Carlo's Think Pieces

Reflections of a Filipino in the Netherlands

Posts Tagged ‘Kindle’

Two Years After the Fall

Posted by butalidnl on 10 March 2011

It is now March 13, 2014. America has undergone a huge shift in its economy in the last two years. On this day, in 2012, the dollar “fell” in value, by about 100%; and more importantly, it “fell” from its position as the world’s reserve economy.

The Dollar Falls
It all started in November 2011. Riots had broken out in Saudi Arabia, and the government was frantically trying to restore order. The Saudi government had bungled in its handling of a relatively small disturbance among Saudi Shiites in Qatif, in the Eastern province. In November 2011, the disturbance had escalated into a nationwide protest movement. By December, workers in the vital oil industry and in the ports had gone on strike. And the demands had hardened – where before they had merely asked for the release of arrested Shiite leaders, protesters had now gone on to demanding a Constitutional Monarchy, some even wanted a republic, while others were calling for the independence of the Eastern province. All of this caused the price of oil to go through the roof. By the end of December,  oil had reached $200/barrel.

To make matters worse, the US response to it was also wrong. Congress passed a new Stimulus Bill of $500 billion, and the Fed proclaimed QE4 – a program to pump $1 trillion into the economy, as a response to the new recession. Unlike what happened during the 2008 recession, however, the US was now alone in pursuing an expansionary policy. This caused a lot of misgivings in other countries regarding the value of the US dollar.

Oil producing countries responded by demanding that they be paid in “hard” currencies – e.g. Euro, Yen, even the Chinese Yuan – and NOT in US Dollars. By January 2012, Central Banks all over the world decided to cut the US dollar component of their reserves, by a modest 1/4. Thus, from an average of 80% of reserves in US dollars, to 60%. This seems to be a modest change in policy; but when it is done by ALL Central Banks at the same time, it had a devastating effect. This policy meant that the Central Banks would gradually replace their dollars with other currencies in the course of a number of months, eventually ending with the target percentage of US dollars in reserve. By the end of February, however, the value of the US Dollar had gone down to the point where Central Banks holding lots of dollars (mostly in the form of US Treasury Notes) became nervous. They stood to lose a lot, if the dollar lost value.

So, it finally came on Tuesday, March 13, 2012. The Saudis were the first to dump their US dollar holdings. This was followed by Russia, Japan, and then China. After this, everybody else dumped their dollar holdings. You could probably speak of an “oversold” situation with the dollar then, but Central Bankers didn’t care anymore – they just wanted out, as quickly as possible.  As a result of all this, the dollar sunk to $4: 1 Euro on March 16, 2012. In the months following, the dollar regained some strength, finally stabilizing at $3:1Euro by December 2012.

Picking up the Pieces
The US was left to pick up the pieces. It still had a big budget deficit, and a huge payments deficit, and a 16 trillion national debt. The only good news in all this was that the national debt remained at 16 trillion dollars, even though the dollar was half its former value (thus, effectively the national debt was reduced by half).

The US had to go to the IMF to borrow money to finance its budget deficit. Nobody else was willing to lend the US money at that time. The US got a 500 billion SDR loan from the IMF (roughly equivalent to $500 billion at the old exchange rate). But the IMF loan came at a price: the US government had to cut spending, and increase taxes, and it had to have a concrete program to balance the budget by 2015. The US also had to open up its economy to foreign investments (thus, the airline, oil, banking etc. industries were opened to 100% foreign ownership).

The IMF conditions were tough, but now, 2 years after the fall, the economy is on its way to recovery. US labor costs had dropped in relation to the rest of the world (while the US dollar’s value was halved, prices rose 30% and wages rose only 10%). This has led to a huge expansion in US-based manufacturing of products which used to be imported from China. (Another large chunk of the production had gone to Mexico, from which it is cheaper to ship to the US.) Automobile production has greatly expanded, with so many people buying smaller cars, hybrids and EVs (Electric Vehicles). And there is now a huge demand for buses, as local governments expand their public transportation services.

Tourism is now booming, with Asians and Europeans making the most of  “cheap” US vacations – tourism revenues have quadrupled since 2012. There is also a surge of “medical tourism”, with Europeans and Asians coming for elective surgery (which are not covered by their country’s health insurance).

American university enrollment has surged; while the number of American students has lessened, foreign students have more than made up the loss. Foreigners find that the US is offering quality education at bargain prices. And while foreign graduates are now in demand in the US, a bigger percentage of them opt to work in their home countries about graduation.

The stock market is enjoying a bull market of sorts – the Dow Jones just topped 20,000 points last January. Some companies are having a hard time: Walmart’s sales suffered as a result both of the lower purchasing capacity of people and the higher prices of goods. It is now repositioning stores to city centers, since people now find their suburban locations “too far away” (due to high gasoline costs). Starbucks has suffered because people have decided en masse that Starbuck’s coffee is a “luxury that they could live without”. Airlines are suffering from people cutting back on air travel.

But more companies are thriving: McDonalds has noted an increase in sales, even in the face of 30% higher prices; Amazon has seen a boom in the sale of Kindles and e-books (paper prices have also spiked); IT companies are profiting from people spending more time at home (people are also working more from home).

People have developed new habits. The magnetron is still all important; what’s new is that companies are now selling magnetron meals in reusable containers. Children often go to school now on bikes (leading to a reduction in child obesity). People are consuming more (local) vegetables, and eating less meat.

