The galloping inflation has been very much in the news because of the very negative effects on almost everybody especially the ordinary Juan and Maria. Inflation has forced the US Fed and other central banks to increase their benchmark interest rates making it more expensive to borrow. The increased interest rate on the US dollar has made the greenback a more attractive investment alternative, causing foreign investors in the Philippines to withdraw their “hot money” and park them in the US in search of better yields. The massive outflow of US dollars is partly being blamed for the weakening of the peso which has already hit an all-time low of ₱58:US$1.
Traditionally, I had thought that a weakening of the peso would be advantageous to dollar earners, like OFWs. Every dollar they send home would now yield an extra ₱1.50 to ₱2.00 for their families. Unfortunately, prices of goods and services have also gone up in the Philippines, leaving what would have been incremental income still insufficient for their families back home. A US nurse confesses she now has to send home more dollars just to catch up with the local price increases.
As this developed, I picked up this interesting bit of news from BBC. The New York Attorney General Letitia James, has accused former US President Donald Trump of “inflation,” not the cost-push or demand-pull variety of course.
The Attorney General, in a 240-page complaint, accused Trump of “falsely inflating his net worth by billions of dollars to unjustly enrich himself and cheat the system.” Trump allegedly “inflated by billions” the value of real estate in order to get loans and pay less tax. This was done over a period of 10 years between 2011 and 2021. The scheme allegedly enriched Trump and his family by at least US$250 million and the government wants to recover that money.
The complaint stated that “the value of an apartment Trump had in Trump Tower in New York was listed at $327 million after its wildly overstated size was tripled and given an unreasonable price per square foot. The record sale in the entire tower was $16.5 million.
The Mar-a-Lago club in Florida was valued as high as $739 million by the Trump Organization…..when the real value was closer to $75 million and that it generated less than $25 million per year.”
POGO – to go or not to go
To ban or not to ban. That is the question.
Based on published reports, there seems to be a snowballing move to totally ban POGO operations. Those in favor of the total ban cite the series of kidnapping, bribery, and rise in criminality , especially involving Chinese and Filipino-Chinese citizens. Not to mention of course the non-payment of taxes by some POGO operators. In a nutshell, the reputational damage and the social costs far outweigh the supposed economic gains from POGO.
On the other hand, defenders (principally Congressman Joey Salceda) argue for stricter regulation, not a total ban. Let us not kill the goose that lays the golden egg. Totally closing down the POGOs will terminate 70,000 direct jobs for Filipinos, reduce to nil ₱18.6 billion in rental income from offices and ₱28 billion in housing rent and a possible tax take of ₱5 billion. The rise in criminality is an enforcement issue which can be addressed by the police and the local governments.
As far as Justice Secretary Jesus Crispin Remulla, any response must be calibrated. Already, Remulla has his hands full trying to deport 281 POGO workers. At the moment, Remulla is still sorting out with the Chinese government the deportation protocols. A total ban would be a logistical problem as this will result in the deportation of an estimated 40,000 POGO workers.