On monetary sovereignty and government spending

philippines-economy ibtimes dot co dot uk

Growing the Philippine economy [Photo credit: ibtimes.co.uk]

By Karl Garcia

I am no expert in anything, I do have a master’s degree, but I claim to be a master of none. But I do consider reading blogs as part of my continuous learning process. I will try my very best to present a layman’s understanding of some technical ideas discussed in Joe’s blog.  I’ll use comments from others and add my own thoughts.

Monetary sovereignty, a starting point to understanding constraints on growth

I was interested in the concept raised by blogger Micha about monetary sovereignty, and blogger Mary Grace Gonzales’ response. Here’s what they said:


Because the national gov’t is monetarily sovereign, it does not anymore need to collect taxes in order to spend. “ 

Mary Grace Gonzales:

I need to know more about a country being monetarily sovereign. My impression of our budget system that is being subjected to annual scrutiny and criticism by the likes of Leonor Briones and Ben Diokno (of the previous administrations) is that it is based on hard money, dependent on revenues collected by the BIR, Customs and other revenue generating agencies of the government. Various department and agencies are forever fighting for a bigger share of the pie, so to speak.

I always though about it as actual hard money, in bills and coins…hahaha…Stories told in my youth about sackful of Japanese money without value which are all over the country during the Japanese occupation are now coming to mind.

According to this: http://mmtwiki.org/wiki/Monetary_Sovereignty monetary sovereignty refers to the ability of a government (generally a national government) to control its own currency.

“A nation is sovereign in MMT parlance if it issues its own currency, floats it freely on foreign exchange markets and does not acquire financial liabilities that are denominated in a foreign currency.” — Bill Mitchell

To be sovereign, a government must have the ability to control the amount of money in existence at no cost and must owe its obligations in that currency. A country can still be monetarily sovereign if it chooses to adhere to certain kinds of domestic rules, for example a Debt Ceiling.


Many governments enjoy monetary sovereignty. The United States, Canada, Japan and the United Kingdom each control their own currencies (the United States Dollar, the Canadian Dollar, the Pound and the Yen). The governments of these nations can create money at will, at no cost. The U.S. Government, for example, can “spend reserves into existence.” The sub-national entities of these Countries (States and Provinces) are not monetarily sovereign.

My question is: “Are our financial liabilities denominated in a foreign currency.” If they are, then if we adhere to certain kinds of domestic rules, for example a Debt Ceiling, does that make us still monetary sovereign despite that?

It would be great if we really are truly monetary sovereign, then with proper control so as not to make our currency worthless, as you say, we can allocate more to LGUs so they can function as they should. I also agree that LGUs should not be lazy and just be dependent on their IRA’s share.

The growth constraint of foreign denominated debt

We discussed that, and then I decided to cut to the point. I asked: “With monetary sovereignty, can we spend on education and military, let us say, at 10 % of GDP?”

Here’s Micha’s response:

Short Answer :

As long as the bills are payable in Philippine Peso, ABSOLUTELY YES.

Not So Short Answer :

The reason there’s a qualifier in my short answer is that when the PNP and the AFP, for example, wanted to upgrade their military hardware they usually source it by importing and those are, as far as I know, always paid in foreign currency (usually US dollars). The Philippine national gov’t is not sovereign when it comes to dollar creation. We have to earn it. Remittances of OFWs are a major source. Our Bangko Sentral has dollar reserves for contingencies in foreign bills and obligations.

The same is true in the education department. If the spending is just for payrolls of employees or teachers, there’s no constraint in the ability of our national gov’t to write the check. But not when it comes to importing goods and services payable in dollars.

The practice of capping spending as a percentage of GDP is rather weird and unnecessary because of this:

GDP = gov’t spending + private sector spending & investments + (exports-imports)

It’s not rocket science. An increase in GS would correspond to an increase in GDP (measured, of course, in Philippine Peso).”

Great, then what is stopping the government from spending much more ambitiously? Especially if we build our own military gear instead of buy it in America with dollars?

Micha, who made the solution seem easy, then gave us a dose of reality, reminding us of our dollar denominated debt.

My simplistic suggestion was to convert all the dollar denominated debt to pesos and borrow domestically. Borrow from the citizenry.

Joe called it “War Bonds”

I recalled hearing about that from DILG secretary Rafael Alunan during the time of President Ramos. Here’s an excerpt from Alunan’s Facebook page:

“Dear Mr President,

Please cut the bureaucratic red tape so that you can, as Commander-in-Chief, buy ASAP the necessary capital assets and support systems for the Navy and Air Force needed to defend our country, protect our EEZ and uphold our nation’s dignity and honor. They’ve submitted their requirements and all it needs now is decisiveness to negotiate and buy what is needed from the most reliable suppliers.

You must front-load the purchase and construction of necessary infra to support those assets in the next 3 years. Buy brand new off the shelf if necessary, but if there are good bargains for existing assets for immediate transfer, please do not hesitate to grab these. Time is of the essence.

How will you pay for it in the next three years and beyond? May I suggest the following:

1. President’s contribution: part of Special Purpose Funds

2. Congress’ contribution: part of PDAF

3. Local Government’s contribution: part of IRA

4. Business Sector’s contribution: buy Patriot bonds; invest in joint-venture defense manufacturing.

5. People’s contribution: in partnership with telcos – 50 centavos on top of current commercial charges for every SMS, MMS or call.

6. Friendly nation’s contribution: ODA, soft long-term loans.

Please direct your ambassadors to obtain full access to modern assets and systems needed to meet our objectives.

Inang Bayan needs decisiveness now, and everyone in your team must focus on securing our nation’s future now.

Thank you.

Mabuhay ang Pilipinas!
Rafael M. Alunan III

P.S. Please clamp down as well on the potential corruption in the acquisition process”

If War Bonds or Patriot Bonds can be used to implement our long delayed AFP modernization, what is stopping us from spending for education and infrastructure and paying all our dollar denominated debt?

The need for better budgeting, built on good forecasting

When we talk of spending, the best starting point is the budget, in particular, the macroeconomic assumptions of the budget (Source Senate Economic Planning Office Publications). Here is an excerpt from the article:

The President’s 2013 Budget: the Macroeconomic and Fiscal Perspectives

“Careful attention to economic trends is essential in budget formulation. The size of the budget and the revenue and expenditure estimates are all dependent on how the economy will fare for the period in consideration. The GDP, for instance, can affect the government’s revenue targets. Higher GDP generally results in a larger tax base and consequently, higher revenue collections from the domestic market. Conversely, lower GDP normally leads to lower revenues. A higher-than-expected inflation rate, on the other hand, could lead to higher government revenues because of the increase in the price of the taxable goods. Meanwhile, changes in the foreign exchange rate as well as in the interest rate can affect both the revenues and disbursements. Moreover, the different macroeconomic variables are highly correlated and can significantly affect one another. The Bangko Sentral ng Pilipinas (BSP) for instance often look at the inflation rate when deciding on whether to cut, increase or maintain its policy rates. Changing interest rates, in turn, impact the currency values as higher interest rates attract foreign capital and cause the exchange rate to rise. Because of these interrelationships, it is of paramount importance that assumptions on macroeconomic indicators and forecasts about the economy are fairly accurate.

The macroeconomic parameters of the budget are deliberated on and determined by the Development Budget Coordination Committee (DBCC) and are stated in the Budget of Expenditure and Sources of Financing (BESF) published by the Department of Budget and Management (DBM).

While admittedly, macroeconomic forecasting is a difficult exercise as it is based on many variables and uncertainties, it is interesting to note that in the last thirteen years, from 1999 to 2011, not even once did the actual GDP growth rate fall within the growth range projected in the BESF. Actual GDP growth was lower than the forecast ten times and higher than what was targeted three times. During the said period, the inflation target was breached thrice–in 2004, 2005 and in 2008 which was the height of the global financial crisis. Except in 2008, actual T-bill rates are often lower than the assumed, indicating that the government spent less than what was programmed for domestic debt servicing for the said period. As for the foreign exchange rate, it was only in 2011 that  the actual peso-to-dollar exchange rate fell within the government assumption. Actual exchange rate deviated from the target by an average of PhP3.01.

Why growing GDP is not so simple

Spending takes planning . . . a lot of it. It is also a pipeline of very complicated processes. How I wish it were a simple formula of GDP = gov’t spending + private sector spending & investments + (exports-imports). The formula says you spend a lot, have investments and have a trade volumes to consider.

Should we forget about the other macroeconomic factors?  Should we forget about taxes, the procurement process, inter-agency transactions, the whole shebang that makes a simple formula into rocket science?

Here are two important excerpts from an article from the Senate Planning Office entitled “Plugging the Loopholes of the Philippine Procurement System

“Several studies in the past referred to the Philippine public procurement system as a spawning ground for official corruption. By government’s own estimates, as much as PhP22 billion is lost each year in government spending due to corruption in procurement. Realizing the severity of the situation, a reform process was initiated, which resulted in the enactment of Republic Act No. 9184 otherwise known as the Government Procurement Reform Act (GPRA) of 2003.”

“Despite the passage of what is Philippine Procurement System referred to as a world class law– the Government Procurement Reform Act has not been enough to prevent notorious corruption cases from being committed. Issues that continue to plague the procurement system, including the harmonization of rules with the procurement system of foreign donors and creditors, alignment of the procedures in the case of Build-Operate-Transfer (BOT) projects, and the challenge of operationalizing and implementing the reforms in all levels of government need to be looked into and addressed promptly.”

Another hindrance is CORRUPTION.

We have good laws but still there are loopholes.