Many more people are employed than at any time in the past few decades. The unemployment rate is now at 5%, and is still dropping. There are less illegal Latinos now, since many Mexicans now prefer to work in the new Mexican factories. Americans are now more willing to take on farm jobs that were formerly done by Latino migrants. There is a marked reduction in the drug trade, with lower US buying power and prosperous Mexican workers.

There are now plans to build a nationwide rapid rail network. Ordinary rail lines are more intensively used for carrying products (replacing trucks), and a lot more products are transported by water. Solar farms are being set up in the Southwest; in Hawaii, the government is feverishly building solar and wind power plants (Hawaii was the worst hit by the oil price rise).

The “fall” of the dollar has caused a lot of suffering in America. But the American people are not only adapting well to the change, they are actually thriving. The resilience and hard work of the American people is now showing that a new economy could be fairer, greener, more equal, and eventually, more prosperous.

Some people say that the “fall” may have been the best thing to happen to America. They’re probably right. The future indeed looks quite bright.

Posted in World Affairs | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 2 Comments »

Raise teachers’ salaries

Posted by butalidnl on 4 February 2010

Richard Gordon proposed during the 29 January 2010 forum that if elected as president, he will raise teachers’ salaries to Php40,000/month. 

Php 40,000 a month in 6 years. This seems to be a tall order, especially in the light of the fact that average pay today range at Php 11 to 14 thousand a month. Even if we just double salaries, the education budget will rise from about PhP 168 Billion in 2009 to more than PhP 300 billion. And this will still leave us with salaries below P30,000/month.

But let us look at things from another angle. The Philippines spends an average of US$ 138/year/student. This is much lower than that of Thailand which is at US$ 853/year/student (Singapore spends $1800, Japan spends $5000).  Even if we strive only to reach 50% of the Thai expenditure/student, there will be enough funds to raise teacher salaries to P40,000 and to spend more money on buildings and other facilities.

Why should the country spend so much on education? Well, because it cannot afford not to. The Philippines’ main “export” product is its people – from Overseas work, to call centers, it is our people and their educational level which is our main product. The products that we make in the Philippines are also knowledge-intensive.  We cannot afford not to raise the educational level of our people.

And I think it is a good idea to improve the whole education system at the same time. The government should also go on a intensive building program for schools, and strive to reduce class sizes to between 40-50 from the present 100. The Kindle (or other eReader) should be acquired and eventually distributed to each child – to ensure that each child has enough books and reference materials. And adult and alternative education should also get a budget boost.

Congress is already quite open to raising the salaries of teachers. During this last Congress, the House passed HB4734 that gives a PhP6500 raise to teachers, and the Senate passed SB 2408 giving them a PhP 9000 raise. So, it is just a matter of the president prioritizing this case, and even pushing for a higher increase in salaries together with a thorough improvement of the performance of the education department.

Posted in Philippine economics, Philippine education, Philippines | Tagged: , , , | Leave a Comment »

A Kindle for every student?

Posted by butalidnl on 31 January 2010

In a forum on 29 January, Richard Gordon said that if elected as presidenthe will provide a Kindle (an eReader distributed by Amazon) to every public school student in the Philippines. At first glance, this seems like grandstanding on his part – after all, his chances of becoming president are not very high – but on second thought, it seems like a good idea. After all, what is to prevent a future president from implementing good ideas coming from Gordon, or any other presidential candidate.

A Kindle for every public school student. In the Philippines, there are 21 million public school students. If a Kindle is given to them all at once, this would cost (at US$100/unit wholesale) $2.1 billion, or about PhP 84 billion. Compared to the budget for education of PhP 167.9 billion, this seems like a big amount.  However, since it takes time to put the program together, and since we aren’t sure whether we would trust Grade 1 pupils with the device, let us say that the program initially distributes Kindle to first year high school students, which would number about 1.5 million.  If this is so, the cost will be about PhP 6 billion, which is reasonably within the education budget. Later, the program could be widened in steps until it reaches Grade 4.

The program should be put together after extensive negotiations with Amazon and perhaps other suppliers of eReaders. Not only should we get a good wholesale price (Gordon’s estimate was $100/unit), but more importantly, we need to also arrange that Philippine-based publishers get a big share of the download-price (the price for downloading the e-Books, which should be only 10% to 20% of the price of the printed book).  Since practically all elementary and high school books are published in the Philippines, the shift to e-Books should not be a great loss to them.

Wide Use
Then, the Kindle program should aim at all students, eventually. This means that university students, and students in private schools should also benefit from the program. I propose that the government offer this to them at the wholesale price, also in a phased program.  With the university students, this would mean that the books which are published abroad will have to be obtained from Amazon itself, with the provision that the overall cost should not exceed 20% of the print book cost.

Wide use of the Kindle will enable students to download more than just their textbooks – reference books, and even leisure books would then be available, and many people will download these. Even newspapers will come out in Kindle format.

The Kindle program will have various positive effects. First of this will be the cost savings from not having to print (and pay for) so many books. If they are distributed to first year high school students, they will use it for four years; and save a lot on the cost of the books.

Then, there will be the environmental effects of not having to print so many books. This may take time to measure, but eventually, with so many books not being printed, it will count.

Posted in Philippine education, Philippines | Tagged: , , , | 1 Comment »