Live in the Philippines

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Forty Four and Declining

Money Matters / by

When I moved to the Philippines in 2000, it felt like a party.  Have you ever heard the song….

Up, up and away in my beautiful balloon….

That’s how it was to be living in the Philippines.

I am talking about the US Dollar.  The value of the dollar was constantly moving up.  It was almost a daily thing that the dollar would be worth a bit more than it was the day before.  From time to time things would become stagnant and the dollar would remain at a fixed level for a while, but sooner or later you could count on it… the dollar would be worth more!

The dollar peaked out in around 2005 or so, at a level of P56+ = $1.  It was great.  Quickly, though, the dollar began losing value.  In fact, the dollar dropped all the way down to P40 = $1, but we never breached the P40 level.  Over the past couple of years, the US Dollar has rebounded, and came almost all the way back to P50, but never went over 50.

This year, during 2010, the dollar has ranged from about 45 to 47 or so, but held steady around 47 for much of the year.  Since July or August, though, the dollar has been on a steady decline.  As I write this article, the US Dollar is worth around P43.5 or so.  And it is falling.  In fact, Philippine analysts are saying that by the end of the year the Dollar is likely to be in the 42 levels.

In my opinion, within 6 months from now, we could again be looking at a dollar that is worth P40, or even less.

Fact is, the lower the dollar goes, the better it is for the US Government.  Why?  Because the US Government is deeply in debt.  Repaying that debt with a dollar that is worth less is cheaper.  Deflation of the value of the dollar makes the debt worth less, so it is easier to pay back.  It’s all complicated, but if you really analyze the situation, it is better for the US Government if the US Dollar is valued lower.  Have you noticed that the US Government is working very hard to force China to increase the value of their currency?  If the value of the dollar goes down, it not only makes the debt easier to repay, it also encourages people in foreign lands to buy more US made products.  So, at least in the short term, it is an advantage to the USA if the currency is worth less.  Do you see anybody in the US Government who is working hard to increase the value of the dollar?  I don’t.  I don’t think we will see that for some time, either.

For US expats, no matter where in the world they live, the decline of the US dollar hits them where it hurts most – right in the wallet.  If you are earning US Dollars, as I am, and living in a place where you cannot directly spend US Dollars, every time the dollar moves down, you get less and less when you change your money into the local currency, in my case Philippine Pesos.  What is the difference between a dollar that is worth 40 and a dollar that is worth 56 like I saw a few years back?  Well, lets say that you live on $2,000 per month.  The difference is that if the dollar is 56 your $2,000 is worth P112,000.  If the dollar is worth 40, your money will get you only P80,000 – a difference of P32,000 per month!  My friends… that is a big difference.  When the dollar slides as it is now, life gets a little harder for expats, and for some it gets a lot harder.

Fact is, I know a number of expats who had to return home to their home country due to currency fluctuation.  If you are planning to live in the Philippines, do not count on a high value of your local currency, always make your plans on a low rate, so that your budget will not suffer when things decrease.  When the value of your currency is up, you will enjoy a little bonus in life, but you won’t have to go home when your currency is down.  It only makes sense to plan for the worst case scenario.

So, where is the US Dollar heading?  Unfortunately, in the middle term, I only see the trend as down.  It may rise from time to time, but over time, it is my opinion that it will go down for now.  I hope we can see a P50 level again, but if we do, I think it is a long ways off.

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Comments

  1. Barclays in the UK said it will hit 40 to 1 next year. That is what I was counting on when I moved here last April. No raise again this year on Social Security. That hurts too but would hurt in the US also. The US has lost it’s “shine” Sad to see it.

    • Unfortunately, I think that Barclays is right on the mark. If the dollar breaks through the psychological barrier of 40… it could really slide further downwards rapidly.

  3. I think it is about time for me to earn more in pesos than in dollars! More tourists and visitors to Marinduque and more wedding receptions at Chateau Du Mer, that will certainly make my day! Cheers to You, Bob!

      • Hi David and Bob, I agree about earning more pesos than dollars.. Bob, I’ve been waiting for a post about your brick & mortar ideas. Have you thought up the best one for you yet?

        I think that if you choose to live in a more rural area, you can get ahead some, if you can grow your own fruits and vegetables and shop at the local wet market more often. Sharing with a neighbor in raising chickens or pigs.. But that isn’t desireable or even feasable for many, or for those who live in or near a city. As we all know now–living cheaply is becoming a thing of the past.

        • Hi queenie – No, as of right now, our plans for something “brick and mortar” are sort of on hold. I started another web-based business earlier this year that is really flourishing, and I am concentrating my efforts on that right now.

      • I send several hundred dollars to the Phillipnies each month, and count every peso. I also can easily remember when one could stop and get a dozen hotdogs and a cartonof drinks for $2.40, instead of around $30.00. Every time the price of anything goes up, it makes the dollar more worthless.

        • Hi John – That’s true. On your hot dog example.. I am assuming you are talking of something in the States? Problem here is that prices go up, and the value of the dollar goes down, and that makes a double whammy on expats here.