The processes attached to the releasing of budget and the procurement system are both momentum stoppers of government spending. Corruption is a drain. And how can we forget DAP, through which the Executive administration sought to speed up spending. It’s purpose was well-intended but it was killed by a Supreme Court decision (here is Justice Leonen’s elaborate concurring opinion). So we also have the bureaucracy getting in the way.

LGU’s are a part of the problem, not the solution

Then there are the realities, on the ground, in local cities and municipalities. Blogger DAgimas weighed in to explain how the government allocates revenue (IRA = Internal Revenue Allotment) and why it discourages LGU’s from working to improve services:

“I don’t think the tax generation or allocation is the problem. on the contrary, the internal revenue allotment makes LGUs lazy. they don’t have to generate their revenue. they don’t have to create jobs to generate revenue. and they don’t generate their own revenue to spend for public safety, education or social services which I observe in the USA as the primary reason for local government existence.

look, public safety and education are funded by the national government. so why do the LGUs still need allocation? they should generate their own revenue to spend on their pet projects?

that’s why I support the BBL but not the provision of revenue allocation from the national govt. all govt entities should have their own specific functions and the ability to generate their own revenue to fund their respective functions and have the power to enforce such functions.

some LGUs are rich like Makati and can function without that IRA. and since some functions are lodged on the national govt like education and public safety, their excess funds are used for the allowance of national govt employees like the courts, police, teachers

but for many LGUs, they just depend on the IRA. even if all the BIR collections in these LGUS are turned over to them, its not enough to fund their operations so its a blessing for them to have IRA”

DAgimus went on to state:

“LGUs get 40% of all BIR collections divided into how many populations and how big the area of the LGU

there’s nothing like it anywhere else in the world. on top of this allocation, these LGUs are not responsible for public safety and education. ( the national govt is responsible) only health and social services are devolved to them. and all property taxes are theirs.

in the US, public safety and education are the responsibility of LGUs. you don’t get allocation from the state and federal govts. you have to fund these services from your property taxes and sales tax etc.

if you can not maintain these services, you are going to revert to the county as unincorporated area.

that’s why the BIR chief said LGUs are lazy, even IMF/WB/ADB say that LGUs should find ways to raise their revenues and not to depend on this allocation from the national govt

My observation was that the local government code intended for the allocation to help the impoverished LGUs to eventually stand on their own. So we have good intentions but bad results. The LGUs can’t operate if there are no automatic appropriations of IRA. That is why they are requesting that Congress make appropriations automatic so they can set their priorities straight.

I understand some LGUS are on top of the mountains, and some are so isolated and remote that we hear the children travel hours on foot just to reach school. Some don’t  even bother.

The rules for local taxation in the Local Government Code are very intricate. I argued that LGUs should generate their own revenues, but other problems must be resolved first.


So if we look at what ought to be simple and not rocket science . . . growing GDP . . . we find that the PROCESS of doing that requires at least some kind of science. Maybe it is called applied economics.

  • Funding debt in pesos so that the choices between military spending and education are not so hard. Removing the constraint of foreign debt.
  • Getting rid of the barriers to spending (improved budgeting and slow procurement processes) and the drain of corruption.
  • Making LGU’s a part of the dynamic growth process rather than being along for the ride.


197 Responses to “On monetary sovereignty and government spending”
  1. Congratulations, Karl. You did it!

    The recommendation of Secretary Alunan on defense upgrade is excellent, and he enumerated the possible sources of funding to implement the same. His post script is realistic, truly apt. “P.S. Please clamp down as well on the potential corruption in the acquisition process”

    I remember you posted this in an earlier blog, and I commented on it, too.

    Would you know if ever ex President Ramos acted on this superb recommendation? If not, that’s a shame, considering he once belonged to the military. President Aquino recognizes the need to upgrade our defense system and is acting upon it.

    Great summary.

    • Joe America says:

      And the irony, the irony. Mr. Alunan is on Mayor Duterte’s hypothetical cabinet.

    • manuelbuencamino says:

      Alunan was Pres Ramos’ DILG secretary. It was during Ramos’ term when Ft Bonifacio was privatized and the proceeds were supposed to go to AFP modernization. It did not happen. I guess Alunan is very disappointed with his former boss. Also I wonder if Alunan wrote a similar memo to Ramos

      • Karl garcia says:

        Yes, it did not happen. I think he still see FVR once in a while,if the memo was given today.FVR would just agree and tell him,it is a good thing you were my DILG sec,if you were my DND sec that is another story.

    • Karl garcia says:

      Hi! Thanks and once you have the time,you may submit a blog too.Joe is very supportive in the editorial assist that the published version is way way better than the one I submitted.
      Ramos started it but finally after so many years we see promise in the AFP modernization,so many reasons or excuses power crisis,financial crisis,americans left leaving nothing ti us so have to start all over,etc.
      Since patriot bonds came from his guy,maybe he will support it.

      • Karl garcia says:

        The reply was for Mary Grace.

      • Mary Grace P. gonzales says:

        Truly time for me is a scarce commodity. But hope springs eternal, as the saying goes….who knows, one day, I’ll be clicking that magic icon “send” in my email account and whoosh, an article is on its way to Joe’s…

        For now, i’ll be content in commenting to this wonderful contribution of yours, the others’ and joe’s of course.

        • Mary Grace P. gonzales says:

          Although foe sure, that would surely add to joe’s editing task knowing my typo problems and other literary shortcomings. Haha

        • Joe America says:

          I look every day to see if it is there yet. 🙂

        • karl garcia says:

          Thanks Mary. I will be waiting,your write way better than me. Just take the Nestle plunge.

          • karl garcia says:

            see another typo, u not alone.

            • BFD says:

              But in the end, it is that thorny side of corruption that we have to deal with even with Mr. Alunan’s recommendations.

              He coaxed it in general terms,

              “P.S. Please clamp down as well on the potential corruption in the acquisition process”

              And I don’t think it’s only on the acquisition process that’s going to be a problem on this thing, it’s on each layer, every channel that it will take, from implementation, collection, bidding and acquisition.

  2. edgar lores says:

    Darn, Karl! I wish I could comment but this is way above my head.


  3. Micha says:

    Excellent karl, congrats for putting it all together. Although I hate you for beating me to the punch. 🙂 (Biro lang)

    I am happy that we’re getting some traction here. Now for some fine tuning :

    You said : “So if we look at what ought to be simple and not rocket science . . . growing GDP . . . we find that the PROCESS of doing that requires at least some kind of science. Maybe it is called applied economics.”

    I would insist that it really is that simple karl. The difficulty is not in the economics but in the politics. Having opened our eyes to the beauty of Monetary Sovereignty, the next step is to open the eyes as well of our Congress men and women who hold the power of the purse and are crucial part in the policy making process.

    Most, if not all of them, are still ignorant of the concept of Monetary Sovereignty.

    (I’ll address other caveats to an otherwise excellent article later).

  4. Bing Garcia says:

    Senator Grace Poe possesses a tremendous amount of good promise and much more propitious time to prepare for an inevitable Presidency by 2022, when she will only be 54 and her youngest child already 16, should she opt out of a Presidential run in 2016. That would indeed be good judgment. But certainly not if she willy-nilly risks an independent run for the Presidency with Chiz Escudero as her VP. That would be foolhardy and airheaded! Buddy Gomez

  5. manuelbuencamino says:

    READ : http://en.wikipedia.org/wiki/Monetary_sovereignty The Philippines is not a monetarily sovereign government. We cannot issue unlimited amounts of currency like the US for example. Even if the bills were payable in pesos no sane businessman will accept payment in a currency that cannot be converted into some other currency. In the globalized economy convertibility of currency is what gives currency legitimacy, it is what differentiates the Philippine WWII Japanese peso from today’s peso.

    • karl garcia says:

      Yes, convertibility is a problem if you ask me. BSP must make our currency stable and convertible.I really would like to hear Micha’s summation on this subject..

      • manuelbuencamino says:

        Our currency is convertible. Our credit rating is investment grade. My worry is that we misunderstand this monetary sovereignty thing to mean that we can print as many pesos as we want so long as they are used to pay peso bills

        • Micha says:

          “My worry is that we misunderstand this monetary sovereignty thing to mean that we can print as many pesos as we want so long as they are used to pay peso bills.”

          The national gov’t creates pesos into existence by paying its bills. There is no constraint in that ability other than the threat of inflation which it could control by employing the tools of taxation and adjustment of interest rates.

    • Micha says:


      “We cannot issue unlimited amounts of currency like the US for example.”

      Issuing currency is the province of monetary authorities, that is, by the Finance Dept. and the Bangko Sentral. They will determine the amount of money supply as measured in Mo, M1, M2, or M3. Btw, the US, although monetarily sovereign and the dollar is king because it is the main international reserve, still has to deal with self-imposed absurdity called the debt ceiling which had been increased so many times anyway.

      “Even if the bills were payable in pesos no sane businessman will accept payment in a currency that cannot be converted into some other currency.”

      I don’t understand why you’re saying this because we have a free-floating currency that is not pegged to any other country’s money, as far as I know. And we do participate in foreign exchange trading, aren’t we?

      And are you referring to both foreign and local businessman? A foreign businessman would always prefer getting paid in dollars. A local one would be insane not to accept a multi-million peso contract from the national govt. Does the national gov’t bids its projects in dollars or in pesos?

      “In the globalized economy convertibility of currency is what gives currency legitimacy, it is what differentiates the Philippine WWII Japanese peso from today’s peso.”

      Nope, in a fiat system, what gives a currency legitimacy is the “full faith and credit” of its national gov’t.

      A Japanese peso was worth next to nothing because there was no legitimately recognized Philippine-Japanese government by the international community then.

      • @Micha I think what MB is saying is that unlike the US who owns the USD which is the defacto currency of international trade that we are bounded by taxation and GDP growth/ inflation risk.

