Back in the 20th century, my occupation was “General Manager-Dairy Farm” with 300 head of Holstein cattle, the black and white breed seen on milk containers. Dairy farming consists of: “Feed cow; milk cow; shovel cow manure”—at least in theory.
It is more complex than that. As with other female mammals, cows lactate only after giving birth. Therefore, individual milk production must be constantly monitored, and when it falls, the cow is taken out of production to rest.
In the good old days, Bessie the Cow and Brutus the Bull were put in a corral for nature to take its course, and about nine months later, a calf would be born. But that is unpredictable and inefficient for a business. There is no need to go into detail about obtaining semen from an 800-kilogram (kg) raging bull whose only purpose in life is to make Bessie pregnant. Further, the process of artificially inseminating an animal whose birth canal is the length of a man’s arm is not necessary either.
Yet, dairy farming is much more than “feed,” “milk” and “shovel manure” with a small skip loader 200-kg at a time.
Although supposedly at the pinnacle of human intelligence, we are always looking for simplicity in what we experience. It is easy to conclude that the Earth is a flat disk from what we see. But then we have to explain why it is daytime in Manila, Philippines, when it is nighttime in Manila, Arkansas, and that is more complicated.
We want “25 words or less” answers to our questions and prefer one or two factors that account for what we see. We believe that we are able to think logically about issues, and often, our “logic” keeps us from discovering the reality.
Aristotle logically concluded that heavier objects fall faster than lighter ones. That makes sense. But it took nearly 2,000 years before Italian scientist Galileo climbed to top of the Tower of Pisa and empirically proved that, no matter the weight, objects fall at the same speed.
In 2014, when Brent crude oil was trading above $100 per barrel, Saudi Arabia decided to flood the market to push prices to a level that would put the shale oil producers out of business because, “theoretically,” their production costs were much higher. Oil dropped to below $40 in 2016. Except, it was Saudi Arabia that almost went out of business, because shale oil producers were able to compete and stay in business.
The Philippine tax-reform law goes into effect, and inflation starts going much higher, and of course the primary cause is the Tax Reform for Acceleration and Inclusion (TRAIN) law because of increased excise taxes. That makes sense. But, at the same time, the crude-oil price increases by 14 percent. Rice prices go higher because of government mismanagement of the reserve supply. The Philippine peso depreciates faster than other emerging market currencies.
But no matter the complexity surrounding Philippine inflation, we all know that the TRAIN law is the bad guy.
We also want to see a direct cause-and-effect relation because that is as easy to understand as the clouds move in and the rain falls. But sometimes things just happen at the same time—correlation—even when we cannot identify causation.
The Philippine stock market has been trending with the Morgan Stanley Emerging Markets Index going back to 2011. Philippine inflation has been trending with US inflation back to 2008. The Philippine peso used to track the Morgan Stanley Emerging Market Currency Index until 2015. Now it is going opposite from that index. And it is still hard to understand that a heavier object does not fall faster than a lighter one.
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