Comments on: economic experts urge: fix rate @ 55php to 1$

By: cesar santos umali

cesar santos umali — Sat, 07 Mar 2009 17:05:51 +0000

yes I agree we should peg the dollar to 55, not only the dollar but the Euro also at possibly 75, because this will pumpprime the economy by aiding the main propulsion of the economy which are the OFWs and partly the export sector. Money velocity will increase, consumption will be stimulated by more pesos floating in the economy, and gnp and gdp will increase.

By: orlando roncesvalles

orlando roncesvalles — Sat, 21 Feb 2009 15:24:34 +0000

Hi Angela,
I thought I’d share with you something that has bugged me for some time in my “other life” in Washington, DC when I worked for the IMF and did a fair amount of banter with the WB boys across 19th St. See my new post on why we are poor at http://foolawecon.wordpress.com/2009/02/21/why-the-philippines-is-a-poor-country/

By: On Why There is Economic Stimulus Fund « The Paradoxic Ley Line

On Why There is Economic Stimulus Fund « The Paradoxic Ley Line — Sun, 01 Feb 2009 03:16:08 +0000

[...] Economic Experts Urged: Fix Rate at 55Php to 1$. Possibly related posts: (automatically generated)Liar Liar Pants for Hire?ACORN positioned for millions in Obama Stimulus ScratchPrivatizationManila plans P100-B crisis fund [...]

By: Orlando Roncesvalles

Orlando Roncesvalles — Thu, 29 Jan 2009 07:33:47 +0000

Hi Angela, no problem. You asked about demand for pesos. Well, it’s a net demand thing of course. The OFW families demand pesos, while importers demand dollars. But with the financial crisis, there may be some who may think the Philippine stock market is relatively safe, compared to US, etc. If only because so much of it is family corporations that are listed on the exchange. There may not be that much “float” out there for such shares, so they don’t fall as much. On the upside, they don’t go up too much either. You can’t win them all.

By: angela

angela — Thu, 29 Jan 2009 06:49:04 +0000

hey louie ;) oo nga, china reminds me of mahathir’s malaysia back in the late ’90s, independent enough, wise enough, to buck the worldbank-imf’s ~~economic order~~ dictates.

By: louie

louie — Thu, 29 Jan 2009 06:10:57 +0000

hi, I agree with Prof. Diokno’s plans to peg the US$:PHP att 55 especially at this very difficult times. China gains a lot from a devalued yuan until now, so why not us? This will surely help not only families of OFWs but the remaining exporters in the country as well.

By: angela

angela — Wed, 28 Jan 2009 15:24:59 +0000

orlando ;) you’re an economist pala, i should have guessed. thanks for taking the time to explain things to this non-economist… interesting, that there’s a real demand for pesos these days. could be from hoarded dollars dug out from under mattresses…

By: angela

angela — Wed, 28 Jan 2009 15:00:40 +0000

uy jojie ;) talaga naman, ‘no, banana republic, whose most profitable export is ofws ;(

By: Orlando Roncesvalles

Orlando Roncesvalles — Wed, 28 Jan 2009 13:21:49 +0000

Hey Angela,
it is okay to have tax cuts financed by printing money. The debt is owed only to the central bank, and gets inflated away eventually. Alternatively, the money printed can be “mopped up” when the economy is back at full employment. This is not irresponsible policy when the economy is faced with unemployment.

It is different if the tax cut is financed by borrowing abroad, but that is not the issue here.

But back to the peso-dollar. The central bank has not been intervening lately, so there is some real demand for pesos at the current 46-47. Diokno’s 55 may well be right when the full impact of the crisis hits us later on, but it also depends on how aggressively the central bank expands money to support the economy. The more money printed, the lower the peso rate (i.e. it can go to 60 or more per dollar).

