CASH AND LESS PRODUCT OUTPUT OF THE COUNTRY will cause inflation. And that is the main reason why United States has the problem of housing market crunch around 2003. Going back to the borrowing of cash from China, let us always remember that there is no free lunch. Everything has an equivalent value that in ACCOUNTING we call that DOUBLE-ENTRY BOOKKEEPING. Double-entry bookkeeping as defined as the accounting methodology where each transaction gives rise to both a debit and credit of the same currency amount. And this old and basic theory is used in achieving balance of payment. Less we forget that the BOP as a flow statement must consider the real assets and the financial assets.
Basta Cagayan De Oro "CHADA" jud
RELATED LINKS:
http://www.bamaquino.com/sen-bam-aquino-on-the-6-7-percent-inflation-rate-in-september/
http://www.bamaquino.com/sen-bam-aquino-on-the-6-7-percent-inflation-rate-in-september/
What Greece and United States are managing
their crisis before is that they inject more financial assets THINKING THAT
MORE CASH WILL LESSEN THE INFLATION OF THE NATION, But the reality the value of
money is starting to depreciate, and the high commodity prices starts to be
uncontrollable. What happened in Greece during
the height of the Greek crisis, everyone starts to withdraw their deposits from
there respective banks causing the local banks to get bank run with the ripple
effect to the national bank of Greece and eventually the whole EU organization. But in the case of Philippines at the moment
the case is still manageable IF the BOP can well be defined and managed.
Less to
forget the supply of rice and other local market products that are already in
scarcity of supply and the government is continuing there cash borrowing in
China, actually China is not helping but in an economic sense Yuan input in the
Philippine market by means of borrowing will not only reach to a DEBT TRAP but
NATIONAL INFLATION and MARKET CRISIS. If
you consider the start of the many historic wars of the world almost all
started with economic crisis. In Europe
during world war 1 partly why the whole population in Europe are in the brink of
the 1st world war is the economic status of Europe. Most countries that are in chaos and war are
the countries that are not economically stable.
In the case of Philippine market the trouble is double. WE CALL IT
DOUBLE TROUBLE. First is the scarcity of the domestic products and second the
huge borrowing of cash from China. These
two are the fundamental culprits of the high rising prices of the Philippines.
ASIAN CRISIS
The roots of the Asian currency crisis extended from a
fundamental change in the economics of the region- the transition of many Asian
nations is from net exporters to net importers.
The most visible roots of the crisis are during the years of 1996 and
1997. With the rapid economic growth and
rising profits forming mobility in the region of Asia is making the currency
flow even more faster. CAPITAL FLIGHT is another issue that during the crisis
in Asia it created an outflow of capital. The rapid and sometimes illegal
transfer of capital out of a country poses significant economic and political
problems. Many heavily indebted countries have suffered significant capital
flight, which has compounded their problems of debt service.
THE SCARY SCENARIO
This very moment Philippine government is continuing the
increase budget for each ministry with the increasing debt from other countries
while the GDP is decreasing and the local market price inflation is almost to
burst. Thus, BOP is not realized in this
given case.
THE IMPOSSIBLE DREAM
The restructuring of the form of government to a more
decentralized sharing of wealth may need a thorough amount of study that in the
case of Philippine setting I can compare it to a CAR that if a given old car is
subject for upgrading and remodeling it must be change as a whole. If you change only the body of the car but
not the engine the overall performance of the upgraded car is just the
same. Same is true with the proposed
decentralized form of government. THE SYSTEM IS CHANGED BUT THE STATUS OF THE
MIDDLE CLASS ENTREPRENEURS NEVER CHANGED and the increasing rate of inflation
is unstoppable. It seems that the body
of the car is changed but the engine is old.
The grass roots of the economy are not the big conglomerates but the
small time SME business people. They are the driving force of
the economy. If the so called brilliant
economic analyst of the Philippines at the moment can’t DIAGNOSE, the real
cause of the problem then it is like a medical doctor who is giving a wrong
medicine to a wrong patient. What I’m
afraid when the ECONOMIC BUBBLE WILL HAPPEN and the economy will collapse. Do
you think the Philippines is the next Greece in Asia?
I hope Senator Bam can still save this very problem of the
nation at this time, given that the rising oil price ripples all increasing
prices for the consumer market. Thus,
according to Henry Hazlitt, chronic and excessive government spending and
chronic huge deficits are twin evils.
The deficits lead more directly to inflation, and therefore, in recent
years they have tended to receive criticism from economists.
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