  5. I think you may be in error Bob, the falling dollar makes exports more appealing due to the lower value of the dollar passed onto the cost of goods. That is a good thing for manufacturing & goods that are exported. But a falling dollar is not beneficial to debt, it takes more dollars to pay the debt off unless the debt was created when the dollar was worth less than now. Inflation is actually a hidden tax, its good for the govt. due the increased revenue.

    • Nah, I’m not wrong. I am talking about exports from the Philippines to the USA, not exports from the US. Sorry if I was unclear. The low dollar makes Philippine exports have problems because they are more expensive for Americans. That puts people in the Philippines out of work!

      • Bob, you are right on the money. I live in a Central American country with my local wife and kids. It is just as you say. The dollar has tanked against the local currency. Exporters here are laying people off. And the U.S. is the primary trading partner by far! Importers are jumping for joy. Every time I walk into my local mail forwarding business I see boxes stacked to the ceiling like never before, all coming from the States and most coming from Amazon.com. The locals for the most part are happy with the low dollar as long as they have a job.

        Inflation here has over the years consistently run between 5 to 10 percent higher than in the States. I am on a U.S. dollar pension. When taking the low dollar, local inflation, and lack of U.S. cost of living increase into account, I compute that I have lost about 25% of my purchasing power in the last two years!

        My kids have been in a private school for the last 8 years. We are now shopping for a less expensive school and/or public option. Everything else has already been cut; thank God we have no debts in either currency! We feel like we are weathering a long storm.

        • Hi David – Interesting perspective coming from an altogether different region, but it sure seems to mirror what is happening here with US Expats. Being abroad, when the dollar dives, we get hit twice – once from each side. It’s not an easy balancing act.

  6. PS: Obama is in wayyyy over his head, his lack of experince is glaring. Things are unraveling slowly back here, come Nov.1st I think he will be pretty much a lame duck for his remaining term. Sad state of affairs for such a once great Country.

    • Hi Brian – Same thing was said about Clinton in 94 when the Republicans won huge gains in the mid-term – he was a lame duck. But, he turned it around. We can’t count our ducks too early….

    • But the dollar started falling long before Obama came into the White House. The powerful in the US want a weak dollar to help their exports (they only care about their wallets), but if you look back at recent history, the US economy has been strongest when the dollar has been at it strongest (think Regan and Clinton). Since we always have a trade deficit, it makes more sense to have a stronger dollar to increase our buying power overseas.

      As another example, Germany does EVERYTHING that conservatives say will hurt the economy : high minimum wage, protective barriers against foreign labor, universal health coverage, high taxes, strong regulations, AND they have a strong currency with the Euro, yet they turned in the strongest GDP growth last quarter since reunification.

  7. Hi Bob,

    Ill wind that dosen’t blow some one good. When I made the decision to come and live in Davao the Ozzie dollar was at 38, today it’s just under 43. Who knows about tomorrow?

    • Hi Ida

      That would seem to be the case but then again much of the Philippine’s Economy depends on the influx of US dollars from Filipinos abroad whether it be OFWs or family members sending money home.

  10. Import, Export, high dollar, low dollar ahhhhhhhhhh!
    Now let me try and work this out when I left Oz to come to the Philippines I was imported but was an export right ? Or was I imported from OZ when I was in the Philippines? So when I go back to Oz from the Philippines will I be an export or an import?
    Never quite understood that side of economics but what I do know is when I got a lot of piso in my pocket everyone here eats well and the wife is super happy. With the Aussie dollar now close to parity might be the time to hedge the bets and buy the greenback, the Aussie dollar has been known to get below 28 piso and that hurts.

    • HI Boss – When you get into trading Forex, they get you both ways. When you trade, the fees are how they make their money, and you also never get the posted rates, you get a little less. So, the banks always get theirs!

      • Yep spot on. Not easy trying to work things out with the currency stuff, but the last time I was in Australia 30 months ago the US dollar and Aussie dollar were close to parity again. So I bought a stack of US dollars so when the Aussie dollar fell against the piso I spent the US dollars that had a better value at that time. The Aussie government likes keeping our dollar down to get our exports selling well.
        I’m pretty sure if the US dollar raises in the future it might be a good bet.

          • Yes siree, when I saw that ship coming in I made sure I jumped on it. Will it happen again, maybe not in the near future but sure as the the sun sets the Aussie dollar will fall and as the sun rises so will the US dollar.

  13. Hi Ida – Actually, a falling dollar is bad for the Philippine Economy, because it makes exports too expensive, and puts export related business under here!