By: jojie-riyadh

jojie-riyadh — Wed, 28 Jan 2009 12:42:54 +0000

Hi! Pinsan,
The proposal of Prof. Diokno to fix the exchange rate of P55/$ has more positive benefits than negative impacts on the macro level of our economy as experts have studied. As an OFW, I favor such fix system since in an erratic market forces, currency hoarders and hedge fund managers in the world banking system can control and manipulate the exchange rate for their own profit advantage only. In a volatile economy like ours, we cannot have the luxury of speculative currency hoarding since our peso is peg to the dollar only.
On taxes, with the prevailing high cost of living for an average 3-member family, I hope lawmakers will propose the abolition of Personal Income taxes for all salaried and fixed income workers since the bulk of these sectors do not have any other source or means to augment their income for educational,health and household improvement expenditures. Hence, increases from personal expenditures saved from this taxes will stimulate the domestic GNP and will have multiplier effect to pump prime our sagging economy,saving this Banana Republic,hehe.
jojie-riyadh

By: angela

angela — Wed, 28 Jan 2009 12:02:19 +0000

orlando ;) “some inefficiency in the decision-making” is putting it mildly… re tax cuts: won’t that mean less revenues for the government, which means uutang na naman nang uutang? how are we ever going to get out of that vicious cycle?

By: angela

angela — Wed, 28 Jan 2009 11:54:15 +0000

hey gabbyd ;) yes it’ll not be good for importers but good not just for ofw’s families but also for call centers and tourism… like orlando says, it’s a difficult balancing act. why 55? if memory serves from past readings, it was diokno’s estimate of what the rate might be if it were allowed to float “clean”, that is, without the bangko sentral “playing god”, that is, intervening and trying to keep it high (in aid of debt service & importers).

By: Orlando Roncesvalles

Orlando Roncesvalles — Wed, 28 Jan 2009 10:35:18 +0000

Hi Angela,
I would be more cautious about P55. It may be good for $ earners but not for the rest. So it’s a difficult balancing act.

The technical way out is to declare a “clean” float, and if the market pushes it to 55, so be it. But what we have is a managed float, so we have to second guess the central bank. And the BSP (and their IMF “angels”) get to play God. Maybe they are really smarter than the rest of us. Some of them are still my friends.

But the issue of the exchange rate is a perennial.

On tax cuts, it is a much better way of putting money in the hands of all citizens. Stimulus on the spending side can be a temptation for unwise objects of the spending, totally apart from corruption, etc.

In Dumaguete, I see perfectly good roads being re-done. They could have cemented dirt roads, so there is some inefficiency in the decision-making.

Regards…

By: GabbyD

GabbyD — Wed, 28 Jan 2009 10:00:12 +0000

i’m not sure about this. this benefit some groups (exporters, those who earn in dollars), while hurting others(importers, who also spend domestically). also, i wonder why 55? why not weaker?

but i have no strong objections perse, only, that i am at this point unconvinced that there is net stimulus effect.

By: angela

angela — Wed, 28 Jan 2009 03:52:28 +0000

hey orlando ;) you’re absolutely right, the exchange rate is only a part of the solution, but the effects of fixing it at 55 would be felt quickly not only by the huge sector of ofw families… rolling back VAT is good too, i’ve advocated the scrapping of VAT in this blog, which would leave more cash in the pockets of people for spending on other necessities. i’m not sure about tax cuts though in the same breath as scrapping or reducing VAT, considering the BIR’s collection problem, esp from big earners…

By: Orlando Roncesvalles

Orlando Roncesvalles — Tue, 27 Jan 2009 17:26:53 +0000

The exchange rate is only a part of the problem or solution. And there is no magic silver bullet, like 55 or 44, etc.

The really fast-acting Keynesian policy advice is to lower taxes. Why not roll back the VAT to 6%? Why not lower the corporate income tax rate to 20%? Why not cut personal income tax rates in half?

A tax cut is not so unthinkable. Even the experts in Washington and elsewhere believe that in recessions or depressions the problem is not price inflation but deflation. A larger fiscal deficit during these trying times can be reversed when the crisis is over.

One more thing. The balanced-budget multiplier is one; the straight Keynesian multiplier is more than one.

By: angela

angela — Tue, 27 Jan 2009 14:28:06 +0000

thanks jenny ;) as for FG, here we go again, sana ping lacson can prove it this time…