A coming wave of inflation

During the last month I have made trips to San Francisco, Tokyo and Hong Kong. While I was in these places—among the most expensive cities in the world—I compared the cost of goods: food, white goods and hardware. Your readers are probably not surprised to learn that many prices on Saipan appear to be going even higher than in these expensive locations. For example I did one-on-one item comparisons and found the same items are 30 percent to 300 percent higher here. Don’t take my word for this bad news: a recent article on Yahoo.com, “Warehouse Club Price Comparisons,” published on May 17, 2009, showed the following prices:

* 1.5 dozen eggs, large size, $1.50
* Strawberries, fresh, 2 lbs, $3.50
* Skippy Creamy Peanut butter, (2) 40 oz jars, $6.99
* Tide Original Liquid Detergent 170 oz. $20.99
* Pepsi, 36 cans, $9.49
* Huggies Step 4 diaper, 176 count, $42.79

Compare them yourselves with prices here and I think you will get the idea. Inflation has already hit the CNMI. Many Hong Kong prices were lower, and some Tokyo prices were also lower than here. For example fresh strawberries imported from California in Hong Kong were $5 for 2 pounds. Our Saipan home grown vegetables are about the same price as California and Hong Kong but imported items are 100 percent higher on Saipan.

My study is not scientific but we should ask: Are the reasons for higher prices on Saipan due to higher shipping, logistics, tax and distribution cost? Most of these same costs also apply outside Saipan. Our markets are small and mostly below a critical mass in size to gain from economy of scale. This may be the reason for our high prices. Gasoline prices are always higher here. When I take into account state, national and local taxes, including the $0.15/gal. CNMI tax, it cost about $1.35/gal more for gasoline here versus the U.S. Is this all due to shipping and storage cost?

The above is our current situation. I believe that the coming inflation could be the hangman’s noose for all of us in the CNMI. There is a wave of inflation coming, I think most people realize this. It has to do with federalization, minimum wage increases, CUC power and water cost and projected increases, poor productivity, and inefficient government.

Washington D.C. is not helping us either. The Climate Security Act of 2007 (S. 2191), also called the Cap and Trade Tax legislation, is moving through the U.S. Congress now! This new tax on energy could add $800 to $1,300 per household in 2015. Electricity prices could increase 36 percent to 65 percent in the same period. This is according to the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation.

What can we do as a community to survive this coming wave of inflation? The huge forces that are impacting us are coming from off our islands. We need to:

1) Generate our own power. We are energy-rich with wave, wind, ocean currents, and solar.

2) It may be time to consider co-ops as a way to buy collectively.

3) Grow our own food,

4) Elect a better government to lead us.

5) Link ourselves more to Asia for supplies.

6) Encourage, through legislation, our business community to work together to lower prices and become more competitive.

7) Seek help from the USA to understand the stress they are imposing.

8) Let work hard together to establish our “Community of Excellence”.

Even with all of these problems the future is bright! To quote a local businessman, “There are diamonds on our islands, let us find them!” Time is not waiting for us!
[B] Frank Stewart[/B] [I]Capital Hill, Saipan[/I]