      • neo canjeca says:

        this comments este question is way off in terms of distance and time. When P Noy took over the presidency there was news somebody might had read about discovery by a farmer or scavenger I don’t recall now in unlikely place in a Central Luzon province (Pampanga?) of a discarded stash or a hill of new crispy notes Philippine currency in Peso 500 and 1000 denominations. People’s curiosity was aroused and voila the thing vanished into thin air. If this came about who says we can’t print or make our own money? Fluke or truth, those who knew about this, Please enlightened us here.

  6. Micha says:

    There are no other entities outside of the national gov’t that is monetarily sovereign. Provinces, cities, and municipalities are not monetarily sovereign. They, unlike the national gov’t, need revenue and/or outside subsidies in order to spend.

    DAgimas criticizes LGU’s for being lazy but taxes are being collected solely by BIR (a national agency). That leaves LGU’s to rely mostly on fines/penalties and business permits for income source.

    In a way, DAgimas validates the reality of MS because if tax collections can only be so much, how does the national gov’t make up for the deficits?

    • DAgimas says:

      the local govt code provides for all the mean to raise revenues. what I don’t like about the IRA is that it gives money to the LGUs without specifying what where should be spent.

      if the national govt shares or allocates revenues, then the LGUs should shoulder public safety, basic education, health, welfare etc. only the last 2 are devolved to the LGUs. worst, the congressmen still gets pork barrel. what else is left for the national govt? nada

      Pimentel wants even to increase the IRA to 60% and include all customs collections. ang swerte nila.

      tell you what. the typical county (province) in the US has its own prosecutor, court, police, jail, health, welfare, community college, housing, transportation, comelec, coa, as their primary responsibility with no assured support frm the state or federal govt. they fund these functions thru sales tax and property tax.

      I know we should not be comparing our situation in the Philippines but that’s how govt should work. that’s why I wonder whats all the fuzz with the BBL? give them autonomy. if they want sharia law, who cares? as long as the rights of the others are respected, why the fuzz? if they want to issue their own currency, why not? just don’t give allocation. they want autonomy? then be prepared to raise your own revenue.

      • Micha says:

        “…they fund these functions thru sales tax and property tax.”

        Bingo. That’s the difference. Our provincial and municipal govt do not have agencies of their own collecting those kind of taxes. Only the BIR does. Am I wrong?

        • DAgimas says:

          seems you don’t pay prop tax yourself or business tax. go visit your city hall or capitol. they have all the offices for these purposes. in fact the local govt code provides for the same office for all LGUs

          LGUs cant levy income tax but common, there are so many ways to skin a cat as they say

          • Micha says:

            Sorry about that. I guess I’ve been away for so long I am not familiar with the set up of tax collection.

            Anyways, taxes always impoverish the private sector, whether it’s being done by local or national govt. The only difference is that LGUs need it for spending, national govt don’t. National govt creates money by spending.

            • DAgimas says:

              Keynesian economics…some economists are pointing out that it didn’t solved the American depression. its the WAR that solved it

              • Micha says:

                Hahaha….what sector of the economy spends a lot during wartime? What sector contracts companies to produce more bullets and fighter jets and combat uniforms?

                Isn’t that sector called G-O-V-E-R-N-M-E-N-T?

                And what is Keynesian economics but government spending. Or more precisely, stimulative government spending in times of recession and/or depression.

              • BFD says:

                A sad truth. Yes, because it creates jobs directly and indirectly. War creates jobs for the unemployed by enlisting as soldiers, and when that is filled up, jobs are created in the periphery, from the farms to the factories, from weapons manufacturing to support materials like food, clothes, and other materials to support the troops, employing even women because the men are off fighting the war.

              • DAgimas says:

                The issue is the American economy was already faltering despite Keynesian economics. its the war that resuscitated it. so Keynesian economics might not work all the time

    • Haven’t had the time to look at it in detail but I suspect that powers like smart and globe and sm act like banks in a way that their sale of load/gift certificate are tantamount to expansion of money supply.

  7. edgar lores says:

    Just dropping this link here. Seems to be a short but comprehensive primer on the topic.


    • Micha says:

      Thanks for the link edgar.

      I remember your main objection to MS then was on the grounds of moral hazard. Do you still hold that view?

      • edgar lores says:

        Thanks, Micha. Did I come to that conclusion? I cannot recall doing so, much less my chain of reasoning.

        What is obvious is my naivete: https://joeam.com/2014/09/23/getting-the-supreme-court-out-of-the-business-of-operating-the-nation/#comment-82123

        This monetary sovereignty (MT) thing is almost as paradoxical as black holes in astrophysics. It’s voodoo economics that seems to work.

        Australia and Canada seem to be two of the countries practicing MT. From my front seat in Oz, I can see that the Treasurers of successive governments still speak in terms of balancing the budget, of their horror at deficit spending, and of the constant aspiration to get back into surplus.

        What I can see is that the successful implementation of MT seems to be in the use of constraints to reign in any possible danger of inflation. These constraints consist of classical economic concepts such as “balancing the budget” and the “debt ceiling” in the US, as well as discarding any foolhardy notions of gifting citizens with a million dollars each, and wiping out the national debt at the stroke of a pen.

        In a word or three, monetary and fiscal discipline.

        • Micha says:

          Monetary Sovereignty (MS) and Modern Monetary Theory (MMT) are sister/twin concepts developed independently. The former by Rodger Mitchell and the latter by Randall Wray, Warren Mosler et. al. Very similar, parallel concepts.

          As Rodger has stated, it’s not a theory or a philosophy or a set of beliefs in the same way that evolution is not a theory or a philosophy or a set of beliefs. It’s a factual description of how the finances of a sovereign govt works in a modern fiat system.

          Most governments around the world including those in the US, Canada, Australia, Britain, Japan, the Philippines and others still operate in managing their economies on the assumptions and metrics of the gold standard. Thus the biases towards “balanced budget” and fiscal prudence.

          The concept has not gone mainstream yet and there’s a lot of ignorance of it even by those who have important roles in policy making, so a lot of work needs to be done in its dissemination. Just as the theory of evolution has attracted a lot of opponents in its infancy and were even ridiculed by religious zealots, MS/MMT is a bitter pill to swallow for classical economists because it’s a case of “everything that you used to know that just ain’t so”.

          • Joe America says:

            So the monetary system is not like the flat earth, eh, with a cliff at the other side. I’m starting to get it. Keep preaching.

            • Micha says:

              I think it was Randall who said that the concept is so simple even his 5 year-old kid has no trouble understanding it. But when he try to explain it to an adult with pre-conceived notions and biases from the old school, he needs pulling more effort to get it through.

        • Joe America says:

          Edgar, your article on moral hazards of the Binay family has been picked up somewhere on Facebook and is getting a lot of reads. https://joeam.com/2014/10/12/warning-the-moral-hazards-of-the-binay-family/

  8. Joe America says:

    It seems that there must be a model for ramping up growth that considers both the funding and spending for big infrastructure projects like the lake dike project that will remake the face of greater Manila. Sourcing funds through debt and grants and Patriot bonds, not just taxes. But the spending side is also problematic as pointed out in the article. Procurement, corruption, the time for bidding and funding. Add to that political interference, as cited by President Aquino today:


    I’m starting to think the Executive branch needs more empowerment. Not less, as occurred with the DAP ruling. Let the leader lead. Ramp up the spending.

    • Joe America says:

      I’m running into the uncomfortable conclusion that democracy is very inefficient, and the constitution does not really do a very good job of inspiring results. It is more focused on control. It is inefficient, too.

      • karl garcia says:

        Time for a rubber constitution.( read an exchange between you and atty leona)

        • You mean like the 1973 Constitution of Marcos? 🙂

        • Joe America says:

          The flexibility of the document would be improved if it were not so detailed, but instead issued broad principles that were put into practice by legislated acts and case law from the courts. Legislative acts suffer from the same rigidity. For example, building codes are established by Congress, rather than the broad principles (able to withstand 8.0 earthquake) being in the law and the particulars (size of beams) being delegated to an agency. Executive has no power to manage salaries or incent people on performance because laws tie their hands. Rubberize the constitution and the legislative acts and the nation would move a lot more quickly.

      • China does not have democracy and it has lifted millions of its people out of poverty in what is probably the greatest achievement by any government in modern times. The Philippines is too caught up with “democracy”, not realizing that it is not synonymous with good governance or progress.

        • jameboy says:

          China does not have democracy, yes, it’s a communist county, so what’s the point? We go communist too? It’s a communist country, suppose to be the anathema of democracy, but it’s economy is powered and supported mainly by governments that are not communist.

          Contrary to the insinuation above, the lifting of people out of poverty was not because of the system of communism but in spite of it. Those “Made in China” products that floods the US and European market is one main reason for the so-called “greatest achievement by any government in modern times”.

          There goes that comparison again paring the weak and third world Philippines with a behemoth and a superpower like China. We are being compared to the second (some claim) the biggest economy in the world just to make us feel we’re nothing really. We’re the favorite piñata every time somebody wants to brag something to show how worse we are. Instead of making it an inspiration for us to aspire, we’re being told that we know nothing any better. That others are much better and prettier than us. We’ll not amount to anything.

          That’s our life story. 😳

          • Jameboy, the first part of your reply is unclear. You say, “but it’s economy is powered and supported mainly by governments that are not communist. ” Do you mean the trading partners are not communist?
            That is beside the point. It was China’s government that decided to open up the economy — that produced the miracle.
            On the second part of your reply: dont you think it’s better to be operating under the correct primary principles? To use your analogy: the girl should know that she is NOT a beauty at this point and make changes to the way she conducts herself (haha you just gave me an idea for a blogpost). All is not lost — this girl, Phillipa let’s call her, was endowed with great resources, she just has to take a bath, brush her teeth more often, and not be afraid to change her clothes. (this is an analogy, jameboy. lest we fall back into the same changing the man-in-the mirror discussion we had before. That is not what i mean.) So, I hope this brightened your day. There is hope if the Philippines does the right things.