  14. Bob, It has been a stated policy of the treasury department to devalue the dollar. For all of the reasons you mentioned so I won’t repeat them. A lower dollar does affect people in the U.S. through higher costs on items that we import-like oil. What I have never understood and perhaps a reader here or yourself can educate me. What in the world props up the Philippine Peso? In my opinion it has to be a currency that is for the most part manipulated by the state treasury/banking system. In addition the comments about the Australian dollar are interesting. The Economist magazine of about two weeks ago had an interesting article. Cover story actually. It said Australians benefiting from Chinese investments-what does China get-well they get Australia. Its just a matter of time before the Australian dollar will also feel the effects of a devalued Chinese Yuan. It amazed me to read what Australia was shipping to China. In basic terms in a decade or more they won’t have much left in the way of raw resources to export or use for themselves. Then what? The circle continues. New Zealand has turned away Chinese advances according to the economist for long term stability and not short term benefit. A good study between the two countries. Love the conversation. Keep it coming. Ron

    • Hi Ron – Unfortunately, I don’t know the answers… although I wish I did! Why does the Peso remain high and continue to strengthen? I wish I knew. You can ask the same about the Thai Bhat, though, even with big political turmoil there, the Bhat has been the best performing currency in Asia of late, and the Peso #2.

  15. we just got here in the Philippines and are trying to get set up IE buy a car, cell phones and such. every time the dollar drops i have to spend more for the car:/ before it was 29thousand US just a few weeks ago now its 32thousand US.. Thank god for Dollar accounts so if there is a day it trends up we can cash out.
    It sucks because we are waiting for our money to roll over to BPO and every day we have to wait the dollar drops. O well such as life. at least we planned ahead for this type of thing. we budgeted 40K for the car because we chose a car before we got here. when we saw it it was to small and expensive. So we decided on a different one. but by also taking the money we would have used to pay cash for the car we decided to get a loan for half the price take the other half of the money and put it in to a money lending deal at 5% a month and the car pays for itself. for the locals no not a 5/6 lol
    I think if you plan appropriately when you get here everything will work out. But im still preying that the dollar does not drop any more :/

    • Hi Jack – If I were in your shoes, I’d probably buy that car and change those $ asap… unfortunately, I think it’s gonna be a while before we see the dollar strengthen appreciably. Right now is the time to do it, IMHO.

  16. As I recall when I bought my first house here back in 95 the exchange rate was 25 peso to the dollar. Things fluctuate but if you hang on long enough it always seems to work itself out. The slow inflation of the property values helped me to more than break even when I sold that place a couple of years ago.

    • You are right, Tony – time is a great healer! In more ways than one. Yes, the Asian Currency crisis was in 97, and that is when the Peso lost nearly half of it’s value almost overnight. I wonder if we are headed back to 25 over the coming year or two?

  18. I’m also rejoicing in the high $Australian but I fear it’s short-lived. Once other commodity-exporting countries gear up in two or three years time to meet Chinese demand, expect it to fall back to more normal levels.

    I’d sure like me some of those Chinese RMB, which is seriously undervalued … if anyone reading is wondering what I’d like for Christmas, a million or two RMB would do nicely :D.

  19. Sadly, the value of the dollar is largely tied to interest rates. As long as interest rates remain at historical lows, the dollar will continue to lose value. Sooner or later rates in the U.S. will begin to rise. This will precipitate a demand for dollars. At this point, the value of the dollar will begin to stabilize

  20. Maayong Buntag Bob
    You are right on with the devaluation of the dollar making the national dept easier to pay back. The other item is the vast number of houses that are upside down on the mortgage. By deflating the dollar these houses will begin to go positive on the loan again. Problem is the wages are not keeping pace with the commodity prices and this is hurting many people. I am lucky that I am heavy in commodities so this helps. Take a look at the gold chart and you will be amazed. http://www.cmegroup.com/popup/mdq2.html?code=GCGLOBEXZ0&title=December_2010_Gold&type=p

    • You are so right on commodities, Larry, particularly precious metals like Gold. I’ve been following Gold. It seems to set a new record every day! 😀

    • Larry you are a smart man investing in gold or the precious metals if you are indeed doing that. The US real estate market will be on oxygen for a long time to come. Many mortgages are set to refi soon and this new delay in foreclosures will only put more pressure on the downside for the market. Higher % rates will be a given as we print more and more money but that will take awhile to set in. So for a little while, the dollar is screwed. Perhaps a correction here and there but the trend appears downward. Looks like more expats on fixed income will be saying bye bye to the Philippines. Really too bad as I have made some good friends that are hurting and all they wanted was a nice simple life with their sweeties here.

  21. I earn 20% in the Philippines so currency flucuations don’t affect me as I have been able to make a transistion to a peso earning existence. My dollars are used for trips back to the states and making investements there. If you look hard enough you can find high return investments with low risk in the Philippines. I do feel badly for expats that are suffering from a lower dollar. But be careful what you wish for. Imagine if the Philippines can reign in corruption and actually stand on its own feet without the help of it’s OFW’s. Then you will be looking at PH/USD rates in the 30’s.

    • Hi Thomad – Almost all of my earnings are in Dollars… now I have to add “unfortunately” to that! I am happy, though, that my earnings are enough that we are not greatly affected yet by the devaluation. It has been my goal to try to shift some of my earnings to Pesos, though.

