There is a commemorative P5,000 banknote that has attracted the attention of Filipinos on social media. Indeed, this new bill sports imagery of national symbols, most notably that of the chieftain Lapu-Lapu, in what is seen as a nod to Philippine history before Spanish colonization. Romantic nationalist ideas aside, there is not much evidence to support that Lapu-Lapu himself personally participated in the Battle of Mactan to drive off Ferdinand Magellan, but we shall leave that for the historians to look into. The real topic of this article is about the printing of money itself.
Introducing new currencies into the market is not something all that new. After all, the P200 banknote was introduced in the early 2000s, and the P5 and P10 banknotes fell out of circulation in the two decades leading up to this one. Are Filipinos getting richer, and thus need bigger denominations of money in their wallets? Is this indicative of inflation, or a weaker peso, and therefore the need for higher-value currencies? Regardless of the reasons, it is interesting to speculate if a P5,000 bill of some kind will eventually enter public circulation in the future.
This leads to another fascinating idea though, namely the idea of simply printing new money, not just to introduce it into the market, but to give it to people for them to spend. Some of you might have considered this regarding paper money and wondered, well why do we not just print more bills and give them to the people? Why not have many new Lapu-Lapu bills swimming in the sea of the Philippine economy?
In this time of a global pandemic, would it not be great if we could simply print an arbitrarily large amount of cash and give that out, so that people could buy what they needed in a crisis? There are reasons why this would not work in reality the way we imagine, but with talks of governments around the world creating stimulus packages for efforts against Covid-19, does it have merit?
The Philippines does have a billions-of-pesos-heavy pandemic stimulus package to inject money, in the form of credit, into the economy and choice sectors in this time of crisis, through the Bayanihan to Recover as One Act. Similar policies are some of the ways many governments around the world are taking matters into their own hands. Even before this, such measures were not unheard of to deal with financial crises.
Whether or not it is a good idea to add money into an economy to help bring businesses back to normal operations in a time of need really depends on who you ask: there are those who favor taking action over doing nothing, and those who contend that the economy would get worse over time if such actions are taken.
Generally, interventionist Keynesian economists, influenced by the thoughts of John Maynard Keynes, would likely favor such measures in order to promote spending and bring the local economy back on track. It is an argument that an institution, such as the Federal Reserve in the US, would normally use to justify the injection of money to fix recessions. Criticisms from free market Austrian economists, influenced by the thoughts of Friedrich August von Hayek, on the other hand, might point out that these measures send the wrong price signals, lead to malinvestments, force decisions based on unsound money, and cause suffering industries to eat up more funds, hurting the economy as a whole as a consequence later on.
Unlike other forms of economic crises though, the one posed by the pandemic creates new challenges due to how it affects the lives of people on a more personal level. It puts stress on health care, agriculture, transport, tourism and so on, however, this is not only a situation of bringing the economy back to life, but also preserving the well-being of people on the ground. Time will tell if the stimulus policies of governments worldwide will bring about positive change, but in a time of global crisis, a potentially warped perception of the value of already scarce resources is a real threat brought about by gigantic recovery packages as we go through this most uncomfortable time together. In this case, we should continue to be skeptical of causes and effects.
Whatever the truth behind the Battle of Mactan, it is clear that Ferdinand Magellan and his crew underestimated their opponents. It was a fatal mistake on their part. May the commemorative P5,000 bill at least remind us of a cautionary tale regarding what it means to lose sight of things as they really are, whether it be in the economic sense of making decisions based on costs, or otherwise.
Harald Eustachius A. Tomintz teaches at the Department of Economics of the Ateneo De Manila University in the Philippines.
1 comment
Hello, sir.
How does this action of BSP (printing new banknotes) compare with other countries’ actions (printing banknotes for stimulus programs)? I am keen on asking this because I cannot find news about the same initiatives (i.e. printing large amount of banknotes) from BSP.