            • jameboy says:

              Aside from being the world’s largest producer and consumer of agricultural products China is also rich in energy potential most of which has yet to be developed. In short, along with other economic factors, China compared to the Philippines is rich. Only nuts will question that fact and worse only those with evil mentality will brag about it.

              Along with that status she also has these partners.

              Main export partners:
              US, Hong Kong, Japan, South Korea

              Main import partners:
              US, Japan, South Korea, Taiwan, Australia, Germany.

              So, I really don’t know where that “miracle” you are talking about is coming from. If China opened her economy, that’s no miracle, that’s practicality in the face of reality. Miracle is when you are dying of cancer yesterday and you were cured today because the cancer all of a sudden disappeared.

              Everything to be a success is there for China. And I don’t think no Chinese will agree that their economic existence was because of a ‘miracle’.

There is hope if the Philippines does the right things. – charlesenglund
              That make sense. 🙂

              • ok seems like I have to give a history lesson too (see my free econ lesson above) — Philippines is likewise rich with resources, what is your point?. Why is it a miracle: China is 10x the size of Philippines and suffered from Mao (some would say just like Philippines suffered from Marcos). Millions upon millions were starving in an inefficient, agriculture-based, command economy. It took Deng Xiao Peng to BREAK OUT of the communist party ideology, do a 360 change and adopt capitalism. He changed the INSTITUTIONS — the system, the whole mindset of the communist party and the chinese people. THAT is the Miracle; that one man can go against the whole ingrained way of thought and dogma, realize things were not working, and actually succeed in impacting the lives of hundreds of millions of people.

                Where is the Philippines’s Deng?

              • jameboy says:

                I think no Chinese will agree that their economic existence was because of a ‘miracle’.

              • jameboy says:

                charles, you’re good and you don’t have to sell it. Don’t have to push anything hard because it might come back and ricochet to you. The “lessons” save it. You just got one, savor it. :;

                I’ve said what I’ve said, now we move on.

        • Joe America says:

          Isn’t that interesting? A government “of the people” is slower and convoluted and bitter (US partisan politics) whereas an authoritarian government can generate more unity and faster development. Plus we have the exciting phenomenon in the Philippines where disasters are put into leadership by the unenlightened masses as the enlightened are left to bitch and moan.

          • Goes back to my original point in our previous thread and on my blog. Philippines has to change institutions: its key belief in an American style democracy; its non-strategy of exporting its own people to keep things afloat; its fear of a strong president.

            • Joe America says:

              “Fear of a strong president.” Bingo, boy did you hit home on that. The chains a President operates with are incredible here. But as far as institutions go, I think there is the matter of pragmatics and how to get from A (inefficient institutions ) to B (efficient institutions). Rebellion and tearing things up are huge steps backward – with no assurance of any better results, because the people and methods are the same – whereas a push toward better deeds within the existing framework can start to break down poverty and mover forward. I’ve adopted the principle of stability as job one, with steady GDP growth above 7% per year, the basic benchmark that will lead to a healthier, wealthier, progressive Philippines in about 10 or 15 years.

        • BFD says:

          @charlesenglund Is this what you’re speaking of? Even China cannot take care of their own…. even with their so-called prosperity…


          • I didn’t say they did. The human rights abuses, the willingness to do anything for money, even tainting baby formula, etc. Funny that you should choose an article that mentions the problem of migrant workers…cough…OFWs.

    • Micha says:

      “I’m starting to think the Executive branch needs more empowerment. Not less, as occurred with the DAP ruling. Let the leader lead. Ramp up the spending.”

      I wish too. But for that to happen, we need a constitutional amendment transferring the power of the purse from Congress to the Executive. Justice Leonen’s concurring opinion on DAP as mentioned by karl is nothing more and nothing less than upholding that congressional power vested from the Constitution. As far as spending is concerned, It’s a political juggernaut, not an economic one.

      Most, if not all, Congress members still believe that the govt is “broke” or that it must “live within its means”. In light of MS, nothing could be farther from the truth.

  9. I feel like I should be charging for Economics lessons, but here goes — A government cannot just print money to fund its expenses. Think about it; if it were that simple, there would be no poor underdeveloped countries today. There is no magic piggy bank. Just like households and people, a country must live within its means. It can borrow to a certain extent depending on how it sees its future income prospects. That’s it. Money is not created from thin air. If you did that (print pesos to match the budget), you would find the peso quickly evaporate in value, faster than you can say the phrase, “mickey mouse money”. A burger at Jollibee would cost 1 million pesos.

    • Karl garcia says:

      Thanks for the economic lessons,do you accept mickey mouse bitcoins? 🙂

    • Micha says:

      Hahaha…I do not know charles if you had been following this subject here but those concerns were already discussed in previous blogs. In any case, I’ll repeat it for you.

      “… if it were that simple, there would be no poor underdeveloped countries today.”

      The reason there are still poor underdeveloped countries is that most don’t actually practice their monetary sovereignty, or at least, use it to maximize public good. Many leaders of those countries are of course corrupt and are diverting public funds to their own pockets. That is the case in Uganda, that is the case in the Philippines.

      “Just like households and people, a country must live within its means.”

      This is the most common mistake people make. The finances of a national govt is not like the finances of households. Households do not have the authority to create their own money. If they do, those money will be considered counterfeit and they will be hounded by the state’s police for criminal prosecution.

      “It can borrow to a certain extent depending on how it sees its future income prospects.”

      Very typical old school of thought. National govt’s practice of borrowing is a remnant of the gold standard days because the amount of gold in its possession is limited. Today, in a fiat system, gov’t bonds are seen mostly as interest bearing instruments that benefits more the buyer than the issuer.

      “Money is not created from thin air.”

      Oh yes it is. Where do you think your pesos or your dollar or your pound or your euro came from? That’s right, it was created ex nihilo by a sovereign govt.

      “If you did that (print pesos to match the budget), you would find the peso quickly evaporate in value, faster than you can say the phrase, “mickey mouse money”. A burger at Jollibee would cost 1 million pesos.”

      Again the inflation bogeyman is being paraded. In a depressed economy, govt spending is not inflationary. That is validated in the recent crash of the US economy. Stimulus spending hardly made a dent on inflation. In fact, many economists here were worried about the threat of deflation instead.

      Mickey mouse money? See my response to MB on Japanese peso.

      • DAgimas says:

        you are correct to a certain extent. the Philippine can still stimulate the economy by incurring debts because it has low level of debt because there is still room for growth. but how about if you are like Japan?

        having said that, all debts will still be paid or at least its interest will still be paid so that you can roll over it and outgrow it.

        • Micha says:

          Govt debt of the Philippines is 41% of GDP. Japan has debt that’s 237% of its GDP and yet it has been struggling for years to shake off deflation. Its Prime Minister recently tried stimulus spending with a little egging from Paul Krugman but the amount was insufficient and was soon neutralized by imposing additional taxes.

          • DAgimas says:

            they have reached their optimum output already. there is no more room for growth unless they allow immigrants or start procreating but the last time I heard , their males are not even interested in sex anymore as evidence by the abundance of 30+ y.o. virgins @ 25%+

            • edgar lores says:

              Duh! The connection between money and sex has been pretty obvious. The more you have of the former equates to having more of the latter… unless one is old.

              Japan owes more money than the goods and services it produces, so it has… headaches.

              But, wait, virgins? It’s not a case of “Honey, not tonight, I have a headache?” Rather it’s a case of “No money, no honey”.

              But Japan is monetarily sovereign. Therefore, to be precise, it’s a case of “Free money, no honey.”

              Did I just make you snort more coffee, JoeAm?

            • Micha says:

              Optimum output? Japan is only the 4th largest economy. In a global set up, there’s a lot of room for growth especially in the case of Japan where it still has globally recognized product brands. In addition to reinvigorating its domestic market, it could always try to re-establish its automotive and electronic foreign market clout. Even guerrilla fighters in Iraq and Syria are mounting their mobile machine guns either on Toyota or Mitsubishi pick-ups.

              • Joe America says:

                Unfortunately, other nations have upgraded their manufacturing standards to Japanese quality. Ford has been pulling in quality awards for years. Plus China is not, I suspect, a big market for Japan. Japan never recovered from the RE collapse because it was absolutely HUGE, and rather than write it off and go broke, buried the losses in bank balance sheets and spent years chipping away at them and merging banks to stay afloat. The work force has gotten older and much of the old economy was powered by young turks working 16 hour days to climb up the corporate ladder. Now there is no ladder. Plus Japanese costs are comparatively high. So it is hard for Japan to excel and compete globally anymore.

    • Micha says:

      And in case you missed it, edgar supplied this excellent link for your enlightenment:


  10. hackguhaseo says:

    Math and economics has never been my strong suit, but it seems pretty clear to me what needs to happen. We need to elect leaders who actually have a strong knowledge in terms of the country’s financial system. More than that, we need to create a branch of government whose sole purpose is to oversee the distribution of funds, writing up reports on whether or not those funds get to where they were meant to go and then posting the reports on a website that the public can view and verify.

    It has always frustrated me that we don’t know how much our LGUs have to spend for our areas and how much of that fund goes to which project. Transparency is the best way to keep governments honest.

    • Karl garcia says:

      Yes FOI, plus whatever legislation for COA will be produced by the makati overpricing senate investigations.

