Value of the dollar is a major concern to nearly every American expat living in the Philippines. There is also a lot of misconceptions out there about a country’s desire to manipulate the value of their currency.
US Dollar VS Philippine Peso
I’ve seen a lot of expats complaining that the Philippine government and the Central Bank of the Philippines (Bankgo Sentral NG Pilipinas) overstating the value of the peso. It is difficult for a country like the Philippines to do that. It can to some extent but there are larger forces in the market, like the dollar and the yuan.
At this time, the USA is putting pressure on the Chinese government to increase the value of the yaun instead of basing the value on the dollar.
Here is the issue, if a country keeps the value of its currency low, it increases export. Increasing export helps to keep unemployment low. While undervaluing the currency makes it harder to import the goods it needs to buy raw components and to feed its people. These two opposing forces tend to keep most currencies honest.
It gets far more complicated than that but we don’t need to get complicated. I also don’t know if my brain is up to it. Also, the Philippines economy is small compared to giants like the yuan, the dollar and the Euro. This makes it harder to manipulate. Now, if you go to the Philippines central banks web site, you’ll find they have monetary policy. They try to stabilize the fall and rise of the value of the peso. That is what they should do. If there is a rapid change, either up or down they can take measures to slow that change. However, those dealing in the currency can also assert influence on those prices. The market is huge. It is hard for anyone entity to completely control it. It is probably impossible.
Treasury Secretary Timothy Geithner stated:
It is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity, to be competitive … It is not a viable, feasible strategy and we will not engage in it…
work hard to preserve confidence in the strong dollar
Now there is another factor in this. If a powerful person had a lot of Peso in the bank, then they may wish to keep the value of the Peso high. So that would at least give some corrupt individual motivation to attempt to influence the markets. I don’t know if even the super rich Filipino could join forces in secret to accomplish this. But there is where the motivation to do could lay.
Currecny markets go up and they go down. The dollar is not doing well because the American economy is doing poorly for a long time. The Federal Reserve Bank has taken steps to try to keep money flowing. They’ve done this by “printing money.” They don’t actually print money any more for this purpose. Instead they buy treasury bonds. This increases the money held by banks. This means the banks have more money to lend. Since a bank can lend more money than it has it has a multiplying effect.
I don’t expect a lot of improvement in the value of the dollar any time soon. I don’t have a crystal ball and I am no expert in monetary policy though I think I have more knowledge than the average person.
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