The Irony Of Beating Inflation!

Someone just emailed me asking for tips on how to beat inflation.

At first, I thought it was a joke until I received messages on my page about it.

It seems like many people believe na there is a way to beat inflation.

The same people siguro din ito na naniniwalang they can beat the market sa stock market.

Let me remove the ignorance about beating inflation once and for all.

WHAT IS INFLATION?

Inflation refers to the rise in the prices of most goods and services of daily or common use, such as food, clothing, housing, recreation, transport, consumer staples, etc. Inflation measures the average price change in a basket of commodities and services over time. ( Source: Inflation Remains On RBI’s Top Agenda: Know Its Causes And Impact (abplive.com))

Pinakasimple nito ay 20 pesos yung kilo ng bigas last month ngayon ay 21 pesos na. Yung 100 pesos mo dati nakakabili ng 5 kilos ngayon 4 kilos plus na lang. Yan ang inflation. Excessive inflation can rapidly shatter the benefits reaped in previous years of prosperity, erode the value of private savings, and eat up the profits of private companies. Bills become more expensive for everybody: consumers, businesses, and governments are all left to scramble to make ends meet.

Yan ang inflation. Pagtaas ng presyo ng bilihin relative sa value ng pera. Paano mo matatalo ang pagtaas na yan? Mag add ka income? Magtipid ng expenses? That is not beating inflation. Ano yun, every taas ng inflation mag add ka ng income? Paano if panay taas? It’s crazy to even think na you can beat inflation. Para mong sinabe na tatalunin mo ang ulan. You do not beat inflation. You just try your best to survive or at least make things work until it subsides.

Yung advice na taasan ang income at bawasan ang expenses is more of a common sense rather than a great plan. Sino ba naman di gusto tumaas ang income at mabawasan ang expenses.

Bago ka mag advice ng ganyan ay tingnan mo muna ang context ng income at expenses ng binibigyan mo ng ganyan na advice kasi almost everyone are trying ibetter ang lives nila daily yet are meet with different sets of challenges. If a person works 16 hours a day to send 5 kids to school and support a family, telling them to increase their income and lower their expenses is being ignorant. They are already trying for a long time yung pinapayo mo sa kanila just now.

“There is a 5% inflation this month so if you can increase your income to 6% you will be fine.”

And pag next month 7% ang inflation? Increase to 8% mo income mo? Hahaha!

There is no beating inflation. Nagbabago yan palagi. You cannot beat it. You just withstand it by being resilient. Having an additional income or pagbabawas ng expenses is not beating inflation. You are just withstanding it. Nilalabanan lang ang inflation at best.

Di mo naman role na labanan ang inflation if truth be told. Ang role mo ay magsurvive.

Trabaho ng central bank yung ihandle ang inflation. Let me share with you what we discussed in TDS about interest rates para naman mas madagdagan ang knowledge mo just in case na di mo pa alam.

PHILIPPINE CENTRAL BANK

Kilala mo yung BDO? Yan yung uri ng banko na tinatawag commercial bank. Lahat yan sila na andedeposituhan mo ng pera tawag sa kanila commercial banks. Sila yung banko na nagseserve sa mga individuals at businesses or in short sa mga tao.

Ang central bank naman ay iba,. Central banks are public institutions of a unique nature: they are independent, non-commercial entities tasked with managing the currency of a country. Source; What Is a Central Bank? (thebalance.com))

They have exclusive powers to issue banknotes and coins, control foreign reserves, act as emergency lenders and guarantee the good health of the financial system. A central bank’s prime mission is to ensure price stability. This means they need to control both inflation – when prices go up – and deflation – when prices go down. (Source: Why do central banks raise interest rates to curb inflation? | Euronews)

Commercial banks serve individuals and businesses, while central banks serve the country’s banking system. They provide money transfers back and forth between banks and governmental institutions both domestically and in cases of transactions with foreign entities. (Source: Why is it called commercial bank? – AdvertisingRow.com | Home of Advertising Professionals, Advertising news, Infographics, Job offers)

So, clear na ang kinaiba?

Para malabanan ang inflation ay gumagawa ng paraan ang central bank. Why? Yan kasi ang isa sa trabaho niya. Gawing stable ang prices.

Ang tanong mo ngayon eh ano ang aggawin ng central bank? Alangan naman bilhin niya bultuhan ang bigas at ibenta ng mura? Hahaha.

Ganito yan.

Yung commercial bank ay umuutang yan sa central bank or sa Banko Sentral ng Pilipinas.

Funny noh? Umuutang ka sa commercial banks tapos sila pala inuutang din yung pinapautang sayo.

Okay, balik sa topic.

Syempre umuutang ang commercial banks. Kapag magbabayad yan sila may interest yun. Ang sentral bank yung nagseset ng interest rates. Konektado ito lahat just be patient.

Kung yung central bank ay magtataas ng interest rate sa commercial bank, yung commercial bank naman ay tatas ng interest sa mga umuutang sa kaniya ke business owners or public. As a result, personal debt, car loans, credit cards, mortgages at iba pa ay nagiging mahal. Dahil dun yung mga tao or negosyo na laging umuutang para magnegosyo ay di muna uutang. Parang domino effect yan. To the point na babagsak ang consumer spending. Lalaki binabayaran mo or ng mga negosyante na interest kaya wala munang gala. Wala munang excessive grocery. Hihina ngayon ang demand sa services at goods. When demand for goods and services decreases, their price tends to decline. Since hihina ang demand, babagsak din ang prices.

Yan ang ginagawa ng Central bank. Pipigilan niya ang consumer spending para bumagsak ang inflation.

Kaya makikita mo minsan sa balita na itinaas ng BSP ang interest rate sa 3.5 percent or any percent. Yan ang logic behind.

Maingat ang BSP sa mga pagtaas or pagbaba ng rates kase madaming affected. Too high na pagtaas ay baka lumaki unemployment. Controlled lang nila yan kasi di rin naman pwede sobrang baba.

Interest rates ang panlaban sa inflation.

You cannot beat inflation. You can just stay resilient and survive it.

The same goes sa stock market. There is no beating the market.

Minsan umaayon lang sayo ang market at minsan naman hindi.

Pagdating sa market ay andami pa rin misconceptions.

Nasa Bear market tayo ngayon and parating pa ang ghost month.

If you want to learn paano magdeal sa bear market, ghost month at maglearn ng new ideas or strategies ay iniinvite kita sa July 30.

We have this amazing event called TD BEAR.