      • Sup says:

        Short answer because to much typing one finger.. COA stands for Can Obey All…meaning if you pay enough they close the eyes…and sign what ever…
        Stop talking and start paying taxes…the bigger the Philippine company the less they pay…How to solve? Incorruptible judges…Go find them and Holy land is near…

    • Joe America says:

      I’d back that down one step. We need to develop an enlightened electorate.

    • The transparency effort started with Sec Robredo and dutifully continued by Sec Mar.

      Most of this information can be found online. 🙂

      I believe the last reported compliance is around 89%.

  11. wjarko says:

    This blog gave me an idea on how destroy our country’s oligarchs and corrupt officials. Its kinda ubsurd but here it goes – Print all the peso we can, hyperinflate our currency to wipe out all their savings in their vaults and accounts. Revert to barter trade until we stablize the economy. Everybody can start from a relatively equal state.

    LGUs, especially in the bondocks exist pretty much on IRA. Ive been there, ive seen their financials. Just plain depressing. Practically dole out since 70-90 % go to personnel expenses, read as salaries and bonuses of top-heavy orgs, and Maintenance and other operating expenses, read as gasoline, food and air-conditioning for our dear officials. That leaves 10% for hard (basketball courts and waiting sheds) and soft (basketball tournaments, pageants, and feeding programs) projects,

    • Micha says:

      Hahaha, nice try wjarko but what’s the likelihood that if we revert to barter, we could then stabilize the economy?

      Somewhere in the Pacific, there’s an island called Yap and its inhabitants have ingenuous way of creating their own money.:


    • DAgimas says:

      if they keep their wealth in their mattresses but they don’t..their wealth is in properties and stocks.

      only the corrupt keep their money in mattresses. remember that dinner in Washington DC during GMAs state visit wherein a congressman pain in cash? how about those apprehended in Moscow carrying bundles of dollars?

      things like these make me wish Lacson or Duterte should be the president

  12. Mary Grace P. gonzales says:

    Talking about patriotic or war bonds, I’d like to repost this comment i made on joseph’s blog article

    To avoid the recurrence of the Marcos era of plunging our nation into deep foreign debt and thereby surrendering our sovereignty to IMF and World Bank by way of economic prescriptions, we should finance our development projects via Treasury Bills and other government securities issuance.

    I miss the SDA (special deposit accounts) investment offered before by my bank, I invested in a conservative way in government securities (mindful of ultra high interest yields that eventually lead to loss of both principal and interest).

    I had that deep satisfaction in knowing that my government owes me a little something so it can finance the development and economic growth. It all stopped as the government is now awash with cash – no liquidity problem there or am I mistaken?

    • DAgimas says:

      If you follow Boo Chanco, he has been calling for the finance dept to issue local bonds instead of going to NY and issue dollar denominated bonds. don’t know whats the problem maybe JoeAm can answer it

    • Joe America says:

      A lot of money would leave bank deposit accounts, I think, where the interest on a half-million doesn’t cover the cost of driving to the bank. Banking in the Philippines is grade-school. Lousy service, lousy rates, no credit facilities of any worth. But I digress. Patriotism Bonds would give the government huge money to work with, and build a bigger sense of patriotism, too. Win win.

      If it troubles the banks, have them do some real work to generate reliable loans (credit-history sharing among banks) so that they have assets that earn money, and so that they can pay higher interest rates on deposits. Banks are along for the ride. Make them EARN their profits.

    • Karl garcia says:

      Dream scenario. The entire 100 million population chips in PHP 60,000 to pay our PHP 6 trillion debt.
      In a few months debt would be wiped out.

      • Karl garcia says:

        Of course if you do it by patriot bonds there is still debt,but we earn interest,and with cards played right everybody would be happy.

        • Joe America says:

          I’d love to lend money to the Philippine state because I am confident I’ll get it back, plus interest. Now I’m relegated to lending to local businessmen, always risky, or to neighbors, always for zero interest.

          • Mary Grace P. gonzales says:

            Haha…we share the same situation… Patriotic Bonds, Patriotic Bonds…where art thou?

            • Micha says:

              Mary, what’s the currently offered interest rate on government bonds?

              • Mary Grace P. gonzales says:

                No idea….my last one was at 5% net of final tax….last time I asked, they say no SDA available at the moment…quite an unsatisfactory answer so I went up to investment managerial level…his comment – the government is awash with cash so no more plans on that area.

                ..TBills are generally offered to banks in blocks and are in turn offered to the public in smaller blocks with smaller interest rates than what was paid by the government…again, profit incentives there…why oh why can’t they offer Patriotic Bonds direct to the public intead of through middlemen/banks…I want to deal directly with the government depository bank, the Land Bank of the Phil….am conservative that way…my current bank says when you invest it in SDA, its no longer sbject to the PDIC coverage…I want more security, it’s a hard earned money afterall….hehe

              • Mary Grace P. gonzales says:

                Awwwrrrrr…..typos, typos…be gone too much of you in ipad typing

              • @Mary That was a bit disingenuous for your bank to say. We would be a failed state if you needed deposit insurance for your SDA.

              • Mary Grace P. gonzales says:

                @ giancarlo

                How secure is the SDA if it’s the private banks issuing them and not the government..?.I’s a lot different when you are in a possession of CBCI – Central Bank Certificate of Indebtedness.

                I have complete confidence in my current bank….years of my investing in SDAs with them are all perfect, no problem at all…just thinking of the smaller banks out there and their investors

                Since there’s no more SDA, am thinking ofu moving my funds in excess of the cap covered by PDIC to Land Bank

      • Mary Grace P. gonzales says:

        In that dream scenario, will that 60K be in patriotic bonds or plain donation..if it is the latter, just a small percentage can join in, oops, on further thinking…few might decide to participate in both instances…billionaires can do it a hundred times your figure and not be hurting. Patriotic bonds will not wipe out the debts, just a change of creditors….i kind of like the idea of PB…one can decide to go further depending on your liquidity and personal budget requirements. My dream is to subscribe to the 80-20 plan…live on 20 and save 80…then the 80 will go to PB…right now it’s the reverse…too many needy relatives

      • DAgimas says:

        you mean pay cash for an infrastructure that has a life of 40 years? that’s insane

        no need to pay debt. just outgrow it. besides, where will the bank base their rates if the govt doesn’t borrow?

        I read somewhere that it is only now that UK has paid its WWi bonds

        • Joe America says:

          Ahahaha, those Brits. Indolent rascals . . .

        • karl garcia says:

          Thanks for waking me up from my dream. 🙂 . Yes, the creditors require at least interest payments,why would we rock the boat by paying abruptly and avoid the accumulated and ever volatile interests. Like the sachet mentality, we buy what we can afford even if buying bulk would be cheaper mathematically,but we can’t afford at the moment.

          • karl garcia says:

            but yes I agree it is insane,one should use of what he borrows, and we borrow because we don’t have the means.And changing terms in the middle of the game might be another issue.

    • chempo says:

      War/Patriotic bonds (peso bonds) is a simplistic solution. Bonds are financial instruments which means you need to have the markets in place. I don’t think you have a good capital market here in Philippines. Peso-bonds will be tough sells.

  13. karl garcia says:

    Mary Grace you mentioned SDA, here is an article with opinions on what could have been done.


    “In fact, Neri was said to believe that “we can, if we wish to, use perfectly legal means to liberate half of the fund ($30 billion) to jump-start a number of badly needed initiatives in education, agriculture, and health over and above the money currently available,” stressing that the “P40 billion requested, indeed needed, by the AFP (Armed Forces of the Philippines) is a small amount compared to what can be made available to the three other programs which, in the process of providing the needed services, also means increased employment and livelihood opportunities.”

    • Mary Grace P. gonzales says:

      Thanks for the informative link, karl…so it is true…the government is awash with cash..so why are we not using it to finance the LLED project, or the MRT upgrade or the expressway projects so toll fees will be a thing of the past….profit incentives for the ultra rich investors…the people will pay for the use of the finished project for decades before turnover to the government. I don’t understand…

      Commissions, commisions …why should the be paid that for doing their job they are supposed to do and paid substantial salaries for?

      We can pay off a great portion if not all of our foreign debts if the SDA investments are offered again…so why are we not doing it so we can be free of dollar debts, servicing of which eat up a large portion of our annual budget?

      …please, will somebody from our Monetary Board enlighten us

      • karl garcia says:

        The SDA topic is RHiro’s specialty. He was mentioned in the article (Hiro Vaswani)

      • @Mary my analysis of the situation is this. During Ramos’ time when the government bonds were giving 18% there were institutions that could get much much cheaper capital than the Philippine Government. This necessitated middle men who can borrow at preferential rates around 4-8 % during that time. These were in theory the AAA companies such as GE Capital etc. Being the middle men these companies were given a sovereign guarantee on what they would earn independent of the earnings from operations of these BOT projects.

        I think the issue right now is that the government can now borrow at 4% whilst there are fewer companies and probably only a handful of Philippine companies that have that much access to cheap capital. What this means is that I believe government should be more prudent with the BOT schemes and instead separate the building with the operations. Find/Create Filipino Based building companies while getting operational specialist .

        I hope to be corrected for my wrong impressions/analysis.

  14. chempo says:

    Am I missing something here? Monetary sovereignty is simply a term referring to a national ownership of the printing of the legal tender. The Sentral Bangko prints the pesos (in Quezon City security complex) so Philippines has monetary sovereignty. (Sentral Bangko contracts out the minting of coins — and there is a fresh scandal brewing I’m sure you guys have heard of it).

    As for the US, it’s a funny arrangement. The Federal Reserve Bank is the authority that prints money. US Treasury Dept is the one that physically does the printing job – they are merely the manufacturer. They print, and deliver the dollars to the Federal Reserve, and earn some fees. The Fed then in turn lends the money to the government at 6% p.a.. The Fed is not the central bank, it is a privately-owned bank. It is owned by 8 of the most scandalously wealthy families in the world whose names often appear in the Illuminati listings. Now does not that mean the USA has no monetary sovereignty?

