Adjusting for inflation

A thousand pesos 10 years ago is of course not the same as it was today.

A thousand pesos now will definitely get you much much less than it would, say 10 years ago. I remember going to the supermarket with P2,000 a decade ago and the amount would be enough to fill up a grocery cart or even two. But try going to the supermarket today.

According to worlddata.info, the inflation rate for consumer prices in the Philippines moved over the past 40 years between 0.7 and 50.3 percent. From 1979 to 2019, it said that our average inflation rate was 8.6 percent, while the overall price increase was 2,312 percent. Thus, an item that cost P100 in 1979, cost  P2,412.82 at the beginning of 2020.

Using the inflation calculator, I computed that goods worth P2,000 in 2011 would now cost P2,656.32, an increase of 32.8 percent or an average depreciation of P65.63 per annum. The same P2,000 worth of goods in 1979 now cost P49,453.67 or a whopping 2,372.7 percent increase. The time value money is computed and adjusted for inflation by dividing it by an appropriate consumer price index and then multiplying the result by 100.

Inflation, therefore, increases the price of goods and services over time, effectively decreasing the number of goods and services you can buy with the currency in the future as opposed to today, assuming wages remain the same.

Since 2009, the maximum deposit insurance coverage (MDIC) of the Philippine Deposit Insurance Corp. has been P500,000. This P500,000 is the maximum amount that a bank depositor can get if the bank closes. Using the same inflation calculator, this P500,000 should now be at P718,000.

It is for this reason that the House Committee on Banks and Financial Beneficiaries, chaired by Quirino Rep. Junie Cua, now wants to give the PDIC governing board the authority to increase the MDIC to an amount indexed to inflation and other economic indicators, subject to review and/or adjustment every three years.

The panel is acting on a bill filed by Makati City Rep. Luis Jose Campos Jr. to increase to P1 million the MDIC to protect the country’s 73.7 million bank depositors. House Bill 8818 also wants the PDIC to become an attached agency of the Bangko Sentral ng Pilipinas.

Congress, by law, has actually increased the MDIC only three times. The MDIC, which stood at P40,000 in 1984 was increased to P100,000 in 1992; to P250,000 in 2004; and to P500,000 in 2009.

It’s about time that a more frequent adjustment be made of the MDIC to take into account the effects of inflation, wage increases, and other economic factors. The low MDIC serves as a disincentive to people saving in banks, not to mention the low interest rate if any, and high taxes on interest earned.

Unnecessary delays

A businessman engaged in real estate is  asking the Supreme Court for help against a law firm which it claims has been harassing him and his family by delaying the dispensation of justice.

In a complaint letter submitted to SC Chief Justice Diosdado Peralta, Fernando Pena said that the law firm has filed at least four motions for the inhibition of judges in four separate Regional Trial Courts (two in Makati and two in Pasay) whenever the rulings were against it.

The five Pena siblings – Fernando and Guillermo on one side, and Juan, Eduardo and Rosanna on the other – are currently engaged in a battle for the control of the family-owned San Antonio Condominium Inc. (SACBI), which is engaged in leasing out office spaces. Several lawsuits have been filed among them, including one for the probate of the will of their late father Don Juan Pena Rivideneira, who together with his wife, founded SABCI.

Fernando Pena, in asking the SC to investigate the said law firm, emphasized that the latter has been resorting to malpractice and has been breaching its fiduciary duties, not to mention making a mockery of the legal profession, by using motions for inhibition as a form of forum shopping. The SC, in an administrative order, discourages judges and justices from inhibiting from cases assigned or raffled to them on grounds that are neither just or valid.