      Be careful what you wish for? I sure won’t wish for anything that brings the $$ into the 30’s! 😯

      • You almost have too (wish for that) Bob if you want the Philippines to become a better place to live in. No more brownouts, paved roads, better transportation, less pollution, better schools, etc.. etc.. etc.. You are a smart man and will find a way to earn pesos as a primary source of income. I am afraid that the internet dynamic will also be changing and things like your blogs, forums and click throughs, affiliateships will become less productive as time goes on. Also, despite your brilliance and positve attitude, there are many, many ,many others that are already starting to copy what you do and that can’t help but dilute the pool of available dollars.

        • Hi Thomad – Actually, the Peso being strong is a negative for the Philippine economy. It hurts remittances and exports here. So, the stronger the peso goes, the less infrastructure the country can afford to build.

          By the way, my total earnings from affiliate commissions is ZERO, so if that gets weaker, so be it, it makes no difference to me. I mostly make money from ways that others with blogs don’t, and don’t even know how to. Yeah, a few smart guys will come along, but I don’t consider what I do as a zero sum game.

  22. a rising currency CAN actually be a sign that the national economy is getting better, but there are a lot of downside to this just like the exports getting more expensive and overseas remittances having lesser value…well, that’s what the expert economists say… good morning, amigo Bob 🙂

  23. I got a rate of 42.5 at PNB last week when I deposited to my Filipino account…plus or I should say less a $3.50 service fee and a 3% foreign transaction fee from my US bank…Uy!

  24. It is the desire of the U.S. Treasury/Federal Reserve Bank to weaken the U.S. Dollar against a basket of other currencies for the reasons that Bob has stated. They’re basically printing billions of dollars and that dilutes (devalues) the dollars that are currently in circulation. The Philippine Government could also devalue the peso by printing more of it. If they print it faster than the U.S. government, the U.S. dollar could actually buy 50 or more pesos again. However, all this money printing assures that the inflation rate will be much higher and nothing is gained in real terms (Inflation = loss of purchasing power). I believe that most of us will have to tighten our belts for the next few years unless we find a way to increase our income. Those who live on fixed incomes will have to struggle with both dollar devaluation and increases in the cost of living…..Great article Bob !

    • I really think you are right, probably the coming decade will be more belt tightening all along, Gary. Thanks for the compliment, I’m glad that you liked the article.

  25. Maayong buntag, akong amigo, Edito! Problem is… if you look at worldwide trends, it is not so much that the Peso is strong… it is a matter of the dollar being week. Currencies from almost every country are gaining against the dollar.

  28. Nope, this is not good. On the upside there are a few banks around that pay 8-13% interest on a one year CD :-))) Will be leaving the US on the first of Nov. for a permanent vacation to Samal and wish it was at 55 like it was in 05 when I met my wife… :-)))

  29. Also Bob, as the dollar get worth less, Americans will not travel as much, and if they do, they will have less money to spend because of the conversion rate. So, they may not buy products and services in Philippines or where ever they travel…or not buy more expensive things,or stay in cheaper accommodations.
    Americans are being squeezed by the economic conditions here, and high unemployment. Fear factor, keeps people close to home, and hold on to their money.

  30. Hi Bob
    I thought one interesting thing that no one has mentioned that last month the Philippines issued their first global peso bond and I think it was oversubscribed by 13 to 1. It shows how foreigners are confident that the peso will be stable and most likely appreciate via the dollar in the near future. Even though the value of the pesos has gone up so has the OFW remittances though some benefit has been lost with the exchange rate. A strong peso does help with inflation since imports has become cheaper.
    Earlier this year when Greece looked like it would default on their debts everyone was saying that the Euro might collapse and it lost a lot of its value but is now making a nice comeback all within 6 months or so. Currencies can change fast either way.

    • That’s true, neil, there was a huge demand when the Philippines recently did a bond release. The Emerging Markets are popular with investors, and the Philippines is certainly taking it’s place there.

  34. hi bob,
    we have a smilar problem, but not quite so serious as we only visit from the uk.
    when i first visited in about 2004, the exchange rate was about 100 pesosto the pound, now if we change moneyn in davao, we are lucky to get 68.
    also, if we book hotels, they tend to price in dollars which has had the problems you described.
    strong currency tends not to be good for the home nation as i’m sure we spend less as we visit, and money sent home, like you said does not go as far.
    keep up the good work

  36. Hello. 1$ =43.44 pesos. Dollar is weak, pesos is strong. Most Filipinos would rather receive Euros from their OFW relatives. It’s better if they exchange that rather than the US Dollar.

  38. I see the problem people face when earning in one currency and spending in another like this. It’s especially hard for those living on a pension perhaps, and already finding it tight to make ends meet.

    I see your problem too Bob, in that your business is largely tied to the USA. Even if you price in Pesos, it still costs your customers more when the dollar peso rate falls and so your sales may drop too. Have you ever considered experimenting with detaching your businesses from the US completely, and making your sales in Pesos drawn directly into a Philippine account? Please feel free to decline to answer this if you wish; you are quite entitled to privacy in your business affairs.