  15. NHerrera says:

    Karl, thanks for the piece. A good read. I will read it again and the associated commentaries to synthesize the thoughts in my mind.

    I admire your modesty and the attribution you generously made on your sources, including the comments of Joe’s contributors here.


  16. Chempo I agree there seems to be a misunderstanding of “monetary sovereignty” by some poeple on this thread.

    @Micha, you are confusing an underdeveloped economy with a deflationary economy. Those are two different things. The Philippines does not have slack economic capacity that can be pump-primed like in the US i.e. a deflation economy is one where you are trying to restart a stalled car. The problems here are much more basic: lack of capital, lack of infrastructure, etc. To extend the analogy, there is no car! People are still using wagons! Do you still believe printing money is a solution to economic growth?

    On the slightly more evolved discussion of borrowing domestically via bonds, economic theory says that if you take capital from the private sector and transfer it to the government, you are only moving it from one hand to the other. Money that could have been used to start sari-sari stores and small businesses that would grow GDP, are suddenly stuck in the government which is bogged down by corruption. This is exactly why growth stalled in 2015, the government sat on its thumbs and did zero public spending.

    • Joe America says:

      “the government sat on its thumbs and did zero public spending”. The controls on spending are enormous, and many are outside Executive’s authority. The killing of DAP, political interference, the need to be cautious to avoid even the scent of bad or corrupt processes. Government did not sit on its thumbs, nor did it do zero public spending. If I need to provide the statistics, I’ll do the work. But I’d guess that you know you are speaking for effect, and not in fact.

      • Joe America says:

        I would add that there are two aspects in the assessment of Philippine activities that lead people toward negativism, argument, and less than constructive work. One is the ultra-sensitivity of Filipinos toward criticism that causes them to reject helpful ideas. The other is the relentless expression, generally from outside the Philippines, that the Philippines can’t do anything right. One is insecurity, the other arrogance, and both are a form of ignorance. The Philippine government is doing a lot of things right. Constructive things. To overlay inept when it is not factually true accomplishes what, exactly?

        • Joe, a voice crying in the wilderness has to be loud, no?. 🙂

          Please expound on your statement – “The Philippine government is doing a lot of things right. Constructive things.”?

          What things are these exactly? Making the government less corrupt? Yes, compared to Arroyo, yes I will grant that. What are the other things?

          • Joe America says:

            Economic rejuvenation and growth, infrastructure development, greater transparency in government without FOI, management toward objectives style of governance, capable executives in the cabinet (good hiring), steady hand during crises, ITLOS filing, CCT program, greatly improved storm preparation and response, focus on competitiveness of LGU’s, more for sure if I thought about it, and even more if I bothered to look up some of the departments. I’d suggest a good place to start to get a different picture of the Philippines would be the NEDA development plan and tracking for infrastructure investments, and DBM to see where the money is going.

            • Joe America says:

              A bad place to start would be foreigners frustrated with a different style of things, or enduring criticizers like the GRP blog. If the comparison is against ideal, you will always judge the Philippines as failing. If the comparison is progress along a time line, you will find the achievements to be quite substantial.

              • Agree with you there, Joe. But as much as GRP is negative, my advice would be to guard that the tone on this site is not too positive, or pro-Aquino and Mar Roxas for 2016. There are still too many things wrong and a lot of work to be done. I think the constructive area is in between.

                I am not comparing the Philippines to an ideal standard at all. Just comparing it to the potential we all know is there but has been grossly underachieved due to a string of bad politics and leaders.

              • Joe America says:

                You want me to adjust to a more negative tone when I think the Philippines is doing well, has made great strides, has an excellent President, and Mar Roxas is an upstanding guy? Why?

              • Joe America says:

                If you read the blogs, they are almost always pointed toward improvement.

              • Oh. Does everybody here really believe that? Well, in that case please carry on with the status quo. So, we are just talking about “fine-tuning” an already capable automobile? Sorry, I don’t share your optimism.

                From what I have seen, Mar Roxas has no chance of winning in 2016. He is a nice guy (I have met him), but not president material. He is totally incapable of connecting with the masses. Mar will just split the vote and ensure a Binay victory.

              • Joe America says:

                Others believe different things, so the idea that “everybody here believes that” is for sure selling the people who contribute here short. They are a bright bunch, are all over the map on background and views, and have but one thing in common, an interest in the well-being of the Philippines. “Fine tuning” are your words, not mine, and I’m sorry that you are not optimistic about the Philippines. Your view of Mar Roxas is shared by many.

                You have started your blog and are for sure entitled to share your opinions about the Philippines there. Indeed, when I started some five years ago, I had pretty much the same attitude you do. Then I started listening to some very smart Filipinos who showed me a different picture and set of ideas. Perhaps you will have that same opportunity for enlightenment. I hope so. It is invigorating.

                I also learned that people don’t much enjoy being told about their nation’s flaws every day. They know they exist. What they appreciate is someone who is interested in listening and learning and building something constructive from the goodness that is here.

                The blog is also successful. It is read by people of importance who appreciate the fresh ideas presented constructively and directly, rather than as complaints. The blog dialogue is often the best in the Philippines. You seem to have a penchant for the negative not to appreciate what is being done here.

              • thank you for the tip. I don’t think Im spouting the negative necessarily. Just keeping it real. Good to hear that you welcome different viewpoints and hope mine have challenged and provoked others and brought the discussion forward.

              • Mary Grace P. gonzales says:

                Why does the phrase “just keeping it real” bothers me a lot?…GRP?

                Negativity, too much of it, I suppose.

                We are realists, too, we face the real facts, frustrated by our seeming inability to move forward in a pace that’s ideal due to contrariness of those who are unbelievably bent on placing anything and everything as obstacles to achieve that elusive “perfect” governance (if there is such a thing.)

                We will continue to fight the good fight, to strive harder to support a government that we observe to be doing the best it can in the face of such negativity.

                We know it will not be easy, not fast enough, not perfect enough, hence this continuing discussions, but then show me a government elsewhere that is, even the US, China, Japan and Europe have their own set of problems right now….we are still recovering from thej ravages of corrupt administrations from the past. Just give us time.

              • Joe America says:

                “Keeping it real” and “reality check” are statements that suggest the other person is not being accurate or truthful, and is therefore sly name-calling. They are also arrogant words, suggesting the speaker has all the correct truths at hand and you’d be wrong to challenge them. So it is a form of armor. They bug me, too, although I suspect I’ve used them now and then. 🙂

              • jameboy says:

                From what I have seen, Mar Roxas has no chance of winning in 2016. He is a nice guy (I have met him), but not president material. He is totally incapable of connecting with the masses. Mar will just split the vote and ensure a Binay victory. – charles
                If the election is held today and there is a three thronged fight (Binay, Poe, Roxas) or more, I agree with your opinion. However, in a two-way race (Binay vs. Roxas), with Poe running with Mar as his VP, your concern about Mar’s chances of losing becomes weak.

              • Joe America says:

                Or if Poe does not pass the “qualification” legalisms and throws her endorsement to Roxas.

              • jameboy says:

                But as much as GRP is negative, my advice would be to guard that the tone on this site is not too positive, or pro-Aquino and Mar Roxas for 2016.
                In fairness, I don’t think Joe needs anybody’s advice on how to run his own blog for I am of the opinion that compared to others, like the GRP, he’s doing fine. Believe me, I’ve been around and everything and I’ve never been in a blog where you can freely state what’s on your mind without feeling repressed because you are not ‘with the group’ that monopolizes the blog.

                I do not agree that the tone here is too positive. Everybody gets to criticize the president or Mar Roxas or anyone for that matter and as long as it’s within the boundaries of limitation everything is allowed to say his piece. The positive views you see here is not like the majority in other blogs that tend to monopolize the board, control the conversation in a mob way or censor or ban you if you tend to sing a different tune with the others. That’s what they do in the GRP that I don’t see here.

                I’m not kissing ass here and Joe will be the first one to tell you that because in some instances I spoke my mind opposite his and in fact, for once, stepped the limit line and been reminded by him to stay the course and I agreed.

                If I think I have to say something opposite to what others is saying I can freely say so without feeling being gagged. The only thing I will not do here, out of respect, is to “advice” the administrator what to do or not to do with his own blog.

                I am not comparing the Philippines to an ideal standard at all. Just comparing it to the potential we all know is there but has been grossly underachieved due to a string of bad politics and leaders.
                I don’t see anything wrong comparing the Philippines to an ideal standards because that should be the mentality in order to be guided properly in the effort to improve and develop. There are a lot of wrongs and mistakes in running the country and like-minded people with the interest of the country in mind is and should always be welcomed to provide ideas on how we can better the situation through objective criticisms and observation. We should be all for that.

                But to compare her to the giants, the rich and the most powerful every time just to show how puny and irrelevant she is side by side with those behemoths is just nasty. To intentionally present her in an image of wanting and emptiness with that of abundance and prosperity to remind everyone of their lowly status is just appalling.

                We’re not all ugliness and bad things and mistakes. There are positives too along with the negatives. That we should be aware of. 👲

              • jameboy says:

                Sorry, I don’t share your optimism. -charles
                That’s fine, we must all express our respective view the way we like it. You don’t have to share optimism so long as you don’t become the prophet of doom for the sake of being different or being better than the rest. 👷

            • jameboy says:

              I also learned that people don’t much enjoy being told about their nation’s flaws every day. They know they exist. What they appreciate is someone who is interested in listening and learning and building something constructive from the goodness that is here. – Joe
              Golden rule.

