The Problem Of Whining About Inflation While Rejecting Free Trade

I may not be an economist but I can at least understand basic economics to help me see through events or understand what economists have to say. It’s been a prevailing problem in the Philippines where people have backwards thinking because they fail to understand basic economic principles. What’s funnier (or stupider) is that this morning — I’ve even read from the Philippine Star that Leni Loud Robredo aka Epal Woman who says that President Rodrigo R. Duterte should focus on fighting the inflation rather than the opposition. But this laughable considering that she’s a die hard proponent of the 1987 Constitution — the very pro-oligarch policy that’s more pro-oligarch than pro-Filipino. It should be called as “the oligarch first policy” or better yet as the “PNoy first policy” because it serves PNoys and not Filipinos. Worse, all Leni Loud does is complain and NEVER offer any feasible solutions either! 

So what causes inflation of prices in the first place? Above is a chart from Tutor2U that shows some of the problems. In short, is it really exclusively the problem of the person who has the highest position in the land? Well, there are times that it would be (ex. irresponsible handling of funds) yet he do have to consider that there’s the internal cause and the external cause. Hmmm… part of them also involves that an increase in money supply can depreciate local currencies while higher labor costs themselves also contribute to it. How would higher labor costs contribute to it? It would be stupid to sell at a lower cost when production costs have increased — that also includes salaries! How can you continue to pay higher salaries if you don’t sell at a higher price? How can you continue to innovate your business if you don’t ask for a reasonably higher price to pay for all the costs involved? That’s what those Filipino activists continue to fail to understand at several levels of stupidity.

How can we say that inflation right now is also a world problem? Consider this fact that no leader of one’s country can affect or truly lower the prices of gasoline. Gasoline is an exported commodity from Middle Eastern countries where you can expect it to be a war zone. If there’s war then think wouldn’t the prices of commodities go higher due to lower supply? Also, some of the product syou are buying are imported. If the countries have depreciated currencies (ex. Japan and South Korea have money significantly weaker than the Philippine peso) then expect their prices of their goods to be expensive. If the country where you import goods from is suffering from inflation then you can expect inflation. The Philippines will have to purchase goods at a higher price and sell them at a higher price — in order to keep purchasing said goods! If you don’t sell at a higher price whenever needed then how can the purchase cycle keep going on?

What solutions could have at least helped minimize or reduce the effects of inflation? One could consider the wise use of economic policies. The increase of the prices of goods and services can never be dissociated from the law of supply and demand. You can’t alter the law of supply and demand. When demand is up and supply is down then prices go high. It’s all linked to the supply. It’s stupid to believe that the Philippines will always be self-sufficient with its own businesses or can achieve it without foreign investors or that first world countries progressed not through accepting foreign investors but through protectionism. But again if that theory were real then why is it that underdeveloped islands are still underdeveloped islands?

How can foreign investors actually help in minimizing inflation? They are registered under the authority of the countries where they invest in. For the nth time why is it that some idiots still continue to insist that foreign investors are foreign invaders or that only foreign investors will get rich if you accept them? Both ideas are nonsense for this reason. Just take a look at first world countries and their use of free trade. Did the foreign investors take over their country? Instead, they are the ones ruling over the foreign investors. Did the foreign investors become the only beneficiaries of free trade? In contrast, first world countries have more taxes to collect from everyone because there are more businesses registered under their laws.

Foreign investors can also help make importation of certain materials easier because they too will sell their products more directly. Sometimes, you just need to import in times of scarcity. For example, if it’s not lumber season then don’t you think you should import from countries where it’s lumber season? It’s sort of like using local sources as much as possible (to avoid additional costs) all the while importing when necessary such as when local sources are scarce. This will help fill in the supply and demand gap. If there’s imported and local sources then wouldn’t that fill in the supply and demand gap? When supply is higher then prices will naturally go lower since demand will eventually lessen overtime.

This is why removing all the unreasonable restrictions towards foreign investments should be top priority. It should be because making changes to more efficient and effective systems can be costly. It’s all about where will you get a more stable and reliable source of money. Other countries may still be presidential-unitary (such as South Korea though they do have a prime minister appointed by a president) while they still became economic successes thanks to free trade.

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