Inflation is just like blood sugar

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By Atty. Ignacio R. Bunye

Speaking Out

Sunday, April 6, 2014


AS A member of MEDIA (ME DIAbetes), I make it a point to regularly visit my physician, Dra. Thelma Dimalanta-Crisostomo, at her Makati Med clinic at least once every quarter.

As she normally has a long queue of patients, I try to go to her clinic very early in the morning. During one of those visits, I met another early bird, a friendly recently-retired school teacher who came all the way from Batangas.

“Hindi ko na kayo napapanood sa TV,” he greeted me. “Dati pinapanood ko kayo araw-araw.”

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I explained that I had transferred to the Bangko Sentral. (Note: I recently said goodbye to the BSP for family reasons.)

“Ah kayo pala ang nag-iimprenta ng pera natin.”

I replied “Yes”. But more than just printing money, I explained that the Bangko Sentral ensures that the money it prints has true value. The BSP makes sure that every Juan and Maria’s hard-earned money (especially his pension) continues to retain as much of its purchasing power as possible.

I explained that the Bangko Sentral does this by endeavoring to keep the inflation rate low and stable.

I noticed that he knitted his eyebrows so I proceeded more slowly and explained inflation in a language that we both commonly use.

Look at inflation like it is blood sugar, I explained to him. A certain level of blood sugar is good for us. But a sugar level that is too high (hyperglycemia) or too low (hypoglycemia) is bad for us. In fact, either extreme condition can actually kill us!

He nodded so I continued.

To maintain a healthy level of blood sugar, Dra. Crisostomo prescribes medication, adequate exercise and proper diet. She periodically adjusts our medication, (either increase or decrease or maintain the type and dosage of medicines) depending on how our sugar level behaves.

Similarly, all the goods and services that we commonly buy and use have prices. The rate at which this price increases over time is called inflation. In analogous terms, inflation is our economic blood sugar.

Too high inflation (hyper inflation) would make our money practically useless. Too low inflation would discourage manufacturers to produce goods and our economy will slow down.

Governor/Dr. Amando Tetangco Jr. and his team at the Bangko Sentral are just like Dra. Crisostomo. It is their job to ensure that the economy stays healthy by keeping the inflation rate low and stable.

They also have an equivalent medical kit. Governor Tetangco calls it “tool kit”. From this tool kit, the BSP team prescribes “medicines”, singly or in combination to move inflation to a target range.

(The Bangko Sentral aims to keep the annual rise in consumer prices within 3-5 per cent this year. It has a full year forecast of 4.2%.)

To arrive at the proper prescription, which the BSP issues every six weeks, the BSP team regularly analyzes and evaluates a mountain of economic data.

In like manner, I said, Dra. Crisostomo writes down her own prescription depending on our laboratory results.

Our impromptu Central Banking 101 session came to an end when the clinic aide called my name: “Mr. Bunye!” I stood up and excused myself.

Ay sayang. Ang dami ko pa naman sanang gustong itanong.

I gave my new friend my calling card. At the back of the card I wrote the name of my book, “Central Banking for Every Juan and Maria” which he promised to look up.

Postscript:

At some point in their respective histories, the following had to grapple with hyperinflation: Philippines, Zimbabwe, and Argentina, to mention just a few.

At present, the United States, European Union and Japan have sub-2 per cent inflation. Japan’s condition is described by analysts as “Japanese-style deflation”.

All three are now aiming to move up their respective inflation rates closer to 2 per cent.

ote: For feedback, you may email me at totingbunye2000@gmail.com.

Opinion

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