              I wish I have a patent for that because that is where operate.

              I know I’m ugly since birth and I continue to make mistakes and be a loser and trust the wrong people. But berating me about it everyday and telling to my face that there are other people more handsome and better than me is not really helping me. It’s making me feel more smaller, irrelevant and unwanted.

              In other words, be of help and not be my tormentor. 👨

  17. chempo says:

    Lots of things going on here. One is the idea of having all Philippines liabilities in pesos and viola you solved your currency risks. Why borrow in foreign currencies, some asked.

    Unless you want Philippines to be isolated from the rest of the world, there is no escaping from the need for foreign currencies. International trade demands it. You just need to manage foreign currency exposures. It’s not fool proof – there will always be mistakes in misreading the market, in efficiencies, in negligence, in mismanagement, etc.

    In looking at foreign currency exposures of a country, one often overlook the private sector. The govt many borrow in foreign currencies and so too do private institutions. Let’s say the govt manages their exposure well, but you do not know about the private exposures. These exposures may cause harm at national levels during times of currency turmoils. That is why financial institutions have lots of central bank reporting requirements.

    Another point one has to understand. There are lots of foreign currency borrowings going on every day in the financial markets which has nothing with borrowing for spending. To financial institutions, money is a stock of trade. Lots of money are flip arround in the foreign exchange market, money markets or capital markets either for trading purposes (objective for profit) or for hedging purposes as they manage their currency and interest rate risks. Even central banks are in the market everday, not for trading but for managing the country’s currency as well as for managing their own currency exposures. Bottom line is you simply cannot stop foreign currency borrowing.

    • karl garcia says:

      Thank you, charles and chempo. I made this article to discuss and find out what’s wrong and what is right about it. I sincerely appreciate the questions and the lessons.There is no silver bullet, no magic wand and we will not Graceland yet.

    • Mary Grace P. gonzales says:


      Private sector borrowing is not what we have in mind re foreign currency debts. What we are trying to suggest is for our government to avail of loans locally or to pay out existing foreign currency loans from bonds offered here and not in New York or elsewhere, to set free a big bulk of our budget for social services and infrastructure projects.

      If the concern is in depriving the economy of small or substantial investments from citizens, this will be up to individual decisions…small enterpreneurs have no chance to compete with malls sprouting even in remote provinces anyway. Might as well be a creditor to your own government who will in turn provide the stimulus to keep the economy going with various projects – providing jobs, etc, etc.

      • chempo says:

        Re para (1) understand what u are saying. I just threw that in for a better perspective. I don’t pretend to be an economist, but I think there’s a whole host of issues to look at first for a domestic bond issue to be successful – Is there a secondary market, is the interest rate competitive, does the Treasury want to take a long term view of the perso rate, is there enough liquidity, how will it impact the financial institutions, and if you are talking of retail bonds that’s going to be very costly. As Charlesenglund say, if there’s a cheaper source of funds, why not use that?

  18. In other words, the money is there foreign or domestic does not matter. Borrow wherever it is cheaper and in line with your forex risk appetite. You have SOURCE of money; you don’t have USE of money. There is not enough economic activity i.e. growth because: 1) the government does not spend on the right projects / infrastructure. 2) The private sector is dominated by a few oligarchs; and 3) foreign investment is curtailed by the 60/40 rule in the constitution.

    Joe, to reply to your reply up there somewheres — what makes you think the Philippines will grow at 7% for the next 10-15 years without changing the whole system? Best case scenario: if nothing is changed, the next 10-15 years will be like THE LAST 10-15 years. The country needs a “disruption event”, something like what Deng did for China. It does not even have to take that much time; a referendum on changing the constitution can be included in the 2016 elections. Now is the time guys. Mobilize.

  19. Sarsi Bodhi says:

    If the sole purpose of government is to prop up GDP, then based on the formula shown above, it can just print money ad infinitum to finance its projects without the need for taxes . The enigma of course is that GDP is a bad measure of how happy a nation’s populace is. A nation can have a 20% growth rate but the people will still feel unhappy if the 1% receive the fruits of the spending and not the general populace. This is true in the US also and not just the Philippines.

    • karl garcia says:

      We smile a lot,and that is a start.Yes GDP is nothing but the size of the economy.The “one percenters ” is the epitomy of a “for members only club”.

    • Joe America says:

      Measurements of “happiness” always show Filipinos as among the most happy, and satisfaction of the population, year over year, is the highest on record. GDP is an internationally recognized standard for comparison. What measures do you use to judge how the Philippines is doing?

    • NHerrera says:

      Yes, the Pareto Principle in action in different areas — in wealth especially as Vilfredo Pareto, first applied the concept. Roughly 20 percent of the population holds 80 percent of a country’s wealth. In finer detail, in the US, 1 percent of the population holds 40 percent of the country’s wealth. Globally or worldwide we have roughly the same numbers: 1 percent of the world’s population holds 40 percent of the world’s wealth. (Needless to say Bill Gates belong to that 1 percent.)

      Pareto’s Principle holds also in non-wealth matters: say, you have a product — invariably 80 percent of all known defects of the product comes only from only 20 percent of the listed defects. Roughly twenty percent of all physicists contribute 80 percent of physics knowledge.

      Here is an interesting link, especially the accompanying video:

      The Pareto Principle and Wealth Inequality —



      If Joe will allow a statement: roughly 20% percent of Joe’s contributors contribute most meaningfully to 80% of the enriching discussion and thoughts in the Blog. Apologia — that is, of course, an arguable or debatable application of Pareto’s Principle. This much, however, is fact — I belong to the other 80% of the contributors.

  20. NHerrera says:

    Independence Day Speech by President Aquino on June 12, 2015, two versions — his speech in Pilipino as spoken by him; and the English translation:



    In my opinion, vintage President Aquino speech.

    • karl garcia says:

      Thanks for sharing NHerrera, good speech. 🙂

    • Joe America says:

      Thanks for the links. Good . . . and fairly short, too. 🙂 Did you read his speech to the Japanese Diet? Absolutely magnificent. Almost no one in the Philippines noticed. But the Japanese did. It was tailored to grant honor to the audience, emotional as befitting his audience’s character, and tough in terms of standing together in the face of aggression.

    • edgar lores says:

      Thank you. I like the continuity from the past to the present to the future. There’s a plug in there for Mar.

    • Mariano Renato Pacifico says:

      If Traitor Murderous Gen Emilio Aguinaldo taken out from the equation there wouldn’t be June 12 Independence.

      If U.P. history doctors did not make up story Gen Aguinaldo buying arms for the rebels out of the proceeds of Pact of Broken Stones, Gen Aguinaldo would be irrelevant and there wouldn’t be June 12 independence.

      For June 12 to be the 1st Independence of Philippines they have to stick to their stories like they made up EDSA Revolution.

      There was not EDSA Revolution. It was the squabbles between two camps of crooks: Gringo-Ramos-Enrile vs Marcos. The EDSA Revolutionaries were just bystanders.

      EMILIO AGUINALDO WAS A CROOK! The story U.P. historians said he intend to buy arms from the proceeds of Pact of Broken Stone was just a story to make Indepndence day on June 12 stick.

      • Joe America says:

        Admiral Dewey agreed with you. He was grilled in Congress after the Philippine American War. Here’s the discussion:

        (Senator) “Why do you say that Aguinaldo took the lion’s share of the property gathered by the insurgents?”

        “(Dewey) Because he was living at Malolos like a prince. He had nothing when he landed at Manila, and he could have procured the means for this ostentation in no other way. He began immediately after arrival to take every dollar in sight. It may be ungrateful in me to state that fact, but it is true that he sent cattle to me – herds of them – for the ships. The stock were taken from the Philippine people.”

        “Was any statement made of this circumstance at the time?”

        “No: that is war, as you know.”

        Continuing his reply to this question, the Admiral said the Philippine Army was then only a mob and without organization, and had to be fed and clothed. “He did as many have done – he made the country support him.”

        “’Did you regard that proceeding as pillage and loot?”

        “Well, we didn’t do that way. For instance, I took all the coal in sight, but I paid for it.”

      • Mary Grace P. gonzales says:

        “There was not EDSA Revolution. It was the squabbles between two camps of crooks: Gringo-Ramos-Enrile vs Marcos. The EDSA Revolutionaries were just bystanders.”

        Hey MRP…I just could not, will not let that remark go unchallenged…more than a million bystanders, ha….your capacity for insult knows no bounds. ..A few bystanders, I’ll grant you that, but for the multitudes who went there, who braved the scorching sun, the tear gas, water hose, not to mention tanks with soldiers armed to the teeth with high powered guns…these principled and brave souls armed only with faith, flowers, prayers and courage stood between Marcos’ army and the Enrile/Ramos group. Their common aspiration is to get rid of the tyrant Marcos, the holder of the world record for plunder. The world stood in awe of that phenomenon, others tried to copy that, but here you are, a former Filipino belittling that. Only someone affiliated with Marcos and his cronies could do that, are you?

        • chempo says:

          Yes Mary, I remember watching in awe in Singapore over those eventful days.

        • sonny says:

          Mary Grace, when I saw the composition of those who marched for People Power and Marcos backing down and staying the ruthless hand of Gen Ver who was willing to mow down Filipinos, his own blood – that’s when I saw the limit of Marcos’s own hunger for power. His name in history will not go down in history as the murderer of his own people! (He could tolerate killings in his name but the bloodbath of People Power, he would not stomach!! His name would have been the author, no one else’s)

          • Mary Grace P. gonzales says:

            Sonny, I’m with you on that…I saw the exchange between Marcos and Ver on TV replays..In fairness to FM, he did not go China’s way at Tianamen Square to millions there in Edsa 1.

