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Prepare yourself

Money Matters / by

It’s time to get ready.  You should always be prepared.  Don’t say that you had no warning, because the alarm bells are sounding, sirens are wailing and emergency lights are flashing.

No, there is not a fire.  The police are not looking for you, don’t worry about that.  Well, maybe they are, I don’t know… but that is not what I’m talking about.

What I am talking about today is that all of us expats, particularly American expats need to be prepared for a fall in the value of the US Dollar.  The signs are evident and have been for some time.

I believe that at this time, you need to adjust your budget and prepare yourself for a P40:$1 exchange rate.  It may or may not come this year, but I believe it is on the horizon.  We saw P40:$1 a few years ago, but in a short time the Dollar got back to a P45:$1 exchange and even up to P48 or so.  Lately, we have seen the Dollar hovering in the P44 to P46 level.  The trend in the past year or year and a half, though, is a lower value for the US  Dollar.

Why?  Well, the reason is pretty simple.  The US Economy is in the dumpster.  And, the way the the US Government is trying to deal with it is by spending money at an unprecedented level.  Keynesian economics has long taught that the way out of a recession is for a government to spend on infrastructure and other such projects to put people to work.  But, the United States is spending way more than ever, and many of the things that the money is being spent on is basically just like throwing the money out the window.  How many new roads or bridges are you seeing under construction?  New schools?  Dams?  It just doesn’t seem so.

Right now, a huge amount of American debt is being held by China.  Other countries too, but China is number 1.  If the Chinese decide to abandon future investments in the US economy, the USA will be in deep trouble.  If you were the one financing the US debt, would you continue to provide more and more cash to keep the country above water?  Me either.

If you think about it, the US Government strategy may actually be for the dollar to go lower in value.  It actually helps the US Government if the dollar is worth less!  Yes, it’s true, if you think about it.  Think of it like this, if you owed somebody $100, even if the Dollar went down to half of it’s value, you still only owe $100.  Since the dollar went down half, when you pay back, you are actually paying back less than you borrowed, in real value terms.  So, the lower that the Dollar goes, the less that the US actually owes!  So, part of the US strategy of paying back all of this debt might be for the dollar to actually decline in value!

Another method of dealing with the huge debt that is piling up is actually even scarier.  What if the US Government went bankrupt?  It could happen, and in fact it may be a lot closer to that doomsday situation than you even think it is.  There has been talk in economic circles that such a scenario could actually happen in 2010, or soon after.  If the US Government were to declare itself bankrupt, the value of the US Dollar would plummet overnight.  We would not be looking at a P40:$1 exchange if that happened, we might be looking at a much lower exchange rate of P25:$1 or so, perhaps even less.

Just yesterday, Moody’s, a highly respected institution that issues credit ratings for governments worldwide issued a statement saying that the USA’s sovereign AAA credit rating is in danger of deteriorating.  They went on to say that unless US economic growth becomes more robust, that the USA “faced a trajectory of debt growth that was continuously upward.”  This information does not bode well for expats, or anybody who is counting on the stability of the dollar.

Do you think that the Dollar could drop from P45:$1 to P25:$1 in a relatively short time?  It seems impossible, right?  Well, there is a common saying that:

Those who don’t study history are bound to repeat it.

Let’s look back just 13 years to 1997.  The Philippine Peso was trading in the range of P25:$1.  Then the Asian Financial Crisis hit.  Almost all Asian currencies fell like a rock almost overnight.  In only a short time, the Peso went from P25:$1 to P40:$1, and over time it lost a lot more value, all the way to P56:$1.  Could it happen to the dollar?  Well, a lot of you are saying it is impossible.  After all, the Philippines is a “banana republic” after all.  Well, look at the USA is handling it’s money, is the US any better than a “banana republic” now?  I’m sorry, but looking in from the outside, it seems that there is not much difference.  Remember also that in the past 2 years or so of severe economic downturn, the US economy is probably the hardest hit economy in the world.  In the same time, the Philippine economy has continued to grow.  The Philippines has not entered recession at all during this time of worldwide economic calamity.

So, with all of these factors, I believe that as expats, we should be planning and preparing for a drop in the Dollar.  It’s almost inevitable now.  I hope it doesn’t happen, but I don’t see much chance of avoiding it.  Perhaps the dollar will rebound as it did a few years ago.  I think, though, that it is just as likely that we are in for a long term decline in the US Dollar.  If it doesn’t happen, it will not hurt you if you prepared for it.  If it does happen, you could be hurt very badly if you are not ready.

I think it’s time to look at options, study possible changes in the way we do things, and generally we should be quite conservative with our personal finances at this time.  There really is no downside to doing it.

Reader Interactions

Comments

  1. Bob
    I agree 100% with you on this one Bob.
    I cannot comment as a ExPat but I will comment on what I see here in RI
    There are no new road,bridge,infrastructure jobs at all squat.
    I do see the same people that work in these construction jobs still working but no NEW jobs.
    All this money that is being thrown around haphazardly at the police, fire departments is NOT creating new positions only saving some of these positions from being cutback or eliminated.

    This whole State of RI seems like it is stuck in some kind of gloom and doom funk. Govt gives less $$ to the States, the State gives less $$ to the Towns, the Towns raise Taxes, people loose houses. We are in for some rough times ahead.
    This Country needs a Enema!!

      • Bob
        Do you think it will hurt all of the Filipino’s as well because they count on the remittances they get from relatives in the US to keep their economy going.
        As the exchange rates drop they too will have less P to spend,this could also send the economy there in the RP spiraling down.

        • That is very true, Neal. Lowering dollar value is not good for the Filipino either. It is two pronged too. Firstly, as you say, a lot of remittances come in from overseas, and most are dollar denominated. Secondly, it kills off the Philippine exporter, making their products way too expensive.

