EVERY week, I write this column for VoxPop Baguio primarily to provide simpler and contextual explanations of complex economic concepts and theories. It is my way of educating people on Economics, a subject most people are allergic to because they either find it difficult and/or they refuse to understand it because they feel they don't need it.
That is why a lot of Economics educators like me find it frustrating when people interpret economic indicators incorrectly. Some even post their misinterpretations on social media with pride. Some of the most common mistakes I see on social media are related to inflation and currency exchange rates.
A screenshot of a meme showing inflation percentages during the regime of former President Noynoy Aquino and President Rody Duterte of 1.4 percent and 3.6 percent, respectively. The former president was mocked and the current praised for higher inflation rate.
Inflation is simply a phenomenon where the average prices of goods and services in the economy are increasing. The inflation rate is a measure of increase of the average prices comparing it with a previous period.
Another screenshot shows a supporter of the current administration praising the President for the “higher” value of the peso. The exchange rate was P50 to the dollar. The social media enthusiast went further to say that they can now buy more with the money being sent them by their relatives abroad.
However, when the prices of goods and services increase, this is blamed on Vice President Leni Robredo. She was cursed and called invectives.
The exchange rate is affected by a lot of factors within and beyond the borders of the country. One of the internal factors is the internal political stability of the country, while an external factor that affects the exchange rate is policy changes and economic stability of the rest of the world.
An effect of a “higher” exchange rate is that prices of imports also increase. Raw materials of many products manufactured in the Philippines are imported. Therefore, if the cost of raw materials increase, the prices of final goods (or goods that are ready to be consumed) will also increase.
Therefore, a “higher” exchange rate would actually mean a fall in the value of the Peso.
Admittedly, I repost these frustrating memes on my social media pages. However, I do not post these memes or photos to celebrate the rising inflation rate and falling value of peso because I know the deeper repercussions of these to the economy in particular, and society as a whole.
I post these because I want people to be more discerning and analytical, not to destabilize nor to POKE FUN, that is not my job. There are other people who do those. Some even do them for a living.
Notwithstanding my political beliefs, I base my analyses on economic theories and concepts. To emphasize, these economic theories and concepts are straightforward. It does not change based on geographic locations, political subdivisions, gender, weather, temperature, etc.
The foundations of economics have deep roots. These concepts and theories have been developed since the 18th century. They are dynamic, as well. One this is for sure, these concepts and theories are here to stay and will continue shape opinions and thoughts of rational economic agents in centuries to come.