    Remember your April idea about setting up at the fish market? Maybe that’s the spark of an idea for generating local income!!! 🙂

    As a matter of interest, and I’ll understand perfectly well if you don’t wish to disclose, but which is the newer website/business that you mentioned is performing very well? ( I could take a good guess, but in case you don’t wish to disclose, I won’t)!

    • Hi Jim – Actually, you misinterpreted me… or I think you did. I don’t think I ever said that a website was doing well (although my websites are indeed doing great). What I said is that I have businesses that are doing quite well, and many of my businesses are. A new venture that I started earlier this year Web Earner is particularly doing great! I have so much work, I need to hire more employees!

  39. The good thing is my wife knows everyone there so if anything were to come up I’m sure we would be informed. Not sure what legacy is but if you have info I would be interested..Thanks much

  40. Hi Bob,

    The drop in the value of the US dollar hurts here in the US. The cost of a barrel of oil has increased by over 11% during several days. This translate into higher gasoline prices and other related inflation. Having less money to spend because of higher gas and grocery costs has a negative effect on the US economy recovering. It has to have an impact on OFW’s sending money home. With less remmitance, the Philippine economy will suffer.

  41. Hi Travis – Do some research on Legacy before you invest any of your money in those high interest schemes. If you think that you will “be informed” ahead of problems, you are kidding yourself. Legacy is a rural bank network that was paying high interest. The whole thing collapsed in 2008 and people lost millions of pesos. Even high level politicians lost big money – they weren’t informed ahead… so it highly unlikely that people like you or I would be.

  42. The American dollar is in grave danger of a huge drop in value. The European countries that were hit by the world financial collapse have taken or are taking severe action to reduce deficits to try to stabilise their economies. The USA from where the collapse originated does not appear to be doing anything to reduce spending or reduce budget or trade deficits. For years the USA has been running colossal deficits that are unsustainable .I am amazed when American friends praise President Reagan – he turned the worlds biggest creditor nation into the worlds biggest debtor nation in 7 years! Sooner or later the debts have to be paid and the result of all this is a much devalued dollar.

    • Hi..I do not think there is any way the USA can pay it debt…They can only tax us here so much and then when we have nothing left then what? They can keep devauling the dollar untill you will need a truck load to buy a banana, that is if you can find a banana..at the rate they keep spending money that they do not have, its only a mater of time when all hell will break lose….

    • Hi Bryan – The huge drop that you mention is what I fear. In terms of the Peso, if the dollar breaks through 40, it could be in for a huge drop. 40 is a psychological barrier.

      • The U. S. Dollar/Peso exchange rate will be < 26:1 by July, 2011. I'd advise changing what you can, and all you can now.

        • Wow, Spencer, that is a bold prediction! So, you feel that in 9 or 10 months the USD will lose like 40% of it’s value or so? Personally, I don’t think that 26:1 is a crazy thought, but I think it would be a few years down the road if things don’t turn around. Frankly, if it happens the Philippine economy will be hurting, though.

  44. OH, BTW, Travis… one other thing that will give you food for thought… On those losses at Legacy… they were supposedly “PDIC Insured” PDIC is the Philippine Deposit Insurance Corporation (like FDIC in the States). The insurance has not been paid after nearly 2 years, because the entire thing was determined to be pretty much just a pyramid scheme.

  45. Good morning Bob,the united states needs to get control again and get some factories running again,higher and higher costs of everything there makes it almost impossible for the average person to keep up with.from nuts and bolts to hospitals and homes.The whole place needs to be revamped.Keep jobs in the U.S.again like steel mills and car manufacturers.Geez and they give money away like water, on top of it.Its all got to end someplace.

    • The problem is, Maynard, that the people in the developed countries demand huge salaries, and that makes it too expensive to produce things like that. If you can set up a factory and get people to work for the same salaries as an average Chinaman, then you have a chance to compete. Australia is a very nationalistic country; they like to see “made in Australia” labels on things, and manufacturers who are still in business make a big thing of it. However, we recently went to buy a bicycle for our daughter…Australian Made $250, made in China from Big W, $79. Yes, there is a difference in quality, but my daughter doesn’t care; it’s shiny and bright and the ribbons on the end of the handlebars flutter in the wind. She told us to put the extra money towards a trip to Disneyland Paris.

      We need to find other things to do, but in about 100 years Chinese wages may become higher than ours in the west, and we will be able again to become manufacturers of products for Chinese consumers.

  46. Hi Bob,when I first started coming to the Philippines the £ was about 96-100 peso today its 68.I priced my house build and other things on 90 peso =£1 lol.perhaps one day.

  47. I appreciate your concern but the way I look at it, it’s an investment. The only thing we have to fear is fear itself and if one continues to live in fear as an investor, we would never make it in this type of business. I have had stocks that have lost 50k+, houses half their value, BIG banks that have been bailed out, small banks that have gone under.You can’t trust one so what do you do? Go hide in a corner? Not me. Do my due diligence to make the best decision and don’t put all my eggs in one basket.. 🙂

    • Hi PaulB – Nice to hear from you. Thanks for sending those links. I was unaware of the Coca Cola investment plan, and the other article talked about exactly what I see happening.