  2. Hello Bob, I have a friend who recently visited me here. From the way he spent his money here, you would think that the exchange rate has gone 1:2. At one point, he told me something I already know, that the dollar has depreciated or the peso has gone stronger. It used to be that when I had visitors here from Pinas that they make mental calculations.

    • Hi Roy – Ha ha… I personally hope we don’t ever see that 1:2 rate! I’d be in real trouble then! Maybe all of us expats would become beggars, and all the rich Filipinos would help us out! 😆

  3. Hello Bob,

    I believe that (in the short term) the value of the dollar will increase as global investors seek safe haven from world declines.
    In the long term, I believe that the value of the dollar will stay about the same or even greater in value based on the overall global picture/declines. We (USA) are not alone in this mess and believe that the majority of 1st world economies are looking for the US to lead all out of the quagmire.

    regards

    Harvey

    • Hi Harvey – I sure hope you are right, but I think you are way off base. I agree that Global Investors will seek safe haven. Problem is that the dollar is not a safe haven any longer. They may go for the Euro or the Pound.

    • Hi Harvey
      I wish I could be so sure as you but I have studied ecnomics and business for years and nothing points towards that. If you look to history as Bob suggests we can only expect it to get worse. We were promised change in last years election but the only thing that changed were the names of the people in charge, nothing more.

  4. Hi Bob;
    I had been planning to buy a new car this year; last week my wife and I discussed it and decided we both were happy with the car we have. Even if I had to rebuild the power train it would still be cheaper to keep it (it’s still running great). Matter of fact I’d started to piece together a future article on not buying a new car

    So as I read your article I was thinking to myself, “That’s another good reason to not buy a new car!” BTW: it was more my wife’s idea than mine to keep our present car.
    Great timing Bob!

    • Hi Paul – I have a Mitsubishi Adventure AUV that I purchased about 3 or 4 weeks after moving here. So, it will be 10 years old in just a couple of months. It’s a 2000 model. I love it. It runs well. It does not look brand new, but it certainly looks like it’s only a couple of years old. It has been well maintained. It’s never had a major problem with it in nearly 10 years. I was just thinking about this the other day myself… I really think that I will be driving this vehicle for at least another 5 years, and likely another 10 years. I can’t imagine having a vehicle more than 5 years when I lived in the States. But, here, I find that I take better care of it… I have a nephew who washes it every day and takes care of any kind of cleaning and such. I take it to the shop for the regular service issues that need to be kept up. Overall, it is a great vehicle, and I have been very happy with it.

      Why change when it’s still doing great! I’m glad that you find yourself in this position too! Maybe we should have a contest to see who can go the longest without buying a new car!

  5. Great article, Bob!
    I remember when the exchange rate was much less of a differential, in the early 90s, and have been reminding my wife of this. In terms of global trade, a lower greenback will benefit the U.S., as other countries can buy more U.S. products with their relatively increased currencies. Unfortunately, It neither helps Americans who wish to travel abroad, nor those who are presently living abroad.
    I am not an economist, but I have concerns about the future of countries such as The U.S.A., Canada, Aus, NZ, and many European Countries. Out-sourcing to Asian & African countries will continue, due to the differences in the cost of living. Close to my heart,the drydocks/shipyards in Canada & the U.S. are taking their last gasps, as they can not compete with those in Asia. Yet, for those with savings, it is hard to decide what currency is best to hold. Does a foreigner in The Philippines gamble on converting their savings to the Peso? Tough call! As well, with the upcoming Philippine elections, will the Peso rise or fall? Very uncertain times, I think.

      • Hi Bob, just was reading what all you were saying about the exchange rate and devaluation of the Dollar. Obama and the Democrats are bankrupting the US. My heart is breaking over what is happening here in the US. When you can’t tax anymore you inflate the money supply, just another way of taxation. You either have to believe these guys are extremly stupid or they are really smart and know exactly what they are doing. I believe the latter. Here in Massachusetts we did just elect a republican to Ted Kennedys senate seat, first time we’ve had a republican since Edward Brook who left office in 72. This gives republicans the 41st vote. However, republicans have not been spendtrifts themselves, all I know is there is movement here in the US of the Tea partiers. Republicans will either get in shape and start voting like the are suppose to or this country will be lost for good. We need strong consevatives now, I’ll be watching this fall mid term elections to see if there is a major shift or I believe the US will become nothing more than a third world country. They are rewriting history texbooks, making christians look like radicals, one in a hundred even knows history, so we are doomed to making the same mistakes and loosing our country. I know you now live there in the Philippines, but I’m sure you still love the USA. God help us here, Half the country is either on the dole, or working for the goverment, and they want more of us. The country is at the tettering point! These mid term elections will dictate what is to become of our country. God bless you Bob and I hope to meet a few of you guys when I finally am able to get there. Jeffrey Lloyd PS/ Our unemployment rate is over 10% on the books, but its really as high is 18%, 8% have just either exhuasted benifits and are not counted or just given up. Another 5% are working part time.

        • Hi Jeffrey – I don’t put the blame just on Obama. He has his part in it, but all of the politicians are playing a part. Oh, I suppose there are a few who are not, but the vast majority are. When Bush was in power, and the Republicans controlled both houses of the Congress they spent like drunken sailors too… (my apologies to any sailors in the readership!). I do hope that some coalition of politicians can get together and save the US from pending financial catastrophe. I think it is unlikely that it can happen, and it may even be too late for the country to be saved already. I hope that it can be done, though.

          Thanks for your kind comment, Jeffrey, and all the best to you.

          • Hey Bob!
            There you go with that “Drunken Sailor” analogy again. It might be true, but it still hurts. (lol)

          • obama 1 year in office spent more than bush spent 7 yrs in office. unemployment was 5% now it is 10% under obama. medicaid and medicare is basicly in debt and obama wants healthcare for everyone he wants to put my children and my future grandchildren in debt! and wants to tax the crap out of everything in sight.