            Enrile, now that’s another story, when he was fearing for his life, he was all for the people, confessing to their manipulations re the snap election results to cheat Cory of votes cast in her favor (in his region alone, meaning it was replicated in all other regions c/o his other cronies)..later, he reverted back to his arrogant nature and claimed Edsa success, even tried to rewrite history in his favor, even allegedly masterminding/supporting the violent coups against Cory’s government that derailed the economic growth that was then recovering, even surpassing that of her predecessor.

      • sonny says:

        From LITTLE BROWN BROTHER, by Leon Wolff

        “Perplexed and disappointed, Aguinaldo went ashore and was met by Mr Rounceville Wildman, who explained Dewey’s absence and assured him that the commodore would soon send a warship back to pick him up. The enforced delay permitted other business to be transacted. To begin with, Aguinaldo handed the American consul $50,000. He then bought a steam launch for $15,000 to be used for transport and communications between islands, two thousand Mauser rifles at $7 each, and two hundred thousand rounds of ammunition at $33.50 per thousand. These items were to be landed in Cavite as soon as circumstances permitted. Next Aguinaldo ordered a long list of additional armaments and supplies, and to cover them he placed $67,000 more to Wildman’s credit.”

        (sonny’s note: $132,000 paid up front by Emilio Aguinaldo to the US Consul Wildman. Dewey was absent since he was already at mid-sea with the US naval squadron headed for Manila Bay. Wildman thought he made a diplomatic coup, instead was severely (my words) by US State Dept. This was part of the hapless condition of the Philippine revolutionaries. I assume Aguinaldo’s money was from the Biak na Bato accord)

        • Mary Grace P. gonzales says:

          Am I correct in my recollection that Bong Revilla’s family are claiming that Aguinaldo is their ancestor?

          If true, I wonder no more.

  21. Melanie Avery says:

    Just to let you guys know how much am enjoying reading your comments here. Very enlightening!! Sorry could not contribute much. I know science but not math, nor money… tho need more of that!!

  22. Congratulations, Karl! You did it and did it well.

    Before we get overly excited about Philippines being a monetarily sovereign country, let us do something with those who hold the purse string. The Congress and its members need a close scrutiny before we embark into something as big and bold as printing currency. At present, there is a lot to be desired with the Philippines’ lower and upper houses. Let’s put the best and the brightest in there first. Out with the pansies and Nancies!

    Mar Roxas has a degree in Economics. The incumbent President also has one. Connect the dots, and you know why Mar is the most logical and practical choice for 2016.

    • Karl garcia says:

      Hi Juana! 🙂 Thanks! Yes,the congress has the power of the purse. I hope this time more people will be receptive on the pre-election related activities initiated by ABS CBN. Voter education is important. Mar is my choice as well.

    • Joe America says:

      No, because you have not explained how the subject of the two links is relevant to the discussion. Furthermore, the subject of Joe’s guidelines is off-topic. The discussion is not about Joe or the blog but about the Philippines and running of the finances.

  23. Great article Karl. Fully agree that the whole process of taxation and government spending needs streamlining and more focus in the Philippines.

    • karl garcia says:

      Hello there. I miss yiur longish comments,but I will get used to it.Thanks,btw finally,the next installment in your blog is published.

  24. Micha says:


    This is in response to your comment from above on June 12 @1:28 pm

    “…you are confusing an underdeveloped economy with a deflationary economy.”

    Nope, nobody here is saying that there is no difference between a first world and a third world economy.

    “The Philippines does not have slack economic capacity that can be pump-primed like in the US i.e. a deflation economy is one where you are trying to restart a stalled car.”

    You are forgetting that the Philippines has the potential to increase its economic output; just as every other country had before they became economically stable and advanced.

    “The problems here are much more basic: lack of capital..”

    Lack of capital? Really? Are you sure that’s not bs? Did you asked some business people? Did you asked if the govt is bankrupt as well? Did you actually found out that everybody, from local businessmen to private banks and govt funding institutions are all bankrupt?

    Hmmmn…we’re supposed to be a capitalist society and you’re saying that if there’s a viable business venture to be had in this part of the world, capital has all but gone kaput? Aba, kung ganun pala, di mag kanya-kanya na lang tayong tanim ng kamote.

    “…lack of infrastructure, etc.”

    Lack means the state of being without. I don’t think that’s the right word to use with what you had in mind.

    “To extend the analogy, there is no car! People are still using wagons!”

    Volkswagon, yes. 🙂

    “Do you still believe printing money is a solution to economic growth?”

    Monetary sovereignty is a tool that the sovereign govt could use to bring about economic growth. It is not, in and of itself, a guaranteed solution for growth, because policy makers could still possibly make mistakes in the proper use of that tool. Or worst, they would use it to benefit only themselves.

    Think of it as a water pump. It could be used to supply water in the whole barangay, or, some greedy neighbor would monopolize water only for himself or only his family and friends.

    • Micha, I think I realize what you are trying to say now. My difficulty is that I do have an economics and banking background so I take issue when what I read does not make sense from that perspective. I suspect I am also a lot older than you. I believe what you are trying to say is developing country governments should follow a strategy of deficit spending and fiscal stimulus. If that is so, then we agree. As has been pointed out by others, however, there are caveats — the money should be spent on infrastructure that has payback to the economy AND the process of disbursement has to be effective, timely and without corruption.

      • Micha says:

        “My difficulty is that I do have an economics and banking background so I take issue when what I read does not make sense from that perspective.”

        Hahaha…it could be that MS/MMT is the economics equivalent then of quantum field theory. Everything seems counter-intuitive and just doesn’t make sense from classical view.

        “I suspect I am also a lot older than you.”

        I’m still eking out a living. How is your Palawan hideaway?

        “I believe what you are trying to say is developing country governments should follow a strategy of deficit spending and fiscal stimulus. If that is so, then we agree.”


        “…the money should be spent on infrastructure that has payback to the economy AND the process of disbursement has to be effective, timely and without corruption.”

        I second the motion. 🙂

  25. Mariano Renato Pacifico says:

    Benigno’s infrastructure spending is anemic. It is not his fault. Benigno is making sure all holes are plugged so it will not go to corrupt Senator’s pocket.

    Lookit this way, Manny Pacquiao and Mayweather fight was boring because each of them are extra careful they do not make mistakes.

    • Joe America says:

      Wrong. Aquino’s infrastructure spending is double Arroyos and ramping up. It would be higher if Congress and the Courts would cooperate, and if he’d fire Abaya. . . . oops .. . you are part right. But you’d have to be here to see all the new roads going in, not only in Manila but outlying areas such as mine. New airport terminals. New flood control measure in Manila. New irrigation projects across the land. He’d be doing more but as Karl points out, process is a problem. A part of the process is to bid properly and avoid corruption.

      Sorry, you missed big time on this one.

      • Joe America says:

        Well, so did I, having only read your first line. And reacted.

        So you are more right than wrong, but spending actually is not anemic. It is robust.

      • We had a long drive from Metro Manila to Sorsogon, and I can vouch for what you are saying. The highways are well paved, and it’s being improved yet, adding more lanes. We motored on yet another route on the way back (after 4 days) via Quezon, Laguna and Rizal and found the same thing. Only those pretending to be blind (and those who are not on the ground, not knowing or seeing but judgmental, will deny this.

  26. RHiro says:

    I say an A+++++ for the efforts of Karl… The issue of monetary sovereignty must be qualified by questions of degree. There are only two countries on this planet with a high degree of monetary sovereignty… They are the U.S. and Japan….

    I consider Micah a Very Serious Person with a perverse sense of humor.

    The issue of money creation, fiat currencies, fractional reserve banking, degree of a currencies convertibility in the forex markets are tied to a countries degree of economic productivity….(Balance of Payments, Current Accounts) Ex. the Philippine peso is not fully convertible in the worlds forex markets…

    Macroeconomics was invented to help resolve the problems of the economic business cycle in major industrial economies. Developing economies default their macro economic policies to the highly industrialized economies.


    • chempo says:

      Not sure what u meant the Php is not fully convertible in the worlds FX market. Every currency is convertible. Those not popular currencies are converted using cross-rates. Perhaps you meant Php is a currency that is not highly traded in the FX market which simply means there is not much demand for it. That of course has got to do with Phil’s trade figures.

    • karl garcia says:

      Thanks. I really wanted to get your inputs, and I am glad you gave them.

    • Micha says:

      Welcome back, RHiro

      ‘There are only two countries on this planet with a high degree of monetary sovereignty… They are the U.S. and Japan…”

      Any country that issues its own currency is monetarily sovereign. It could, however, undermine that sovereignty by borrowing another nation’s money. Because all US debts are denominated in dollars, including those it owes to China, you are right to say that the US is on top of the world when it comes to MS. It can never, ever, default on those debts because it can never, ever, run out of dollars. Except of course by erecting an artificial constraint called the debt ceiling which had been raised so many times before.

      I am not sure about Japan but my understanding is that most of their debts are also denominated in their own currency.

      The euro of course is an attempt to rival the dominance of the dollar, although it’s on shaky ground right now because of political and economic wrangling among member nations. The Brits have managed to keep their pound (sterling) but the sun has set on their empire.

      The Chinese have recently organized an infrastructure bank to rival perhaps the ADB or maybe even the IMF-World Bank. I don’t see how will that assert the power of the yuan because its capital base is also in dollars.

      “I consider Micah a Very Serious Person with a perverse sense of humor.”

      Hahaha…it’s good to know that you’re also reading Krugman. But I take umbrage at labeling me a VSP. I am not, in any shape or form, in league with Greenspan or Simpson-Bowles. 🙂

  27. David Murphy says:

    In re both the article and the comments, I can not remember reading anything that I enjoyed so much and understood so little.

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