HIGH INFLATION CAN INCREASE YOUR WAIST SIZE

I must have heard or read it somewhere, but I think it’s true — high inflation can increase your waist size. Funny, but it’s true. Let me count the ways:

1. High gasoline price will discourage you to go out, and be some place else. Instead, you’ll get stuck in the house – eating, lying like a couch potato and watching tv/dvd all the time. It saves gas, it saves money from eating out and watching movies — ergo you have avoided spending. The contrary will argue that saving gas will allow people just to walk or take a bicycle. I don’t know what you’ll do, but with the hot and humid weather outside, I’d rather stay inside the house and watch Spiderman 3 in HBO for the nth time.

2. People will eat less often, but with big meals so that they dont have to eat snacks. Mostly high carbo food, to justify that they would have enough strength for the day. Yeah right.. you need 3 cups of rice, and all you need to do is sit in front of your PC and file papers all day. When you starve your body, the more it will store fat for the rainy days.

3. Now you decided to stay home, and just order out or have food delivered. Since you worry about spending too much, you opt for cheaper take outs like Jollibee or mcdo (wow, free plugging!). Have you tried eating mcdo everyday? — who would forget the “Super Size Me” documentary. I rest my case.

4. You’ll start trimming your monthly expenses — and the first things to go are those you dont usually need… gym membership and recreational activities. There goes all the fat-burning moments.

5. To lessen your trips to the grocery, you’ll buy more items in one trip to justify the cost. Trust me, the more food you store in your fridge and pantry, the more you’ll get tempted to eat. And as you spend more time inside your house, the more you’ll be tempted to eat.

Call me pessimistic, but reality bites.

INFLATION HITS 11.4%

Inflation finally hits double digit in June with 11.4%, brought about by relentless oil price increase in the world market hitting a market high of $145 per barrel.

When inflation is high, what does it mean for the common people?

- Inflation eats up the purchasing power of your money. As prices of basic commodity increase, you’ll find yourself spending more for the same basket of goods you’re buying.

- Spending more would mean increasing the money supply in the market. As most people will continue to eat, drive to work, and spend everyday- more money will float in the market.

- When inflation is high, central bank tends to increase Interest Rates to control the money supply in the market. With high interest rates, people will think twice before buying goods which they have to pay with interest rates. With this, central bank hopes to reduce the money supply in the market, and hopefully curb inflation.

- If inflation is high; Interest Rate is high. Then interest rates for auto loan, housing loan, personal loan, etc will also increase — So, is it best to buy a new car, a new home, and get a loan during high inflationary period? — if your paying cash, go right on.. but, if you’ll pay the mortgage or monthly amortization — may not be a wise move.

- Inflation is not all negative — again, there will always be two sides of a coin. As a consumer, high inflation will definitely beat you down. But as an investor (if you have existing investments in the money market), high interest rates will work to your favor. As central bank increases interest rates, banks should follow suit by increasing their Time Deposit Rates, Bills and Bonds Rates, etc. What is the logic? With banks now offering attractive interest rates, people will save more and put more of their money in the banks than spend it — again, solving the problem of too much money supply in the market.

So, how do we cope with Inflation? Spend Less… Save More.