          • No it is not just Obama, Bush started it and like a snowball it just keeps rolling downhill. Funny thing is just about every country in the world is in the same boat right now as it’s all paper. What I eventually forsee happening down the road is a return to “real” money (ie gold and silver). Many are scoffers but it will be the only thing that will save the economy… now I just wonder who will be the first country in the world to take such a radical stance? As for politics, Democrats, Republicans, it doesn’t matter all the same. It’s time for disenfranchised Americans to Wake up and realize there are 3rd party options out there. (I support the Constitution Party actually)

            • Hi Brspiritus – Actually, it started long before Bush. Although I have been a Republican most of my life (I consider myself Independent now), I am happy to admit that Clinton is the only President for many years who got the budget under control (with the help of a Republican Congress, though). Before him, I believe that Nixon ran a surplus for a year or two. But, this goes way, way back, and is only getting worse.

        • Let’s see, the Republicans ran Congress for 13 years (1993-2006) and the White House for 8 years (2000-2008), we’re in the worst recession since the Great Depression and it’s the Democrats fault?

          Enlighten me how 3 years controlling Congress and less than 1 year controlling the White House has destroyed the work of 21 combined years of Republican rule?

          I don’t want to argue about politics but you can’t blame everything on Obama and Democrats. Both Democrats and Republicans, liberals and conservatives share in the blame for the situation that United States of America is in. Both the liberals and the conservatives have decided that their precious ideology is more important than our nation. I pray that that both parties actually work together instead of placing partisanship and party platform before country.

          I don’t that like watching my adopted country so bitterly divided and people can’t find a middle ground. Peace out!

          • I see all of this talk about the US failing but we have one thing that many other countries only claim to have. The right to vote out people who can’t do the job. It has worked since we fought and won our freedom from oppressors. 2010 is an election year as well 2012. I believe some of the problems will be dealt with then.

  6. Hi Bob – I’d tend to look at the indicators after the May elections. During run-ups to Philippines elections, the PHP:USD ratios always trend toward a weaker PHP. The days after the election often brings a correction, then a truer trend reveals itself.

    Wonder how OFW remittances will play into the exchange rate. Since they are a large portion of the Philippine economy, a devaluation of the OFW’s functional currency would most likely have some impact on remittances reflected in overall economic terms.

    Might be time to “sell pesos” at the airport to new arrivals! 😆

    • Hi Paul – The elections are of little concern to me on this particular subject. Elections may play a role for the short term, but short term only. Mostly what I am talking about is the fall of the dollar, not the rise of the Peso. Anything the Philippines may do would have little impact on the huge debt and reckless spending of the US government. I’m not in a mood to be selling pesos… rather, I think it’s time to sell dollars and start building a stash of pesos.

  7. Interesting and none of really know what will happen. There are as many theories as there are apples on the tree. The Euro is not a safe haven-the EU just today had to make a decision about bailing out a bankrupt Greece. Greece is not alone. The same economic problems that the U.S. faces are being faced in Europe-just ask the Germans. The one issue that I think is totally a very near reality is inflation in the U.S.. I for one don’t think we are in a depression. My opinion is that we are in a depression and its going to take a long time to recover. I just heard on the news (CNN) that 85,000 more jobs were lost last month. The Justice Department however is on board to hire 17,000 more people in 2010. When the government is the only sector growing and hiring that for sure does not bode well. China cannot stop buying U.S. debt. If they do then Americans will not be able to afford Chinese products. The real fear in the world is that the U.S. and China will come together as a form of the E.U. and share resources of all types. I am rambling and I apologize to Bob and anyone who has read this posting. Bob you give great advise-change is coming and those that are prepared will do so much better than those who are not prepared. I can say that all of this is frustrating-a feeling I am sure that is shared by others.

    • Hi Ron – It’s a tough situation, that’s for sure. I disagree with you though, about the Chinese. If things continue as they are now, the tim ewill come when the Chinese have to evaluate things and cut their losses. Yes, it will kill off the exports to the US, but if they are sending those exports on credit, and the credit is not a good risk, they have to cut and run sooner or later. We’ll see….

  8. hi bob –you can not throw buckets of cash in the toilet and expect good things to happen–bailing out millionaires with million dollar bonus–does not put a lot of money in the regular working mans pocket–i do not know where congress got this idea but it does not work.–if the economy can hold out 2 years i think i will be ok if the dollar does go to 25:1–but if it is that bad in the phills how much harder will it be to last in the usa at 1:1 with an almost worthless dollar and higher prices every day. i am not real sure the usa will survive the obama administration –i am not counting on my s/s for more than a couple of years–i think the writing is on the wall–i hope i am wrong

    • Hi james – I am not blaming Obama, I blame all of the politicians, and both parties. They all had a hand in this. Years of warnings, and nobody listened. Each party spent a lot of money, and continues to do so, they just have different things they spend it on.

      Actually, to be honest, things here in the Philippines are doing pretty good, economy wise. Here in Davao we are having an economic boom, lots of new buildings going up, employment is looking good here, etc. It’s a totally different situation than in the USA.

      • Hi Bob,
        Government overspending including reckless military adventures has contributed to the demise but the failure of the US government to properly regulate a cowboy US banking system is what has finally brought the house of cards down not only for the US but Europe as well which also had massive exposure to the US based banking scams. Here in Australia we have not had a recession – our government spent a lot of money to prime the economy and made banking guarantees to keep credit available to business and the result is low inflation and unemployment declining from the current rate of 5.6%.
        The difference was that our banking system is regulated and cowboy banking scams like sub prime are not possible. Our banks have continued to be highly profitable and have not been bailed out.
        The US government should have bitten the bullet and allowed the rotten apples in the bank sector to fail rather than rewarding the cowboys with bailouts and effectively saying “it doesn’t matter what stupid incompetent deals you make or how much you pay yourselves, we will always use taxpayers money to cover your gambling losses”. Its a disgrace because nothing has really changed.
        I agree with you as I predicted on this blog when the GFC started that the US is on a slippery slope headed down to be rapidly overtaken by China and India as economic superpowers. Of the western economies Australia with massive resources to sell to China and India and the benefit of being located in the Asian region will enjoy great growth. Many other western countries and mainly the US will experience a significant decline in living standards, unemployment and a falling dollar as the balance of power shifts.
        Scary stuff when a totalitarian regime like China will hold the whip hand in the future.

