The motto of the Boy Scouts is “Be Prepared.”
The motto should also apply to American expats living in the Philippines, or in any other country in the world for that matter.
What do we need to be prepared for? The declining value of the US Dollar.
Yesterday, the US Dollar closed the Philippine Trading day at P43 to $1. Much of the past week or so, the Dollar has been trading in the 42’s though. We started off 2011 with the Dollar bringing 46.655 Pesos to $1. The way things are going, the trend is likely to continue on the downside in the foreseeable future. In fact, at the very beginning of 2011, when I issued my Philippine Predictions for 2011, I predicted a bad year for the dollar and said we could see the Dollar reaching the rate of only about P40 to $1 or even less.
What is the problem with the Dollar?
Well, the US Dollar is weak worldwide, against nearly every currency out there. Frankly, it is because the United States cannot get it’s economic house in order. The US Government is spending money like a bunch of drunken sailors (sorry to all sailors out there!). Right now, the US President and Congressional leaders are trying to come to an agreement to get some of the financial mess in order and to allow the US Government to borrow additional money to keep the Government from defaulting. But, it all seems like a juvenile game where neither side seems willing to compromise at all.
The Federal Reserve of the USA has been playing all kinds of games infusing additional cash into the banking system for the past several years. Months ago the Fed went on another binge, which they called QE2, under which the Fed started printing more money to buy back debt, which has always been proven to be very inflationary. What happens to the dollar when inflation spins out of control? The value of the dollar drops! In other words, it takes more dollars to purchase something, which literally speaking means that the dollar is worth less. There are not two ways about it.
Over the past years we have seen the situation in Greece particularly where the Government is instituting all kinds of austerity measures to cut back on Government programs. The Greek people are in the streets rioting over this. The same thing could happen in the USA as well, from what I can see.
In many ways, I feel very thankful to not be in the USA currently. In other ways, the falling value of the dollar affects expats like me a lot harder than it does US residents, because we actually have to trade our dollars into local currency in order to live. And, every dollar is buying fewer and fewer Philippine Pesos as the days and months pass.
How can the situation be fixed? Well, the US leaders must be responsible and bit the bullet. The US people must accept that the cannot expect so many benefits from the Government. Everybody must agree to share in the sacrifice and fix the problem. Problem is, I don’t see anybody willing to do that. The leaders will only hold to their party line. The people want things to be cut, but if you try to cut something they are getting, they are up in arms. The dollar keeps falling.
So, here is a word to the wise for American expats. Be prepared. The dollar is going to keep falling. I know a lot of expats who are barely holding on financially right now, and in my opinion the worst is yet to come as far as the exchange rate goes, and it could be a long, long time before things get much better. If you are one of those expats who is barely making it, you need to do some planning. Some people have told me that they will just go back to the States if things get too bad. Go back to what, though? There are no jobs in the States. A lot of people are living very tight so there is no reason to believe that if you return to the USA you are going back to the “land of milk and honey.”
So, for all of us on this wild ride of US Dollar exchange rates, I wish us all well. Expect the worst, though. If things don’t get down to that level, at least you were prepared, though. Just like a Boy Scout!