Wednesday, October 15, 2008

11+ inflation rate

Last week, it was announced that inflation rate “eased” to 11.9 per cent last month of September. This highly technical report made by the National Statistical Office may not mean a thing unless an elementary understanding of the following economic realities is established.

Money: It remains both necessary and practical to point out that the real value of money is based on how much it is worth and how much can it buy. In other words, while it is good to have much money to count, it is better if the little money someone has buys much. This is why long before in this Country, a little amount of money bought so much, compared now that so much money buys so little. Hence, there was a time not too far back, when a fifty-centavo ride took people far – the same distance that now requires eight pesos and fifty centavos to cover. More than saying that living is so expensive, it is more true to say that the peso buys or pays for so little these days. But this is not all.

Bank Interest: To date, banks usually give a 1 per cent + interest a year for money entrusted to them as Savings Deposit. This means that banks give the interest income of one peso for every one hundred peso savings deposit in one year provided no withdrawal was made therefrom. But there is the government that gets its 20 per cent tax from the one peso deposit interest earning. In reality wherefore, the depositor only gets some 80 centavo interest income – not one peso. As for time deposits, the banks give an interest income of 3 per cent in the usual time frame. Hence, in principle, a one hundred peso thus deposited, should earn three pesos after the agreed time of the deposit in the hands of the banks. But there goes the government again getting its 20 per cent tax. Thus it is that after the time lapses, the interest income amounts only to some two pesos and forty centavos – not three pesos. But thus is not all.

11+ Inflation: The meaning of “inflation” is just that, i.e., air goes into the money that while it becomes more in count, its value remains the same. In simple language, what then cost 100 pesos to buy, the same now costs some 111 pesos to have. Here are the head-bangers: While both Savings and Time Deposits should in principle earn 11+ pesos for the money to break even in its value, it only earns but some 80 centavos and but some two pesos and forty centavos, respectively. The conclusion is heartless and Juan de la Cruz is helpless.

While simply keeping one’s money at home is a loss as time passes by, putting in a Bank is also a losing proposition because the interest income is always less than the inflation rate. In other words, there is simply no way that even the middle class could keep pace with the cost of living – much more so the lower-income people.

They continuously but less and less commodities with the money they keep at home or deposit in a bank. Under such depressing economic circumstances, they have no choice but to have less and less food, in clothes and at home, Only highly corrupt characters, big-time crooks and the professional thieves in and out of government have it otherwise.

+OVCruz, DD
October 15, 2008