        • Hi Michael – Things are screwed up worldwide, with a few exceptions. Although I have not studied the situation in Australia, I have heard good things about the economy there, and the banking system too.

          As for the US banking system, yes, those guys screwed up royally, and the taxpayer bailed them out of it. Then the banks turned around and are basically screwing the very people who bailed them out of the hole. It is a totally messed up system. The free market capitalist system certainly has no place for the government to bail out businesses that fail through their own stupidity. Things are running in all kinds of crazy directions these days.

  9. been thinking about this for some time bob,i think i’m going to diversify. split my savings up somewhat equaly between 3 or 4 currencys.i just havent figured which ones yet .i have a couple houses that i rent in US so thats one,then acourse ph/peso’s .then maybe some yen and or chinese. i still have till about middle of march till i make the move to molugan.input anyone?

    • Hi jamesjones – I am not sure if now is the time to switch to the yen. The yen gained a lot of value last year, and I’m not sure if it can sustain that in the short term future… the Japanese economy has been in a mess for many years longer than the US has, so this may not be a good time for that. Just my opinion, though.

  10. Whether your money is in Peso’s or any other currency. If the USA flagship sinks, all will sink. Imagine, From GE to the Farmlands what that would entail. What about the prices? What could any money buy that wasn’t affected by price increase? Sad,very sad scenario. I think the US will stay its course, come out of it, but the dollar will weaken short term. And Bob is right by saying like the Boy Scout he is…”Be Prepared”

    • Hi Lenny2000,
      Get some Chinese yuan if you can – the Chinese currency is hugely undervalued helping it to put US industry out of business with its cheap prices but it will rise, eventually replacing the US dollar as the currency of choice – how frightening!
      Throughout history empires have risen and then declined to be replaced by new ones. We have seen the British empire fall from being the dominant world player at the beginning of the last century with colonies spread worldwide, then the rise of the USSR and USA in competition after WW2 when Britain bankrupted itself fighting Germany, followed by the demise of the USSR. Since then the USA has dominated the world militarily and economically but now the USA is in rapid decline.
      Don’t anyone fool themselves that it will be turned around in the next 20 years or possibly for a long long time. The US economy is no longer competitive, the government doesn’t have a clue what to do and has a massively unsustainable debt. Some form of bankruptcy will be the only way to escape the crippling debt – a bit like what we see in 3rd world banana republics. That will mean Chinese Government owned corporations assuming controlling interests in a lot of key US corporations. China could close down the USA tomorrow if it wanted to by withdrawing credit because Chinese credit is all that is keeping it going.
      So unfortunately for us all western domination is coming to an end and Asia will increasingly dominate this century and God help us because the strongest nation will be China.

      • Hi Michael – the lineup of how nations will be in the coming decades will certainly present challenges, and a new scenario for us who are from western countries. It will be fascinating to see, and could present good and bad.

    • Hi lenny2000 – My God, I hope you are correct, but I think that the day of the USA being the flagship are coming to an end. I hope I am wrong.

      Like we both agree, though… be prepared for whatever may come.

  11. Bob, usually I agree with you, but this time I do not. It is true that it is not all of Obama’s fault, for there is plenty to go around to all of the knuckleheads in office, yet Obama’s spending spree seems to have no end in sight. The U.S. is in financial trouble, unemployment is over 10%, and many of the top democrats want government health care, tax and trade, and many other programs that will cost trillions.

    I can not run my checkbook like the people in charge are running America’s checkbook. They are not all the same. That is the politically correct thing to say, and like you I am tired of politics. But now my future and the future of my friends are in deep trouble, and this president still wants to spend, spend, and spend.

    I agree with Lloyd on this one. And I am in a union, make good money, but none of it will matter if the country does not quickly change course, and the man-Obama in charge does not or will not entertain that idea, because he is driven by an ideology. There can be no other reason. Even Bill Clinton moved to the center when his cabinet saw what was happening.

    I’m still your bud, even when we disagree,
    ┌─┐　 ─┐
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    　│▒ /▒/─┬─┐
    　│▒│▒|▒│▒│
    ┌┴─┴─┐-┘─┘ Peace…
    │▒┌──┘▒▒▒│
    └┐▒▒▒▒▒▒┌┘
    　└┐▒▒▒▒┌┘

    • Hi Armando – Don’t think that we are not in agreement. I don’t like Obama’s plan (is there a plan?)…. I think he is doing the wrong thing on the economy. I am just saying that others have done wrong too. I hope Obama changes course, but it doesn’t seem he will.

      Thanks for remaining my bud! I appreciate that! 😉

  12. Hi Bob- Great article and thought provoking.I remember first coming to the Philippines in the very early 80’s and the £ was 22pesos since the $ then was almost 2 to the £ I think the $ bought 12 pesos.The irony then was the Philippines was a cheap place to come and take a holiday.However since the heady days of 2005 when we got up to 108 pesos for a £ and since then to date its been a steady decline, currently 72.500 to the £ and on Monday last it was 75.600.I also know the £ dropped to around 67 pesos within the last 5 years.
    I honestly believe despite the present economic ill’s of both the US and UK the peso is being manipulated for whatever reason.The only other possible factor not influential in the early 80’s but certainly more so in the last 5 years CHINA!!!!!!!!!!I rest my case.
    Regards.
    Jim.

