Time to hold dollars and not pesos?

A friend of mine here hails from the Philippines and wants to return home to his farm in Mindinao. The problem he’s up against, according to him, is that the area in question harbors armed crooks who, combined with nitwit government policies, have made small scale farming a difficult, and sometimes bloody, vocation.

So he’s playing it safe and signed up for another year of work here in Saipan.

Meanwhile, the specter of full blown civil war in the Philippines has been raised by some American analysts. Accounts that I’ve read peg the number of armed insurgents anywhere from 11,000 to 15,000, as opposed to a reported figure of 88,000 troops for the government.

I’m no analyst for Philippine political affairs, so I’ve got no earthly idea what’s going on there. In terms of economics, though, the Philippines remains a total mess, and there’s no hope on the immediate horizon.
To the extent that economic strife and political strife are related–and I suppose they are related–we have to admit that a policy of poverty might have repercussions in the political realm.

And, if the accounts I’ve read are accurate, there are some rumblings to be reckoned with.
From armed peasants in rural areas terrorizing farmers, to full blown military skirmishes between rebels and troops, the reports we hear about the Philippines can lead us to suspect that the lid is about to blow.

In terms of sheer geographic juxtaposition, we can’t ignore the fact that Indonesia went totally bonkers and nobody knows what will happen over there. This fact is on the minds of American investors, which makes it important even if it is, on its own merits, meaningless in the Philippine context.

Saipan’s kababayan are far better equipped than I am to predict any turmoil that might boil to the fore in their native land. But if such turmoil is a possibility, one strategy would be for these folks to keep as much of their money as possible safely socked away in Saipan banks. Such deposits, of course, are denominated in nice and stable greenbacks.

If the Philippines goes kaboom, the peso might very well go kersplat, as the moneyed class and investors bail out for safer places. As Indonesia…and Thailand…and Malaysia…and, yes, the Phillippines have seen, investors in such thin economies can run for the exits and easily cut the value of the currencies in half just about instantly. You wouldn’t want to be holding pesos in such a situation.

And you might not want to be looking for a job under such circumstances either, unless toting a rifle in the jungle is a career that appeals to you.

In summary, unless someone had a compelling reason to convert dollar earnings into pesos, it looks to me like dollar hoarding wouldn’t be such a bad idea right now.