BY DANNY DE GRACIA AND JOHN WILLOUGHBY – Nearly every Hawaii Filipino knows that one of the chief reasons for coming to America is the fact that the US dollar (USD) buys more than the Philippine Peso (PHP). Filipinos routinely work in “hard currency” economies such as the United States so that they can send money back home to family in the Philippines which purchases more. This tradition however may be coming to an end as a result of the devaluation of the U.S. dollar which has resulted from excessive government spending and a loose monetary policy at the Federal Reserve which has been printing in overdrive: the peso has been appreciating rapidly against the U.S. dollar and is starting to buy more while America’s money buys less.
In April 2004, one USD purchased 56 PHP. Today, one USD purchases only 43.89 PHP, a -21.04% slide over the last six years. This rapid valuation of the peso is a warning of things to come. In fact, the USD dollar has been losing ground not just to the peso to nearly every currency. The reason for this is because basic Austrian economics tells us that when the money supply is increased, more money chasing after the same or diminished production results in lowered purchasing power. Because the USD is the world’s reserve currency, the U.S. government has abused this by printing more money whenever it needs it for more spending. That season of excess is now coming to an end as numerous countries are dumping U.S. Treasuries in anticipation of America being unable to pay back its debt which is rapidly approaching a level which could be mathematically impossible to pay off.
At present, interest on the national debt accounts for $600 billion new debt per year adding to the already whopping $13.4 trillion which is expected to double by 2014. Sovereign default, or the inability of a government to pay off its debts is the inevitable destination of any country which prints money out of thin air and spends on fiscally unsustainable projects. If sovereign default occurs in America , the first thing that will happen is that the nations of the world will eject their holdings of dollars, resulting in hyperinflation of the dollar at home. A similar situation occurred in Zimbabwe in 2008 where devaluation of the currency resulted in three eggs being valued at $100 billion Zimbabwean dollars (ZWL) and one USD purchased $669 billion ZWL. The effect such hyperinflations have on the domestic population is an utter gutting of the economy and a total destruction of the people’s quality of life. If the US Congress does not immediately cut spending and prioritize paying off the national debt, we will see a situation far worse than Zimbabwe here in Hawaii
The unfortunate aspect of hyperinflation and currency devaluation is that almost never do governments take responsibility for it. In post-WWI Germany, the government claimed that rising prices, hyperinflation and the poor economy was the result of the Allies who were forcing Germany to pay war reparations when, in fact, Germany’s government was abusing their central bank and printing money out of thin air. Today, here in Hawaii, elected officials tell us that we have to sever the dependency on fossil fuel and force everyone to go “green” because Middle Eastern cartels are controlling the oil supply and holding us hostage to buy gas at $3.60+ a gallon – when in fact, the truth is, gas is expensive in Hawaii not because of OPEC but because the US government has devalued the dollar through its spending spree and poor fiscal stewardship. (In fact, the Arab nations were in large part responsible for bailing out the USD and preventing its total collapse.)
We need to stop pointing the finger at others and start looking in the mirror when it comes to fixing the mistakes of this country. We simply cannot continue to support big government and not reap the consequences. Hawaii Filipinos must pay attention and get actively involved in demanding that their government stop wasting their hard earned money and stop destroying the currency. If things continue as they are, Hawaii Filipinos may find their families in the Philippines sending money to America to bail them out – if we don’t act now.
Danny de Gracia is a resident of Waipahu. John Willoughby is a retired U.S. Navy pilot and the Republican candidate for U.S. Representative, District 2.