    • Hi Jim – My first time in the Philippines was 1990, and the $/P exchange was P19:$1, things have changed a lot since then, no doubt. But, I fear it is about to go back the other direction again. I hope I’m wrong, but we will see. I know a lot of expats think that the Peso is being manipulated by the BSP, but I personally don’t believe that. A strong Peso does not benefit the Philippines in most cases.

      • Bob, your earlier statement about the devalued dollar against the peso not benefitting the Philippines I would bring into question. I understand why you say this but I have read plenty of articles in the Pinoy press suggesting efforts are being made to keep it close to 50 to 1 for various reasons. The way I read this (reading between the lines and sleuthing somewhat) is that it is mostly to do with remittances. The Government admits that these make up to between 15 and 20% of total GDP. Now that is huge in itself but there is another issue which is rarely dicussed in the press. The banking privacy laws mean that only money by wire, such as Western Union transfers etc. is counted. Money deposited from o/s to Philippine bank accounts is tax free and fully covered by privacy laws within the Philippines. The Government of the country of origin can subpoena information in the case of tax evasion only. If the remmittance is fully franked (tax paid) there is no cause for anyone outside the bank to know anything about this money. What this means is that the real value to the Philippine economy of remmittances is far higher than is ever admitted by the Government or the press. I have spoken in detail through this with friends there who have lived there for 20 years or more who generally guess the real value is closer to 50% of the real income of the Philippines. Of course this can’t be proven under current laws; but the people on high who have friends in the big banks would have heard the whisper. The other fact is that most remmittances go up and down in line with the current value of the dollar, in other words they are a dollar denominated proportion of the Balik Bayan’s earnings. As these earnings don’t tend to fluctuate much, and the cost of living is going up everywhere, most Balik Bayan cannot afford to adjust the dollar amount upwards to compensate the fall in it’s value.
        My 10 cents or 4.627 pesos worth.

        • Hi Barry – The way I read your comment…. what I say and what I say are perfectly compatible. A lower value of the dollar will buy less pesos, so when the dollars are remitted, the recipients get less money, thus, it hurts the Philippine economy.

      • Oops, sorry Bob, I did missread your post, and I am still stumbling a bit on this site! I know what I say here is probably not news to you, but many others particularly outside the Philippines might be interested to know these issues.

  13. Agree with you Bob, this issue of tax and over spending is a bipartisan issue both are guilty of. The Tea party movement is a great idea who’s time has come…but unfortunately a little late to the “party’. I predict a blood bath for the existing representatives both blue and red come this Nov. elections and a victory for the Tea Party movement, but Americans have short memories and the Tea Party will take the blame for a Country gone bankrupt albeit it was decades in the making. Obama’s inexperience is becoming more pronounced each passing week. I understand health care is a major concern but now IS NOT the time for it. The housing market is poised to take another dive this mid-year, the commercial end of it is soon to be headed of a cliff as well, I also feel that the USD is headed for a major down turn. Its amazing how many people are angry over this and rightfully so, social unrest is a real possibility when the wealth of the middle class has been reduced to a 1/3. Decades of elected officials and the Federal Reserve have exploited this Nation for its own gain.

    • Hi brian – I can’t argue with any of your points. I feel that the US is teetering on the cliff right now… economically, and on a lot of other issues too. I don’t know if it can be turned around or not…. we’ll have to see. I also don’t think the right team is in place to make the changes that would be necessary to turn it around. On top of that… turning it around would involved painful times for Americans, and I don’t think they are prepared for it either. All around, it’s a bad situation that few are prepared for!

  14. Hi Bob,when I first started coming to the Philippines,it was 96-98 peso to the £.So I priced my land buying and house building at 90 peso to allow for a drop,but ouch not this much 72.90 today lol.
    But never mind,I would not exchange the Philippines for the world,the best thing I ever did.

  15. thanks guys,after listening to you all’s comments i’m leaning towards ,US,PHILI,AUS. as a way to diversify my savings moneys
    i also have a small amount of gold i bought about 2 years ago,any idea how much i can transport through japan , and manila airports at one time without getting in to trouble ?

    • james, safest thing to do would be to sell it where u are then rebuy it when u get to ur location, u might make or lose a little but its better than having it confiscated. Also, if it is somehting u can have made into jewlery its easier to get past customs as long as ur wearing it, but if its in bar form u will take a hit on the value but by the sounds of it that will occur as well since your not “trading cash value” with the maker of the bar, by this I mean those who have thier stamp on the bar will usually give spot value since they know the purity of it hence someone who has to test it.
      Thailand is a good place to by and hold I recommend CB locker in Bangkok. Gold is almost a second currency in thailand, easy to buy sell and store in quantity. Sorry to jack the thread Bob.

    • Hi jamesjones – if you bought Gold 2 years ago, you should have made some nice money on it. Gold has really shot up in the past year or year and a half or so. I’m sorry, I don’t know the answer to your question about transporting it. Are you sure you would want to do that?

    • Hi Luc – Obama has blame, as does every other politician out there. That can’t be argued, or if something does argue about that, he simply does not know the facts.

      • I think the most responsible for the credit crisis is The Federal Reserve.

        They kept (still do) the intrest rate too low too long time.

        + more than a decade the US (and now also Europe) has a trade deficit. Open borders is ok if you can compete with the same rules and regulations. While in the West companies have lots of rules & regulations there are none in China. They told us, yes we know but China is a huge market and at the end we will all profit. Not!!! At the end, we will all be bankrupt.

        More credit to solve a credit crisis wont solve the problem. It will only make it worse.

        • Hi Luc – Actually, the US has been running trade deficits for a lot longer than that. In the 80’s there were terribly large trade deficits with Japan. In my opinion, the biggest problem is from over spending, which the Fed has no control over at all.

