ACCORDING to hedge fund manager and American investing legend Ray Dalio, money has two purposes and two masters: Those who want to obtain it for ‘life’s necessities’ usually working for it and those who have stored wealth tied to its value.
Throughout history, these two groups have been called different things. The first group, workers (the have nots) and the second group, capitalists and investors (the haves). Along with the government (which sets the rules) the major players are the workers and the investors in this drama.
“A Template for Understanding Big Debt Crises” by Dalio expounded most of the world’s economic dilemma.
“In economic crisis, policies to redistribute wealth from ‘haves’ to ‘have nots’ are more likely to occur. This is because of the condition of the ‘have nots’ become intolerable and also because there are more ‘have nots’ than ‘haves.’”
Dalio added: “While generally both groups benefit from the borrowing and lending, sometimes one gains and one suffers as a result of the transaction.”
What if an inflation occurs? Finance Secretary Carlos Dominguez revealed that the inflation rate has gone up from 4.2 percent in January to 4.7 percent in February. What then is inflation? Is it better than deflation? British Economist John Maynard Keynes gave a distinction between the two: “Inflation is unjust while deflation is inexpedient. Of the two, perhaps deflation is the worst, because it is worse in an impoverished world to provoke unemployment than to disappoint the capitalist lender.”
From Dalio’s experience, he learned that the “too little credit/debt growth can create as bad or worse economic problems as having too much with the costs coming in the form of foregone opportunities because credit creates both spending power and debt whether or not more credit is desirable depends on the borrowed money is used productively enough to generate sufficient income to service the debt.”
The Philippines borrowed P62.5 billion for the procurement of Covid-19 vaccines. Money put to good use if spent on what it is intended for. If and when our economy regains its financial capability then perhaps our government will be able to pay back our huge indebtedness of P641 billion.
I hope Juan de la Cruz will be able to understand as to why the government is opening up businesses but he has his share of responsibility to observe all health protocols even without the police patrols with their sticks and barangay tanods with mega horns.