  49. @Bob, do you believe network marketing is a pyramid scheme too? Just curious. As far as PDIC, it’s about worthless in PH to begin with. Most banks that I have seen only cover 250,000 peso to begin with.. Equivalent to $6000. Not much..

  50. Hey Bob,
    I don’t mean to sound so negative, but I think it may even go below 40/1. As The US buys more of its loans back (read more money into the supply) other countries are also doing the same. Everybody wants a cheap currency right now. It’s a race to the bottom

    • I don’t think you are sounding negative, Hudson… I think you are being realistic. If the dollar breaks though 40, though… all hell could break loose.

  52. Hi Travis – Oh, I take risks too, that is what investment is all about. But, these banks paying 15% interest… well, it’s a lot more than just a risk. Yes, PDIC pays low, only up to 250k. It’s not the “banks paying only 250K” it is PDIC. The banks pay nothing, it is the insurance company who does the paying when the bank fails.

  53. Bob. Stimulating article BUT:

    1. A falling dollar has NO impact on the ability or cost of the US Government paying back. It borrows in dollars and pays back in dollars, so how can the value of the dollar affect its cost of paying back.

    2. The reason that the US Gov (Fed.) wants the dollar to fall is that a lower dollar means that US exports look cheaper and the US can export more and import less (imports cost more) = more jobs in exporting and import competing industries, more profits in those industries, more invertment in those industries and more tax revenues in those industries. Conversely, a sterong dollar makes it harder for the Philippines to export to the US. This is also why China is fighting revaluation. (Another reason is that the Chinese Gov. holds $2.5 TRILLION in US dollar denominated bonds. If the dollar falls, these bonds are worth less in Chinese currency.)

    3. US inflation is currently less than inflation in the Philippines, hence those Americans i=living in the Philippines are taking a double hit: less pesos per dollar and less goods and services per peso.

    4. The Philippine peso is “propped” by remittances, 12 million (20% of the workforce) OCWs remitting (officially) about $18 billion per year. Most countries export goods; the Philippines exports people so that they can be sold abroad at a higher price than they are paid in the Philippines. I might add that the higher remittances, the higher the currency, the less investment (more difficult to export and to compete with imports), the fewer jobs, and the greater pressure to work abroad. Also exporting workers de-skills the economy.

    Sorry for the l;exture. But I used to teach this stuff at the university graduate level.

    3. right

    • Hi ProfDon – So, you are saying that if the USA were forced to repay the debt in 1950 dollars, for example, it would not cost any more than if it paid in 2010 dollars? Sorry, I just don’t buy that.

      You point about export is just exactly what I said. A strong Peso (weak dollar) makes exports from the Philippines expensive, and hurts business here in the Philippines.

      #3, yes, this is exactly what I said. On the Philippine side we are hit by high inflation. On the US side, we are hit by a dollar that is dropping in value.

      No problem on the “lecture” – always good to hear your viewpoint.

      • Bob, I think what ProfDon meant is that the depreciation of the dollar against any other currency or its devaluation due to inflation doesn’t have any effect on the US government’s ability to pay dollar-denominated debts (treasury bonds) because it gets paid in the same currency. And in principle, if worst come to worst, the US can just print more dollars to get its debts paid.

        • Don’t worry, Jose. I understand what Don is saying. I just happen to disagree on that. There are lots of economists that agree with what I am saying, there are also plenty who agree with Don. That’s one good thing about economics.. if you don’t agree with an economist, no problem, just check with a different one and it is likely you will find somebody who agrees with you! 😉

  54. Bob;
    I’m confused, (that’s a normal condition for me) but here is how I see it as it applies to my life. I have a 2 pensions, a good sized IRA in the states that is for my wife when I shuffle off this mortal core. My house and car have always been dept free. If I can’t pay cash I won’t buy it. I budgeted my life here to never use more than one half of my pensions per year. So as for the peso fluctuation, I smile some months and frown on others. But by sticking to my plan, I can survive even if the peso went into the thirties (I pray that’s not going to happen.) I’ll go out less, I’ll drive my car a year or two longer. Take less trips and live the same way as I do today. We little people can’t change what will or will not happen, but we can plan for it.

    • Wise advice, indeed! In my earlier visit to Davao, I learned the hard way that one must have plenty of padding to survive there. Fortunately, I was in my late twenties when I learned that lesson. I believe the Canadian dollar at that time was at P$18 to C$1. Unfortunately, added to the present financial “correction” is the ever-increasing cost of foods and oil and the major out-sourcing of jobs in North America.

      In fact, I contacted my telephone/internet provider the other day to question a specific charge on my bill & spent about an hour chatting with “Raymond” in Davao! A couple of years ago, it would have been someone in South Carolina & before that would be someone in my hometown!

      • Hey Mike – I think that Paul’s lifestyle plan, monetary-wise is so perfect that Obama needs to appoint Paul to some kind of position as a monetary czar or something! Will they let him work from the Philippines, though?