  17. Maybe I am missing something here? Did OBama come to the White House with a 0 budget deficit? Has he spent 1 trillion Dollars? Or has he just added to a enormous amount he inherited? As a man I see Mr Obama as a good decent man trying to do what is best for “his” country. But you know what? Once upon a time a managed bands. There were maybe 6 or 7 at most in them. And trying to get them all to agree and stay together was a monumental task. How do you keep a senate, congress, etc, together to agree? And how in gods name, can every Republican in the USA say “No” to a health bill? Come on, not one, not even one single Republican agrees??? But if you carry a title of Democrat you vote yes?? Where is the Democrat who says No. Its like a Civil War going on within the ranks of the country. Somethings very wrong there.

  18. well i think gw jr way overspent and stayed to long in iraq wich cost us billions but these democrats with thier crazy health care ideas wanting to spend trillions thats just crazy personaly i think if u want health care u should go to work and pay for it yourself and as for the unemployed my work is seasonal and i am unemployed half the year but i still manage to find some kind of sideline work when i need to mostly the problem is we have to many computer gurus and not enough skilled workers no one knows how to do anything anymore without having to pay some one to do it why do u think so many filipinos work abroad as welders and machinist and pipefitters engineers ect.. these are trades we are having to outsource in the usa i worked a construction job in the usa with over 400 pinoys i think the whole system in the usa needs to be changed from education on up to the military my dad said when he was in the marines the di would hit you i doubt you would find that today seems everything in the usa has been girlyfied and made politicaly correct

    • Hi jason – It is true that the US long ago abandoned training people to do work with their hands. When I was young there were trade schools – high schools had shop classes and such. As far as I know, in the USA those things are all relics of the past now, and the USA is certainly outsourcing almost every kind of work now. This is not an example for prosperity and survival.

      • EXACTLY BOB THAT OUTSOURCING NEEDS TO STOP ITS KILLING OFF THE MIDDLE CLASS WE NEED TO INCREASE OUR TAXES ON IMPORTED GOODS FROM ABROAD AND BECOME THE MANUFACTURING GIANT WE ONCE WERE OR ELSE WE ARE IN TROUBLE THIS IDEA OF FINACING YOUR WHOLE LIFE WITH CREDIT IS JUST UNREALISTIC ITS JUST LIKE A HOUSE OF CARDS WAITING TO COLAPSE BUT I DID READ THINGS ARE MUCH WORSE IN SOME OTHER COUNTRIES PERSONALY I GET MY WIFE TO PUT MY PAY CHECK INTO PESOS FOR NOW IF IT DOES GO DOWN TO 25 ATLEAST ILL HAVE ALOT MORE PESOS THAT I CAN BUY MORE DOLLARS WITH BETTER TO BUY AT 45 OR 46 THAN AT 25 I THINK IT WOULD BE FOOLISH TO HOLD ONTO DOLLARS IF THE RATES GO LOWER

  19. but i have read the hsbc usd and php forcast and they said its gonna stay in the 45 to 43 range till about then end of 2011 for what they can see bsp forcast said the same thing but who knows its just a forcast as for america taking a down fall i dont think so it would hurt the rest of the world to much with other counties holding usd as thier reserves and the main thing i would watch out for if the usd was gonna take a dive would be 3rd world countries start to change thier reserve currencies to euro or pound or other (jmho) and if the phils did hold onto thier 33 billion in usd reserves than the peso would be introuble to even at 25 to 1 the peso would be worth less cause the currency backing it is worth less (jmo)but what do i know im just a pipe welder

    • Hi jason – there are always banks and other economists that make forecasts, and they usually turn out wrong in the long run. Just 2 years ago HSBC was projecting that the $ would hit 52 by the end of 2008, it never happened. A few years ago, when the dollar got down near 40, some banks were projecting that it would hit 35 in months, but the dollar never closed below 40 within the past 8 years or so. So, it’s anybody’s guess. For me, it is just wise to be prepared for the worst. Heck, I hope it doesn’t happen, but we just can’t be sure. The signs I am seeing are not good.

      • YEAH BOB I HOPE IT NEVER GETS TO 25 GOSH ID NEVER GET MY EARLY RETIRMENT THEN. THATS WHY IM STASHING AWAY SO MANY PESOS NOW WHILE THE RATE IS HIGHER I THINK IN THE SHORT TERM IT WILL GO UP AFTER THE ELECTIONS BUT AFTER THAT IT MIGHT CONTIUNE ITS DOWNWARD TREND BUT IM KEEPING MY FINGERS CROSSED IT WILL STAY AROUND 45 AND HOPING WONT CLOSE BELOW 40

  20. Hi, Bob!

    Even though the Philippines escaped last year’s recession, the American economy still no doubt has a sizeable impact on our country’s economy. The US is still one of our largest markets of export goods and of course, our Filipino expats. Even our local stock exchange mostly follows the trend of that in the Wall Street. So even though the Philippines may be faring “well” despite the global crisis, it’s still not a pretty picture for us Filipinos. I keep on hearing almost every day, from friends and relatives there, how life is getting harder and harder there in America. In fact, I’ve heard that my aunt and uncle who live in California for almost 20 years now had have to borrow money last year from their daughter here in the Philippines. And there is that constant talk among economists and analysts how the shift of power (particularly) economic power is shifting from West to East. Somehow I feel that more Filipinos who wish to go abroad now prefer to immigrate to countries other than the US such as Canada, Singapore or Australia, well at least for now. The US deficit does continue to expand and the labour market of the world’s biggest economy is still sluggish and the repercussions of which are felt globally. Now I know when America sneezes, the whole world catches a cold. I work in a multi-national company, Fujitsu Ten, and the US is one of our major markets, so our profits are affected to a high degree as well.

    I fear that America, despite its traditional title as the “land of opportunities” may have to clamp down on its immigration quota, indefinitely, just to save millions of jobs for Americans. I think this may be good only in the short run though; from what I know, America’s prominence in the world was brought about by her ability to welcome talented people from the world over. America still has advantages over most other countries: her amazing ability for innovation, the intellectual freedom of her citizens, and talented workforce. I really think these are the true wealth America can ever have. I’m not an American, but I do feel sad about the sorry state of America’s diminishing economic prowess. But I guess it’s about time our people create their own new venues of opportunities as well, even here in a “Third-World” country like the Philippines. It’s long overdue I believe.

