Inflation worldwide is declining, no special credit to Dutertenomics

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Bienvenido S. Oplas, Jr.By Bienvenido S. Oplas, Jr.

“Money cannot call forth goods, but goods can call forth money…”

— David Ricardo,
on the “mere increase of money” (1809)

That statement from one of the world’s famous classical liberals is the early seed of monetary explanation for inflation. David Ricardo, known for his free trade theory of comparative advantage and the labor theory of value, argued that greater output can only come from greater savings and investment, not from greater quantity of money being put into circulation by governments.

Fast forward two centuries, monetary policies by many governments to tweak their local interest rate, exchange rate and inflation rate are done more often.

The Philippines experienced high inflation in January 2018 (4.0%) vs December 2017 (3.3%). TRAIN bill became a law in December 2017. And the inflation rate kept rising until May 2018 and public dissatisfaction keeps rising too.




Year-on-Year-inflation

On June 7, 2018, the Department of Finance (DoF) produced a chart and posted in its social media accounts with this note:

“With a running average of 2.8%, the Duterte administration’s inflation rate is well below the 6.3% average of the past five administrations.

According to the data released by the Philippine Statistics Authority (PSA), the average inflation rates during the respective terms of the past five presidents are: (1) Aquino, C. 10.2%; (2) Ramos – 7.8%; (3) Estrada – 6.5%; (4) Arroyo – 5.2%; and (5) Aquino, B. – 2.8%.”

That is a deceptive campaign by the DoF and give high credit to Dutertenomics. Asiawide or worldwide, inflation rates are declining in many countries from the 70s and 80s. Interest rates too are declining, GDP size of countries are rising.

So almost all recent administrations in many countries can claim or grab credit for themselves what are actually global phenomenon.

Canada’s Trudeau, USA’s Trump, Australia’s Turnbull, UK’s May, Germany’s Merkel, Japan’s Abe, Taiwan’s Tsai, South Korea’s Moon, China’s Xi and HK’s Lam can also brag that inflation in their administration is lowest compared to many or all previous administrations’ record over the past 30+ years.

Also Thailand’s Prayut, Singapore’s Lee, Cambodia’s Hun Sen, Indonesia’s Widodo, and Vietnam’s Nguyen (see table).

So almost all recent administrations in many countries can claim or grab credit for themselves what are actually global phenomenon.

The proper comparison should be the inflation rate of the Philippines vs. other countries over the same period and years, say from 2016 to 2018. Many countries’ inflation rates declined in 2018 despite the rise in world oil prices, except the Philippines and few other countries.

Aside from credit grabbing of Dutertenomics, notice also its cherry picking of years. Why compare inflation under Du30 vs past five administrations only, why not six? Why did they skip the last six years of Marcos where inflation rate was nearly 20%? So that the Duterte idol of Marcos family won’t be upset?

A few groups and former NEDA, DOF, DBM, BSP officials are producing statements blaming many factors for the high inflation rate – world oil prices, peso depreciation, “profiteering” by the private sector, “our own worst enemies” self-infliction, etc – but not TRAIN tax hikes.

So long as Dutertenomics will not have the humility to admit that (1) series of tax hikes in TRAIN 1 has unleashed high inflationary pressure, (2) fare hikes and limited wage hike adjustments must be done before January 2019 or part 2 of oil/lpg/coal tax hikes will be implemented, the ills of TRAIN 1 will only be replicated in TRAIN 2 bill that will soon become a law.


Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.

minimalgovernment@gmail.com.

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