Personal Pet Peeve on the Philippine Centavo.
I remember the time when I could still buy a candy called "Dilimon". It was a sugar drop with different colors and flavors that took a while to melt in your mouth. Kids like me used to buy that kind of candy for sharing with our friends like edible marbles. Unfortunately, you don't see that kind of candy anymore here.
But perhaps the thing I missed about that candy was that it was only worth .25 centavos. That's right. A quarter of a piso (PHP 1.00). Things were so cheap back then that the centavo was an actual daily allowance to school. People use it for gambling, transportation fare, and even groceries. Today, centavos still exist. However, they are not viewed as valuable as before. I'll give you an example, how many times do you see a centavo on the ground or road? Ever attempted picking it up? If it was dirty would you still pick it up?
Unfortunately, you might likely say "Hell no Ballan, that thing is dirty. it's not even worth it." Sadly I agree with you. It's not worth it to pick up a piece of metal that costs .25 pesos and gets the risk of getting your hands dirty, especially for something that doesn't have much value. And that's the point. Value. Money represents a unit of value. And if people don't see your money as valuable it is close to (or is) worthless.
This is what always grinds my gears because the government keeps on minting centavos. And not only .25 ones, they even go as far as .5 centavos. I mean who does that! Why would I carry a .5 centavos in my pocket? i can't buy anything with it? Unless I need to collect 20 more, I can make it into PHP 1.00 but it is not really worth it. Like I believe that the time of a Filipino is now worth more than just 5 centavos per second.
A country's currency relies on 2 things and that is, Economic Value and Confidence. If the economic value is high the currency becomes more valuable. The same thing goes when people are confident with the currency, they will view it as valuable meaning they are likely to save on it. Now, I believe that if we make people more confident in the currency people will tend to use it more and won't waste the currency.
Proposal 1: Remove the cents and high-denominated bills
One solution that I believe should be implied is to cut the pesky centavos including the high-dominated bills. The dilemma in picking up something that is not worth of value is the same as not being in the position to liquidate into small bills for a transaction to be settled. How many times how you ever went to ride on a jeepney in the morning with a bill (Php 50, Php 100, etc..) that becomes a dilemma to give you change?
I believe an economy should be prioritised on the speed of the transaction that is taking place rather than the degree of value of it. When a denominated bill that is acceptable to the majority and can be easily settled with, the circulation of trade will be much faster making the boost in the economic growth.
Of course, this is not a perfect solution. When a commodity’s price causes a dilemma in settling a transaction* it also gives the same problem. Hence I also give the second proposal which is to expand digitalisation.
Proposal 2: Digitalisation
Like it or not, Money is dirty. Like literally, there’s a disease of holding contaminated cash called Staphylococcus aureus. The other suggestion I believe that could help is digitalisation. Using technology in our financial system makes transactions organised and efficient. It gives a better accuracy on how much money is generated and how much excesses are unused. It also helps keep track of where the money is spent. What I like about digitalisation is that even to the smallest centavo, it is stored, counted, and transferred easily. You don’t have to worry about keeping your coins intact and not losing them. With digitalisation, you get to have your money stored in the digital space. You can use your phone or card to do transactions. No need for the hassle of counting and calculating, it’s all automated and direct. You can even do transactions within your own home and have the goods or service delivered to your door step.
Of course, digitalisation still has its downside, especially when living into country with a vulnerable cyber security. The risk of getting scammed, theft and your data getting compromised is higher than being rob. You also get to suffer with those transactions fees also known as “convenience” fees and other charges. Overall, convenience has its cost and over time we as species will evolve on how to adapt to those kinds of unique challenges.
Proposal 3: A New Currency: Piloncitos 2.0 (₿)
And finally, the last resort. Let's make a new currency! But this time, making it different. This not something new but rather an upgrade on the existing currency. In order to make the currency be more successful, or at least have its confidence and economic value last for a longer time, They need to execute 2 important principles.
The new currency must be linked to something that is hard money (e.g. Gold). If they do this, the currency (whether paper or digital) builds a strong basis of value or wealth. This strengthens the confidence and acceptability which expands the opportunity or being used internally and externally (i.e. Dollar). This way, the printing of money, even to the smallest denomination, will be limited to the value of the hard money to be exchanged with.
The second principle is to increase its sense of decentralization. I’m not saying we need to switch to bitcoin, however, there are valuable things we can learn if we use technology to our advantage. Having a more decentralized currency limits people to spend and borrow because keeps track on how much money is left for circulation. There’s limited control on the wealth, and create certain consequences for hording it.** Inflation is there but not as high as the productivity growth that can keep up.
Once again, this is not a perfect solution; however, I believe it is a better alternative to our current currency (fiat). In this day and age, we must learn from the mistakes of history and find ways to innovate and break the cycle of excessive debt and borrowing. We need to value economic growth based on productivity, not on stimulus. When people have limited resources, they tend to work harder and be more patient for growth. They also consider others to maintain existing peace and help lift everyone up, so everyone benefits from prosperity regardless of inequality. This won’t be a utopia, but it will be a world better than the previous one.
**When the distribution of wealth is decentralized hording too much wealth becomes painful as the driver of economic growth is spending. Therefore, the amount of money necessary for savings will be healthy along with the inequality gap.
*Example: Buying a car with Php 100 bills also causes the transaction to be slow and chaotic because you have to bring in a massive volume of cash.