Everybody sighs, the price is higher and higher. I hope that in the future i won't take a bag of money to buy a loaf of bread.
Quite telling, because we've seen this happen within the last hundred years in Europe and Africa ... and, to a lesser extent, Vietnam.
The price of Vietnam's mishandled and stymied growth is inflation joined with the VND weaking against the USD concurrently, all within a culture conditioned over the last 35 years to distrust banks and investment in their own economy.
"How does this hit me?" you ask.
For example, let's say you and a friend graduate college and start teaching English on this exact date last year (February 9, 2010). At that time, you and your friend are given the option to be paid in USD or VND.
(Now, you might say I'm stupid, and everyone would get paid in USD, but that partially highlights the lack of confidence the Vietnamese have for their currency which feeds into this problem.)
Your salary would be $8 USD/hr and your friend's 147,759.884 VND/hr at the exchange rate of 18469.9855 VND per USD on Feb. 9, 2010.
Now fast forward one year later. The exchange rate today (Feb 9, 2011) is 19500.0366 VND per USD. Inflated 5.6% over a 1 year period. Or, in other words, you would still be making $8 USD/hr, but your friend would now be making $7.58 USD/hr.
That slight difference ends up costing your friend about $6 million VND per 40 hour work week which is no laughing matter. Your choice 1 year ago nets you $24 million VND MORE than your friend per month.
I hope you treat your friend to a nice lunch every month ...
The real crunch comes because,
1. Businesses understand this phenomenon so they write their contracts in VND in order to take advantage of the VND weakening against the dollar, and
2. when coupled with the general inflation the country experiences as, on a whole, it gets richer, the common worker has less liquid cash than previous, and
3. 70% of GDP is in Ho Chi Minh City, so although you might survive the numbers crunch in the city, few people unlucky enough to be born/live outside TPHCM will have the money necessary to move to the city for education or a better job.
(All data from www.mataf.net)
2 comments:
I felt I was sitting in an Economic class. lol
I think everyone here knows what's going on but how to deal with it is a problem. *sigh*
Sorry about that!
The answer is probably locked away in another college class ... history.
I don't have specifics at my finger tips yet, but in the years between WW1 and WW2, the USA was entering a period of rapid growth. The "roaring 20s" saw Americans become demonstrably wealthier as America enjoyed the fruits of a burgeoning economy. Americans displayed their largesse by buying more expensive clothes, etc.
This is all very similar to the current Vietnamese culture. The young, educated, English-speaking Vietnamese are much richer in real dollars than their parents' generation, due to Vietnam's economic gains.
However, during this time America had monopolies that eventually had to be broken down, a stock market that collapsed when France defaulted on loans, and years of austerity after the riches and before WW2 based on protectionism. It took a war to get things righted on America's side.
It will be interesting to see if Vietnam follows a similar path. It'd also be interesting to do some research into the actual variables that caused the boom-bust cycle of the 1920s and 30s and see if they are repeating themselves in the 2000s and 2010s of Vietnam.
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