        • Bob;
          They would fire me in a millisecond, when I tell people to cut up all credit cards but one and save it for emergencies only, and join a credit union vice any bank. The credit card/banking lobbyists would hang me.

  55. Right I understand that the insurance company pays but what is $6 in the scheme of things when you have a much larger loss? After seeing the things that I have in all banks here, you can’t trust any of them..

  56. Just trying to give a heads up, Travis. Not sure, but it seems you are upset at me. If that is the case, I am sorry for that, it was only my intention to help you.

  57. No I’m not upset with you. I appreciate the heads up. The more info on a topic the better decision one can make. I get a little upset when people use the word pyramid scheme because most people that talk about a “pyramid scheme” don’t have a clue what it actually is and if something has gone wrong they automatically call it a “pyramid scheme”. Just because a business pays out a high interest rate doesn’t mean that it’s doing something wrong. It could also mean they have found a way to take care of those that keep money with them. For instance most people think network marketing is a “Pyramid Scheme” fact is most of those company’s a legit company’s and yes there are a few out there like that take advantage of people. I’m just saying one should always do their due diligence so they can make the best decision they can. Oh and don’t for get to pray about it 🙂

  58. Looking at the Mexican peso the exchange rate is 12.41 to $1. While the exchange rate is so low people still think of Mexico as being a cheap place to visit and also live. I understand that individuals living in the Philippines are feeling a money crunch when the dollar has lost some value I still don’t see tourism going down because of this small jump down. But I guess I would have to live there to fully appreciate that.

  59. Believe me, Travis… I am not stupid, and I well know what a pyramid scheme is. The fact is, when the legacy pyramid collapsed, it was found that it was not a failed investment that caused the problem, it was a fraud all along. New investors were used to pay off older investors, etc.

    Anyway, I have said all I will say on this. All I can say is good luck to you.

    • In 1890 William F. Miller ran the first (that is recorded) Pyramid Scheme
      In the 1920’s Charles Ponzi got it named after him, sorry Bill Miller.
      But now it should be called the Madoff, after the most successful guy at it, Bernard Madoff
      If it just sounds to good to be true…
      Do people really think that someone spent a billion dollars to build a casino in the hopes that you’d get rich?

  61. Hi Darin – Yeah, I am not worried about tourism – it is almost non-existent anyway! Ha ha… it’s more a day to day life thing. When you lose 15% or 20% of the value of your money quickly… well, life is a little harder then. 🙂

  64. Ah, I am not really worried about myself…. I have lots of different businesses, and my businesses are really recovering nicely from the recession… but a lot of expats are in real trouble financially at this point, that is more what I was writing about than my own situation.

  67. Ok I re-skimmed the article. I see your point. I will just have to make sure I save my money and buy property to ease the long term of relying on the value of US currency to stay in place. And I hope all the ex-pats can recover soon.

  68. Good afternoon. Here’s an unsolicited advise… if it’s okay. If you’re an expat and you plan to retire here and put up a business, may be buy a property as an investment. Put up a restaurant as well. Does not have to be a fine dining. A small eatery/diner or anything that sells food will suffice. You know people here always eat a lot. You’ll always have customers. The bucks will come along. If you have the means to franchise a fast food (is that too much?) then why not do it. He he. Again, there will always be someone who’ll want to eat.

    Hope that helps. 🙂

    • Just curious ‘sugar’ if you plan to “retire” here, why would you want to start up a business? The two concepts in my eyes don’t go together lol.
      If you want to retire here, you bring 20 or so million pesos with you and smell the banana trees.
      Maybe I’ve missed something?

    • Ha ha… OK, sugar. I can’t say I agree with you, but that’s OK, we all have our own opinions. For example, why should somebody start a diner or restaurant if he is not interested in that? Why not start some kind of business that he is passionate about? Or, if he is retiring, as you say, that would tend to imply that he won’t have any kind of business at all. But, I certainly believe a lot more in starting a business in which you have a passion that pigeon-holing yourself into a restaurant that you really could care less about.

  70. And the Aussie $$ just kept shooting up, Bob. The talk in the Aussie press is that the Aussie$ could even surpass the US$. But I do have an American friend (still in the US and intending to retire in PI soon) worried about the falling US$ too.

  71. Hi Darin – I have written about rent vs. own many times. Think about this.. I have been offered to buy the house I am living in now for P20M. I am renting it for around P37k/mo. I would have to rent for 540 months to pay the cost of buying it. That is 45 years! Ha ha… it makes no economic sense to buy. I do own land and we may build a house on it, but I am in no hurry.

  73. Hi Bob

    The big problem is that the whole world is in bed with the elephant ( the U.S.A.) and when the elephant rolls over, we all feel it. The US economy is in shambles and while people feel it, they do not seem to realize what bad trouble they are in. The US has 4% of the world population and consumes 20% of the world resources. They have been doing this for decades on borrowed money. They have become a consumer economy, manufacturing and/or supplying very little based on the size of the population. The average American thinks he can have and deserves to have it all. The US government already spends more than it takes in and is becoming a bad credit risk. I hear and see the commercials in the US for the upcoming elections and they are all chanting the same mantra ” Cut taxes, cut taxes”. Why would you actively try to lower your income when you already do not take in enough money to live on and to pay the interest on your debt? I plan to retire in 6 years and am worrried about what may happen. Canada has rode out the latest crisis better than most countries because we have stricter banking regulations, but the the whole world is tied into the US economy. Buy some land Bob. At least you can grow your own food.

