Best Posts in Thread: INFLATION

Not wanting to mess up the "Rising cost of dining" I made this thread because of two items I read in the last two days:

1. "LPG prices rising for the 4th month in a row":

"In separate advisories, Petron and Phoenix LPG Phils. Inc. increased LPG prices by PHP3.25 per kilogram. Solane-branded LPG also hiked prices by PHP3.27 per kilogram starting at 6 a.m. Friday [April 1st]. The new price adjustments reflect increments ranging from PHP35.75 to PHP35.97 for a regular 11-kilogram LPG cylinder.

According to the Department of Energy, prices of 11-kilogram LPG tank range between PHP880 and PHP1,100." [Not sure if this price is for Manila only because I bought 11kg a few days ago and it cost PHP 1189 - but perhaps the delivery cost and the fact it is not Manila accounts for that]. (Source: PNA)

My record: Sept 2020 Php840; June 2021 Php915; Nov 2021 Php1132; Mar 2022 Php1189. This is an increase from Sept 2020 to March 2022 (before the increase in April) of about 41.5%.

2. Metro Dumaguete Water will be increasing prices by Php32 per cubic meter from June. As an example they give a new price for consumers using 0 to 10 cubic meters (prices rise per m3 as usage increases, to benefit the poor) of currently Php150 to "only" Php202 - if my math is correct that is an increase of about 35%. Quite a neat use of the word "only" (although have to admit water is really cheap here compared with the UK). As water is used for commercial purposes (and their rate is higher) then this should feed through to more inflation in other products and services.

 

Depends. If we look at a poor person in a developed country (or in a very urban area here) who have to buy most of their goods then we see the relatively big impact on inflation, but if we look at (and I know Filipino family members and friends here who are exactly like this) those who cook using foraged wood, fish just offshore for fish and other seafoods, raise cows, goats, chickens who graze locally and go to sleep during the hours of darkness, then inflation hardly touches them. I can't give a figure but there must be many Filipinos living like that, as one family I know live with the city and many Filipinos live self-sustaining lives in rural areas.

We don't really knows what goes on - they would never tell us but they share the same social circles. Appointed by government, given Honours by the same government (especially in the UK) and directed towards policies which avoid financial shocks from the Sovereign debts they helped the governments to build up by reckless money-printing (QE), Central Bankers are not as independent as we would like them to be. We have a situation now that ordinary people are suffering huge price increases and a decrease in living standards and some of this is due to the policies of Central Banks, afraid to take action on interest rates early enough - although 'Black Swan' events have contributed.

And the Stock Markets - prices are out of all proportion to earnings (it used to be a P/E of 14 that was the figure rating a stock as sound and is now what? 42?). Government policies, aided by Central Banks, turned savers into speculators and, to quote a cliché, it is a House of Cards ready to tumble. Could be that they will ratchet up the printing presses again and just push the crash down the road (as they have been doing for years) and at an ever increasing level.

Btw, as people might guess, I am an informed pessimist on the World's financial situation. Just as a viral pandemic was a certainty, but the timing unknown, so is the case for the financial system.

 

The poorer you are, the more you spend on basic needs (percentage wise), so I would say that to the contrary, the impact of inflation is generally felt more by poor people than by affluent ones.
Luckily in this country the price of rice has so far been pretty much stable or even gone down a few percent in 2020/2021 but with the price for wheat going through the roof, global demand for rice as a substitute will go up, thus the price of rice will probably not escape the effects of the Ukraine war either.
Obviously transport, fish, pork, and chicken have all gone up in price already, so yeah, whatever the fate of the price of rice, the poor already suffer.

Luckily there are only very few central banks that take instructions from governments when it comes to interest rates (Turkey being an example of what happens to economies where the government insists on low interest rates when they desperately need to be raised), so almost all of them will look at their policy principles and discover they are supposed to stabilize prices as their main priority. And thus they will raise interest rates in the short term already, unless the current market disturbances from the Ukraine war would suddenly end (which basically nobody expects).
Higher interest rates will encourage consumers to save rather than spend, thus lowering demand for goods and services and clear the way for falling inflation (in the longer term that is, we agree that for the time being high inflation isn't going anywhere).
These higher interest rates will inevitably spill over into mortgage rates and bond yields, ensuring that the housing bubble will come to an end and that governments will discover reduction of deficits as their new priority.

 

Yes, not a problem to expats - but we all must feel for the poor when inflation rages. It is not just the cost of the original items but also the knock-on effects on transport, for example, which raises the cost of these people getting around and the products which need to be transported (which is most things). The saviour for many of the poor must be that they live in basic ways (having no choice) and the impact of inflation is not as great.

Inflation worldwide seems set to stay for some years and is cumulative, of course - most governments are so much in debt that they dare not raise interest rates, but they will erode their own debt via inflation.

I am aware you know all these financials.