Op-Ed: The storm we’re not preparing for…inflation or hyperinflation
As May rolls out, and June approaches, all the meteorological and emergency management pundits start their media tours to forewarn everyone on getting prepared for hurricane season, which will last up until November.
The warnings become full campaigns, which will flood the airwaves and the social media environment hoping that preparations will somehow reduce the risks associated with natural disasters.
If we weigh in the fact that we have endured several disasters since 2017 and our government is allegedly getting out of the public debt crisis thanks to its “wonderful management,” maybe we can be somewhat confident that we are ready and resilient.
With a news cycle filled with stories on the mountain of federal funding looming to spur the recovery and the perils of the still ever-present pandemic, maybe we are all distracted from a potential storm that other types of pundits are screaming about.
And unknown to many in Puerto Rico some of those gurus are right here on our shores and few in the media are paying attention.
Peter Schiff and Harry Dent Jr. are Act 22 residents in Puerto Rico and their businesses are Act 20 beneficiaries. They are renowned financial experts that regularly appear in CNBC, Bloomberg, and other business shows, podcasts, and the YouTube sphere.
Along with other financial experts, Schiff and Dent are forecasting the possibility of hyperinflation throughout the US as the Federal Reserve Bank (which is not federal nor is it a bank) is printing dollars to the moon. They even debated about it for Australian media back in November 2020.
Whether you like them or not, agree or not with their predictions, their cautionary message should be taken seriously, or at least consider that the spectrum of hyperinflation would devastate Puerto Rico in ways I’m not fit to describe. Maybe you can check what Dent has to say.
Now, what about hyperinflation? According to Investopedia, hyperinflation is a term to describe rapid, excessive, and out-of-control price increases in an economy, typically at rates exceeding 50% each month over time, and while it is typically rare, once they begin, they can spiral out of control.
If prices rise disproportionately, cash or bank savings decline in value or becomes worthless since the money has far less purchasing power.
Making the admonition that I have a business degree but I’m no financial expert, it is troubling that collectively it seems that we are ignoring what recently elected Senator Rafael Bernabe calls a multilayered crisis. After more than a decade in an extremely difficult economic situation, the pandemic has severely lacerated our struggling economy. We all expect to get out of this morass but there are clear signs that in the US inflation has arrived and that something worse can come in the recent future.
In Puerto Rico, the inflation effects are written on the wall. A local economic consulting firm has forewarned that the US inflation will affect Puerto Rico.
For instance, the price of milk is higher per request from the local dairy industry. House prices are surging and demand outpaces supply in some municipalities. There is a documented shortage in construction skilled labor and the cost of materials has soared. Gas prices are also up. And the expected rise in electric utility costs with the LUMA-PREPA transition this June could make matters worse.
So, the question remains, what is the plan? How is the Pierluisi administration preparing for this storm? How do we mitigate the impact? Does the Fiscal Oversight and Management Board have a plan? Is inflation factored on the proposed Fiscal Plan?
There are more questions than answers.
With the Biden administration threatening a spike in corporate taxes, hedge funds are considering moving to Puerto Rico as a safe haven, swelling the number of Act 20/22 arrivals. And I’m no expert, but that influx does not help our decade-long calamitous territorial finances.
The bottom line is that very much like a hurricane we must prepare individually to mitigate the worst in the coming years. Maybe bitcoin can save us?