    • Hi JR – I fully agree with everything you said. One point in particular – a lot of Americans have become very anti-immigrant. I suppose it is natural, because Americans certainly want to protect jobs for themselves. However, in the past, it is the rather liberal immigration policy that has really made huge growth and opportunity possible for Americans.

  21. Dear Bob,

    You are right to warn your readers that the United States is in bad shape and that they should be prepared for the worst. Back in the 60’s I remember Congress saying that the US was to become a service oriented country and I laughed at the thought. Well here we are!! Unions and government have pushed out most of our manufacturing companies and real jobs. Over 70% of the economic engine that drives the US is taxes on purchases of non essential items by people without stable jobs or without jobs. Social Security benifits will not be increased based on increased cost of living because they cut out energy and food from the cost of living equation. Last week congress quietly voted to print & borrow 1.9 Trillion dollars to pay the interest on our national debt so we won’t default. The U S is presently bankrupt. Social Security, Medicare, Medicade, pension plans are all broke. The entire infrastructure of the U S is at the bottom of the barrel. Most of the states are bankrupt and trying to get help from the federal government which is unable to help. Michigan is particularly hard hit. The state doesn’t even have money or means to cremate the homeless or the bodies of people whose relatives are destitute. The cost is $600 each but there is no money and bodies are piled up in sacks in refrigation units. My financial advisor saw this coming two years ago and helped isolate us from this recession. My wife and I have a double lot near Davao in preparation if, worse comes to worse here in the U S. Foreign countries are buying up and trying hostile takeovers of what little industry we have left. Abu Dhabi owns much of Wall Street and talks are ongoing to sell the PA Turnpike to China. Parts of our national parks are up for sale. I could go on and on. Back during the Bush administration, talks were started with Mexico and Canada to merge and create the United States of North America with a new currency.
    An 8 lane highway has been surveyed from Mexico to Canada for this purpose. If anyone doubts what I say; check it out on the internet.
    The heavy inflation on the dollar is expected to hit in about 2012.
    As usual, you are right on the money Bob, (no pun intended).

    • What a sad picture, Dave. It was already bad thinking about it, but when you start throwing in all of the specific examples, well.. it only makes things feel worse. My goodness… dead bodies piling up in MI because they don’t have money to process them… now that is a sad state of affairs!

  22. Bob, timely that you brought this up. Among other things, esp those in North America, is something called “unfunded liability”, i.e. our govt pension. Although on paper, my govt pension, govt benefits (to which I paid into through taxes), some socialized programs should allow me to live just above the poverty line. I’m wary that Canada which is totally dependent on the US (80-90% of our economy) will just sink faster than the US. The P25-$1 exchange rate will not matter as much if all I have will be worthless i.o.u from the govt.

    I decided to “diversify” 4 years ago. Some in the Phil, some here. My Phil investment in condo dev has a net return better than best bank rate rate. When I’m there, I spend my pesos, when I’m back here, my CAD. I’m thinking of the Phil retail treasury bonds as my next investment for any extra cash. They have good the best yields available with much lower risks. The country’s debt to GDP ratio is 50% (back to pre Asian crisis, still going down); debt servicing is 17% of revenues (going down). The US is now about 70% of GDP (and rising). As you put it, if the USD deprecites, then it’s good for those with USD denominated loans (like the Phil) and bad for the US economy.

    The Phil has survived the current crisis is because it is more diversified economically, not so export dependent (only 30% compared to countries like Canada, 60-70%); strong domestic consumption; has a large market for a small country (90 m in a country less than the size of Indonesia, Thailand, Japan and UK); and surround by a large strong regional market. Worse comes to worse, one can always live off the land in the Phil (e.g. plant your own vegies, buy local stuff) and live local. It’s not as bad as living wihtout heat, cold water, and winter clothes. You know, Filipinos seem to survive with little money, little effort (for many), little ambition and still smile. I think that would be a plus for me.

  23. I don’t need to hear this Bob but if it happens it happens I guess….thanks for the info ..as bad as it sounds …Phil n Jess

  24. Two major factors here: the leveling of the international playing field being slowly brought about by globalisation and the massive printing of money causing devaluation of the $USD. It is unstoppable. When wikileaks.org gets back up they are about to release loads of info on corrrupt banks in Europe and the USA. Keep an eye out for this. Another factor is the gold market.DO NOT BUY PAPER GOLD; IF BUYING GOLD MAKE SURE IT’S THE REAL DEAL AND TAKE PHYSICAL DELIVERY. There is about to be a massive stouch on the internationational gold market. http://news.goldseek.com/GoldenJackass/1265248800.php

    • Hi Barry – I agree that the playing field is undergoing some leveling, and that leveling will be painful for those on both sides of the field Some will experience a decrease in their standard of living. Others will be expected to improve their productivity to achieve that leveling. It won’t be easy for either.

  25. Ron Paul recently made this youtube presentation on the state of the Union and the dollar, very interesting 5 minutes! He shows that the dollar deflation is both inevitable and will drag down the real value of other currencies with it; in other words USD$ inflation leading to worldwide deflation. The dollar may not only buy less pesos but those pesos will buy less rice.

    http://www.youtube.com/watch?v=Y2y4na-HSrY

  26. This summer will be an interesting one, the unemployment figures Washington releases are laughable, they never tell you since FDR they use a “different” method used to calculate the rate than they did in the great depression to keep the figure lower. Perception is 9/10ths of the battle but even the average American is beginning to see through this propaganda. The markets just don’t make sense anymore…
    I have strong suspicion the bank cartels are manipulating the markets (dramatically more than before), precious metals being one of them.
    Interesting note, gun sales have gone ballistic in the USA since Obama, ammo up until the last 2 months was in very short supply.
    What concerns me the most is the fabric that holds out society together is a strong as rice paper, we are not our grand parents
    generation.

