Google
 

10.31.2006

From Adam Smith

Great nations are never impoverished by private, though they sometimes are by public prodigality and misconduct. The whole, or almost the whole public revenue, is in most countries employed in maintaining unproductive hands... Such people, as they themselves produce nothing, are all maintained by the produce of other men's labour... Those unproductive hands, who should be maintained by a part only of the spare revenue of the people, may consume so great a share of their whole revenue, and thereby oblige so great a number to encroach upon their capitals, upon the funds destined for the maintenance of productive labour, that all the frugality and good conduct of individuals may not be able to compensate the waste and degradation of produce occasioned by this violent and forced encroachment.

-- The Wealth of Nations, Book II, Chapter III

10.27.2006

Fundamental Economics: Minting Currencies

One of the factors to be considered when minting coins is the material value of the currency which should not exceed the assessment that it represents.

For example, the price of the metal that composes a dollar coin should not be way above $1. The reason being is that “enterprising minds” can easily be tempted to gather all the dollar coins, melt it and sell the metal for its higher value.

Here are recent stories regarding coins that are being smuggled and recycled into other forms:

IExpress

Scotsman

Other factors that should be considered include the possible alternative uses of the coin. In the 80’s, the Philippines circulated small aluminum like 5 & 25 centavo coins that quickly disappeared from circulation. An economics professor said that fisher folks found the coins a cheap substitute to “Fishnet Floaters”, which cost a lot more.

The link (below) tells a story about coins being smuggled and used as tokens in gaming machines.

Manila Standard

A few years ago, and probably until now, Philippine coins were also being smuggled to South Korea and used as a cheap (and illegal) substitute to Korean coins when purchasing products in vending machines and when using public telephones.

10.19.2006

Land Reform: Land of Bondage Land of the Free

One of the most moving speeches that I've read. During grade school, this was the most often recited elocution piece in my school. Here it is, the text of Raul Manglapus' Land of Bondage, Land of the Free.

Land of Bondage, Land of the Free
By Raul Manglapus

And yet, ladies and gentlemen, the tao is constitutionally free! No wonder, then, that the tao being a slave has acquired the habits of a slave.

No wonder that after three centuries in chains, without freedom, without hope, he should lose the erect and fearless posture of a freeman, and become the bent, misshapen, indolent, vicious, pitiful thing that he is!

Who dares accuse him now? Who dares rise up in judgement against this man, reduced to this subhuman level by three centuries of oppession?

Ladies and gentlemen the tao does not come here tonight to be judged -- but to judge!

Hear then his accusation and his sentence:

I indict the Spanish encomendero for inventing taxes impossible to pay!

I indict the usurer for saddling me with debts impossible to bear!

I indict the irresponsible radical leaders who undermine with insidious eloquence the confidence of my kind in our government!

I indict the haciendero for seizing my lands with subtle trickery and reducing me to peonage!

I indict him for sacrificing the honest efforts of an honest government on the altar of his illimitable greed!

You accuse me of ignorance. But I am ignorant because my master finds it profitable to keep me ignorant. Free me from bondage, and I shall prove you false!

You accuse me of indolence. But I am indolent not because I have no will, but because I have no hope.

Why should I labor if the fruits of my labor go to extinguish and inextinguishable debt! Free me from bondage, and I will prove you false!

Give me land. Land to own. Land unbeholden to any tyrant. Land that will be free. Give me land for I am starving. Give me land that my children will not die.

Sell it to me. Sell it to me at a fair price as one free man sells to another. And not as a usurer sells to a slave.

I am poor. But I will pay it! I will work and work until I fall with weariness for my privilege and my right to be free!

But if you will not grant me this last request. This ultimate demand, then build a wall around your homes... build it high!... build it strong!... place a sentry on every parapet... for I who have been silent these three hundred years, will come in the night when you are feasting, with my cry and my bolo at your door...

And may God have mercy on your soul!

10.17.2006

Fundamental Economics: The value of a currency

For the past several months, the Philippine currency (peso) has been increasing in value against the US Dollar. A year ago, the peso was at 55.977 (3 Oct 2005). It fluctuated several times but the trend was a continuous climb. Today, the Peso seems to be standing on solid ground, as it refuses to yield beyond 50.

How does one determine the value of a currency? Here is an explanation.

The short and long-term movements in the exchange rate, like any price, are caused by changes in market demand and supply conditions.

When the demand for a currency (pesos) is high relative to supply, the Peso goes up in value (an appreciation). The reverse is true when the market supply of pesos exceeds the demand. (A depreciation).

At this point, the economy has a more than the usual level of dollars. Therefore, the Philippines need not exchange Pesos with US Dollars. As a result, the value of the Philippine currency has stabilized/ increased, over the past several months. This is in sharp contrast to the continuous decline, which most Filipinos have gotten accustomed with, for the past several years.

DEMAND FOR PESOS: The surge in demand for Philippine currency comes from the following:

  • Philippine goods and services, including the Overseas Foreign Worker's (OFW’s), are exported overseas, creating an inflow of currency into to the country which needs to be turned into pesos. Por ejemplo, OFW's need to convert their dollars into pesos so they can use it to buy food, television sets, refrigerators and other items in the market.
  • Inflow of Foreign investment.
  • When Market speculators buy huge volumes of Philippine currency, in anticipation of an increase in its value (the intention is to sell it for a profit, at a later time).
  • Official buying of the currency by the country’s central bank.