    • Allan,
      You seem to be one of the few who has seen through all the economists bull and can see the truth of the situation that exists in the world today – as you say the USA has been living on borrowed money for years and very soon it will end in grief . Unfortunately even those few countries that have managed their economies well – such as Canada and Australia ,will suffer the same as the profligate.

    • Hey Allen,
      The US may only have 4% of the worlds population, but we also have 67% (2/3) of the worlds lawyers. This may be what our problem is.

  74. Thanks Bob I briefly remember now the article you are talking about. I appreciate your response to my questions that have been answered I am sure many times in the past. LOL

  81. True, in comparison to what it was, what it is and what it could be, but then it could be as it was first time I went to Phils back in 1970, when it was less than 4 to 1, although a cold San Miguel in a Subic bar was only 1 peso back then too so when funds don’t flow as well its time to tighten up until it flow better—Sink or Swim! Thanks for the article, Bob, you write well.

  82. I/we are currently on our second negotiated five year rental lease. No rent increases. Fixed dollar amount per month regardless of the ups and downs of the Peso.

  83. Hi Mike – Ha ha… Yes, I think the days of 4 to 1 are long gone, or at least I hope! Unfortunately, the days of P1 San Migs are gone as well! Thanks, Mike, I’m glad you enjoyed the article!

  84. Hi Bob,

    Where is Paul Keating’s comments on this?!. He’s the money man:). I’d like to hear his reasons and predictions.

  85. Hi Mike – Good move on the rent. I hate those leases where they keep the rent going up every year! We are just finishing up a 5 years lease, and looking for a new place this time. Hard to find what we are looking for, though!

  86. Hi, sorry for the off topic, but I see you are talking about rental properties.

    I’m interested in moving to the Philippines and would like to find a nice and safe area where to live.

    I’m not interested in big cities, small cities are better for what I like, but I do need broadband.

    After some research I understand that the South is not safe.

    Can anyone please advise me and even better point me where to find reasonably priced properties? I’d prefer a house rather than a condo.

    Also, how bad is the risk to step in some deadly snake, scorpion, crocodile, spider or anything else?

    Why don’t you make a few articles about these topics so you can help prospective new immigrants to make informed choices?

    Thank you

    • Hi Max – I have written dozens of articles on the topic, so “why don’t you write an article about it” doesn’t really apply. Just read back through the archives of this site and all of the questions you have asked are answered.

      The south is not safe, huh? Hmm… I’ve lived in the southern part of the Philippines for more than 10 years, never had a problem. Don’t believe everything you read, it’s not always true.

    • Hi Max, wear steel capped industrial safety boots is my advice, and check them carefully before you put them on. Crocodiles have been known to hide inside the larger sized boots that foreigners typically wear.

      • Ken – You are a wise and safety conscience man, and I salute you for that. I would also point out that with those larger sized boots, the snakes also like to curl up in them, so I usually advice people to wrap their boots in aluminum foil if they are not being worn. It works for me every time!

  87. Seems like if someone had money stored in a savings in 2005, withdrew it then and kept it in a secured box in their house, then pulled it out today, they’d be lucky. ‘Cause if they made that withdrawal later, they’d get less. A time machine would come in handy with these situations! hahahahahahha

  88. Forex is getting down! Too bad, I should have known Google Adsense when I was a kid.

    The other day I went to check how much usd’s were left on my bank account.Then when I told the teller I’d like to convert $100 into pesos, she told me not to.Why? Because a dollar is worth 41 pesos only on banks.So, I went to a money changer inside the mall and found out that “forex: $1 = P41.03”.And I was like, WTF! I traveled all the way there to see a tad of difference? With that, I must say this is just so horrible for people making money online.It actually made me wonder, when will it ever increase? and asked who should we blame for this?

    Bob this may be out of topic,but if I may ask, just curious, do you earn thousands on this website alone?

    • Hi Mark – Yes, the falling dollar hurts those of us who earn online, because most such earnings are indeed in dollars.

      Yes, I make a good amount of income from this site, and from my other sites on the net as well. I don’t feel that I need to name the exact amount. I will say, though, that I work very hard to earn what I earn from this site, spending many hours to make sure that the site is done right, and always up to date.

  89. Hi Bob,

    CAD $ almost hit parity again. Two years ago it went over parity. But in the Phil, USD is king and CAD is discounted when exchanged. Whatever I invested there was at 40=1 (2 years ago), so I’m still losing. I’m on the other side of the equation and hoping pesos further strengthens.

    Alex

    • Hi Alex – I am thinking that in a few more weeks, parity will no longer be an issue. The way the USD is sliding, the CAD will have passed it by in a short time.