    • Hi Brian – I agree that the glue of society is weakening, and even falling apart. Just the fact that people can’t agree to disagree, they fight over every little thing, that shows that we are falling apart as a society.

  27. I love how papers in the US are now referring to it as “The Great Recession” anything to avoid using the dreaded “D” word. It’s The Great Depression II and there’s no sugarcoating it.

  28. The thing which worries me most about all this is my family in the Philiipines (Northern Luzon) being so close to Taiwan. China and the USA are again making noises over a recent mega armas sale to Taiwan by the USA. The economies are entwined with the USA owing China Trillions. China is now capable of producing virtually any kind of weapon. The Philippines is the closest US friendly to Taiwan and would almost certainly be asked to help if the USA does end up in a war with China. Things could get very messy. I pray this does not occur but the way things are headed anything is possible. History has shown that the quickest way out of a depression is a big nasty war. Hideous to even think about.

    • Hi Barry – Indeed, the situation with Taiwan is not looking too good right now.. US is also fighting with China over President Obama meeting with the Dalai Lama.

  29. Hi Bob

    This is a big and painfull subject for us all, no matter where you live. I agree with you. This is not the fault on the latest group of politicans. It has been caused by bad decisions, made in many counties, Canada included over the last 50 years. Can you even buy a TV,computer,camera or phone made in the U.S.A. or Canada? Canada and the U.S.A. exported our jobs and convinced ourselves we can live the high life forever. A new car ever few years and every new gadget when it comes out. With regard to investing your money in another currency or country, the whole world is in bed with the elephant (USA) and when the elephant rolls over, it effects everywhere. I find it kind of sad. A bad decision made by millionaires means kids in poorer countries get less to eat. But, it is too late to turn back the clock. All we can do is hunker down and do the best we can for our families.

  30. Dave Labarr! LOL, Who told you about the secret plan that Canada & Mexico devised many years ago to annex the U.S.? Actually, the road you speak about is a trans-continental shipping highway, for funneling resources out of Canada, sort of like a very long siphon!

    Michael from Aus –
    Interesting points regarding Australia’s economy. I’ve heard similar from my boat building/design Aus buddies. Of course, you need to make a lot of money to be comfortable in Aus, due to the outrageous prices on everything, especially imported equipment. Just don’t do what we Canadians did & start selling off your raw resources, or the manufacturing jobs will go with them. Though American protectionism is Canada’s greatest fear, for the U.S., I highly recommend it. I always felt that free trade was a big mistake for Canada and believe that the extension of free trade to include Mexico was a major mistake for both the U.S. & Canada. If allowing companies to out-source to Asia had been tied to a requirement for the Asian countries to increase wages, radically, things may have balanced out. Unfortunately, the corporate elite & preferred shareholders are the ones’ whom continue to reap the profits, while the workers are no better off.

    Consider this: My brother-in-law is working in Singapore, 14 hours/day, 7days/week, for 800 Singapore dollars/month. The agency which sent him collects over S$1,000/month. As a shipyard steelworker, I earned Can$35/hour. A Filipino welder or fitter earns about Can$10/day, before taxes. Yet, a Filipina friend just returned from her annual Vacation in Manila. While there she fell ill & went to the hospital. For 4 days in hospital, during which they conducted many tests and found nothing, She Paid P$80,000+. In Canada, I pay C$54/month for my medical, which includes hospital visits+.

    AIG, whom I formerly delt with, was bailed-out by the U.S. Gov. & announced that they are giving their executives $100million in bonuses. It has always been my belief that governments should exist to represent the people and protect the people from greedy corporations/wannabe “tycoons”. Sadly, most governments do exactly the opposite, through a “hands-off” approach. Ah well, back to studying, enjoyed the opportunity for a rant. If you’ve got food on the table & a roof over your head, the rest is gravy!
    Mike

  31. I suppose I can understand why Americans would feel sad that the empire is crumbling but they should put things in perspective. Does their happiness really depend on China, India etc remaining poor? I mean are they really so dog-in-the-manger or insecure that they can’t stand the idea of other countries catching up? It’s not as if the USA is about to become a third world country.

    The American economy remains far and away the biggest in the world and is extremely productive. Nevertheless there’s been a ridiculous asset bubble caused largely by the Bush Administration and Reserve Bank keeping interest rates low and running deficits when economic activity was high, when they should have been doing the opposite. The result was that when a recession hit, there was little room for stimulation through lower interest rates and increased government spending had to take place on top of the high deficits already created.

    All the apocalyptic predictions are way overblown. We had several years when lots of people kidded themselves they were getting incredibly rich because their house/s and shares were increasing in value by 20-30-50% plus per year. As if that was ever going to be sustainable! It was just a giant Ponzi scheme, regrettably boosted by politicians for their own short-term reasons. Now we’re seeing the inevitable correction, that’s all.

    In the longer term however I suspect Bob is correct and the value of the $US will fall. The US can’t really tackle its chronic balance of payments problems until it does.

    • Hi Ken – For me, personally, I have no problem with other countries “catching up” and the people all around the world gaining a higher standard of living. I think it is natural and is not a threat to my way of life, so I’m all for it.

      Personally, I don’t think that this bubble is a creation of Bush, it was already growing wildly in pre-Bush days. There was talk of a real estate bubble when Clinton was still in office. The economic problems of the USA are plenty big and blame is spread out enough that all of the politicians can take a fair share of it. To blame it all on Bush is way too simplistic, in my view.

  32. Bob I agree that it would be unfair to blame it all on Bush, and as a non-US citizen it’s not really my concern anyway, but the time to prick the bubble without too much pain was 2003-6, and Bush and Greenspan blew it. I’m not saying anyone else would have done any better but they were on the bridge when it happened and they ought to accept responsibility.