SUPPLY OF PESOS: Pesos is sold/ exchanged on when

  • Goods and services are imported (pesos are exchanged for dollars to pay for importations or when filipinos go overseas on holiday)
  • Speculators sell pesos for another currency
  • Investment capital flows out of the Philippines.
  • Central banks go into the market and sell pesos to buy other foreign currencies.

-------------------------------------
Related Topic: Fluctuating Forex

10.12.2006

NOKOR NUKE TEST: Economic Repercussions 2

Will the US or another country, invade North Korea?

They will probably not..

In a similar incident, a few years ago, Bush declared (to Nokor) that they are capable of winning wars in two different fronts.

However, if they do, and are able to conquer NOKOR, the country will be theirs, including its starving population, possible insurgency, etc..

One only needs to look at Iraq and Afghanistan.

"To the victor goes, the spoils of war!"


NOKOR NUKE TEST: Economic Repercussions

North Korea's announcement of having successfully conducted a nuclear detonation has resulted to angry reactions from various world leaders.

At this point, the US, China and other countries strongly condemned NOKOR for such action, Japan barred all NOKOR vessels from its ports and has stopped all importations from North Korea. Other countries will possibly implement similar actions.

What are the tensions possible effects to other countries?

Let us start with the direct effects:

  • Japan is said to import US$133 Million/year worth of clams and mushrooms. A sudden end to the deal will most probably result to hunger for millions of North Korean farmers.
  • Korean vessels that are already on its way to Japan will be unable to dock and its cargo (most probably agricultural products) will rot. In addition, the vessels will be unable to bring back precious cargo and/or proceed to the next port of destination. The direct cost to the vessels will be monstrous
  • Other ocean vessels will avoid the area (Sea of Japan and the Yellow Sea) in order to avoid getting caught in the middle of a possible military conflict. This will also result to increases in the cost for millions of tons of vital economic goods.
  • The movement of goods intended for and coming from the neighboring countries (South Korea, China, Japan and Russia- Far East Port) will be directly affected and the recipient of the said countries’ export will experience delays in the arrival of raw materials. It will further lead to immediate delays in production for factories located as far as the United States, Europe and the rest of Asia.

Indirectly, the results include widespread speculations in the prices of petroleum, precious metals, steel products, electronics and telecoms, chemicals, etc..

The Competitive Advantage of the Philippines

As India gets too costly, BPOs turn to Philippines

"HIGH salary and transfer rates in India are making that country less appealing to business process outsourcing (BPO) firms --a trend the Philippines can take advantage of by accelerating information technology (IT) training among students, an executive of a US firm said Monday.

Jim Sanderson, vice president and chairman of applications developer Lawson Software, said India could readily provide large companies with 10,000 people or more with its big number of IT professionals but its BPO costs were rising 15 percent, compared with relatively stable costs in the Philippines.

“We see that small to medium sized companies looking to hire a few hundred to a few thousand professionals with three to five years’ experience have a better environment in the Philippines,” Sanders told the Inquirer.

He also noted that the attrition rate in India is about 30 percent, compared with 10 percent or so in the Philippines.

“A new Indian IT person expects to be promoted within six months and (to get) a 20-percent raise in six months, then another 20 percent on his first year, and so on,” Sanders said. “If he doesn’t get it, he will go to another company. Being a software developer, rather than being a project-related company, we [at Lawson Software] can’t have that kind of attrition.”

Sanderson said his company is optimistic that its investment in Filipino technology workers will result in a long-term partnership with the local workforce.

The potentials and skills of the workers were what drew them to the Philippines, preferring it over other countries in the region, he said.

read the entire article

10.05.2006

Government Intervention

Got this from Whiskey & Gunpowder:

"It’s a broadly accepted principle that government interference in the private production of resources creates economic consequences. The extent of the interference usually dictates the severity of the consequences. The Soviet Union was notorious for its hopelessly inept price and quota system that led to rationing and shortages. Central planning commissions dictating supply, capital investment, and demand is clearly a fool’s errand in an infinitely complex modern industrialized economy.

How about the establishment of a pure free market to determine energy prices? A “pure” free market cannot exist as long as energy prices are measured in an elastic paper currency. But leaving this complication aside, history teaches that the freer the market, the more efficiently and quickly supply can be developed to satisfy demand."

10.04.2006

PHILANTHROPY BEING VERY FASHIONABLE

In a recent article written by Manny V. Pangilinan (MVP), it was pointed out that Philanthropy has never been so fashionable for the rich and famous to engage in. To cite a few, he mentioned Bill Gates (US $31B) and Warren Buffet’s (US $37B) recent donations, which were followed by a number of prominent leaders.

MVP further noted that, Philanthropy has become very business-like, organized and professionally managed undertakings.

Talking about his company’s own thrust to help people, he wrote:
“We recognize that business-especially in a developing economy like the Philippines- can and should play a unique part in enhancing welfare. Indeed, because of its size and influence, business has the capacity to transform societies- by creating new needs, raising new hopes, inspiring new dreams. That is precisely what establishes the ground for corporate social responsibility”

A big majority will applaud the above statement. However, some of our great thinkers will probably disagree. Another school of thought would say; “Leave the people alone. Let Darwin do his work. Let the fittest survive. Leave the weak to die.”

I’ve just written about and described two opposing viewpoints.

Please tell us what you think..