Geopolitical expert blames LP and their "yellow book" on high inflation rate - The Daily Sentry

Geopolitical expert blames LP and their "yellow book" on high inflation rate

Geopolitical expert: Duterte’s critics have once again proved their Economic ignorance
Adam Garrie, photo from Washington Examiner
As announced by Philippine Statistics Authority (PSA), inflation or the increase in the prices of goods climbed to another 9-year high, hitting 6.4% in August 2018.

This high rate of commodities has been a national issue since last month but the government is evidently doing its best to address the same.

United Kingdom's Geopolitical expert, Adam Garrie said that Duterte administration is aware of the inflation level and that reasons for high rate are primarily factors external to the country.

"No one, including President Rodrigo Duterte is hiding the fact that current inflation levels in The Philippines are high. But the underlying reasons for this are primarily factors external to The Philippines," Garrie said.

Garrie said the fact is that virtually every developing economy including China’s economy is experiencing a currency depreciation which results in consumer price inflation.

"While the overall strength of China’s economy has helped to shelter the average consumer from much of the pangs of inflation, in other countries including India, Pakistan, Turkey, Russia, Iran, Indonesia, Argentina and many others, both businessmen and ordinary consumers are feeling the pinch."

Adam Garrie stated some phenomena that causes of current inflationary spirals in developing markets:

–The US Federal Reserve shrinking the global Dollar supply by effectively reversing the quantitative easing practices of the last decade

–US tariffs and sanctions against developing economies leading to negative market speculation against multiple world currencies

–A robust US Dollar making it more difficult for developing countries to pay off Dollar loans while also increasing the cost of all Dollar based transactions (aka the vast majority of transactions) in international trade

–Comparatively high US interest rates scaring off emerging market friendly lenders

–Comparatively high global energy princes in the light of new US sanctions on Iran and the generally unstable political situation in parts of the Middle East including in Iraq which like neighbouring Iran has vast oil reserves

According to Garrie, it would be unreasonable to blame President Duterte for the high inflation rate as the one to be held accountable are his opponents.

"Unless President Duterte is also the Chairman of the US Federal Reserve, the US President, the head of OPEC, and a Chinese trade envoy in addition to being the President of The Philippines, it would be ludicrous to blame Duterte for the current levels of inflation stemming from a weak Peso," Garrie stated.

"Ironically, it would be fair to blame his opponents in the Liberal Party for this inflationary spiral because it is the Liberal Party that continues to defend the Liberal authored and implemented 1987 Constitution which severally restricts foreign direct investment (FDI) in The Philippines," Garrie added.

According to the geopolitical expert, The Philippines is currently a high growth developing economy, something which according to Keynesian economic rules will necessarily lead to at least some inflation even in the best of geo-economic circumstances.

"A similar situation exists in Turkey. When the US decided to turn the screws on the Turkish Lira, Ankara’s solution to the problem was to use a weakened national currency to its advantage by luring more foreign investors to the country – primarily from China. In fact, Turkey’s low Lira has helped to confirm a new era in respect of copious amounts of Chinese investment into Turkey."

"Turkey’s openness to foreign investment, its continued economic growth and high employment numbers and an increasingly innovation friendly economic environment have given Chinese investors the confidence required to realise that in the long term an investment into an economy experiencing inflation will ultimately offer a higher return than investing in a slow growth or low growth economy with a highly valued currency and thus low inflation," Garrie stated.

Garrie blamed the 1987 Constitution which he branded as the "Yellow Book" as the said could not make the best of a low Peso. "The Philippines could likewise make the best of a low Peso by attracting similar kinds of investment but the 1987 Constitution (aka ‘The Yellow Book’) will only let foreign investors own 40% of any corporate entity. Such draconian restrictions on FDI are incredibly unattractive to investors seeking to take a chance on putting money into an economy where foreign currencies can go further thanks to a weak Peso," Garrie said.

Garrie also explained that the 1987 has helped to protect a small cabal of business oligarchs at the expense of a more open and diverse economy, the corrupt oligarchs continue to exploit the inflationary crisis to squeeze consumers further when a system open to economic diversity could help consumers buy inexpensive imports at a time of rising prices.

"This is for example why the price of rice has become un-affordable to some of the poorest Filipinos. Furthermore, the restrictive, anti-innovation business environment ushered in with the 1987 Constitution has made it difficult for The Philippines to export its way out of an inflationary crisis which under normal circumstances is a very important method that developing economies can implement to reduce the effects of a weak currency."

Garrie believed that with the help of  House Speaker Gloria Macapagal Arroyo who is an ex[ert of economics can help to ease inflation. "Of course no such strategy can help to lessen inflation overnight while the prevailing global trends which are the root cause of the current inflationary spiral are not likely to change any time soon," he added.

"While it is becoming increasingly commonplace for Duterte’s critics to blame everything from personal heartbreak to the weather on the President’s policies, when it comes to inflation, the roots have little to do with the internal situation in The Philippines while the solutions that are forthcoming could not in any circumstance result in the voodoo problem solving being advocated for by the Liberal Party whose much beloved constitution makes solving the inflation problem that much more difficult," Garrie ended.

Source: Eurasia Future