What to do with your greenbacks

Quick. Give it to me.

How I wish you would. Only a few Filipinos are lucky or persevering enough to earn in mighty (U.S.) dollars but thousands of our countrymen and women earn, aside from the US $, in various currencies ranging from the euro, Japanese yen, Saudi Arabian rial, Malaysian ringgit, or whatever. Virtually all the currencies in the world are represented.

Most of these however, are converted to U.S. dollars by the time the recipient (invariably, much of the foreign income is sent back home) gets the money if these are sent through the banking or the formal remittance system. These are spent on basic necessities like food, education and shelter, but a few families do manage to keep them intact usually in a dollar savings account earning next to nothing or negative interest.

Negative interest?

Yes, by the time you want to spend it, the value in pesos or goods is less than at the time you receive them. Especially these days that the Philippine peso and many other currencies of the developing world are appreciating versus the dollar. If you listen to our economic rah-rah boys, the situation won't be reversing soon because--well, they claim that the country is becoming an investment-grade haven, and foreign currency should be flooding in.

In the turbulent years of the 80s and 90s, and well into the first half of the new millennium, keeping part of your money in greenback was considered investing. It still is, but in a very different context. Every time you convert pesos to dollars, you are speculating against your own currency. It's only a small amount, you say, but multiply that by several thousands, and everybody is putting pressure on the peso.

It made much sense then. By the time I was aware of the currency exchange mechanism, the exchange rate was 6 pesos to the dollar, then it dropped to 8, 10, 12 up to 20 pesos per, when I left in the early 80s to spend some time abroad. People were hoarding dollars.

Four years later and after the EDSA people power revolution, I returned and got the shock of my life. The exchange rate was now 40 pesos to the dollar, which is roughly the present parity. The exchange rate even got worse diving to 56 pesos to the dollar during the coup years and the EDSA II.

All the denominations were brand new. I could not make out how much or what a P20 bill could buy. In my childhood, 100 peso bills were non-existent, but now Ninoy bills are exchanged more often than the 100s.

With a seemingly stable foreign exchange rate with the bias for the peso to appreciate against the greenback, it makes a weak argument to  stash your dollars in a savings or time deposit account. Remember that the bank will deduct a substantial amount from your account if the balance falls below a threshold.

So, if you really need to hold some dollars and if you are not ready at investing internationally, or the amount is no enough for such purpose, one should at least think of ways to preserve the value of your dollars. The biggest and most popular banks do have dollar-denominated investment funds which accept a minimum placement of as low as $500, but most require a minimum of $1,000.

 My usual take is, know as much as you can about the nature of these funds. Know how the fund is invested: in corporate bonds, government securities, or even equities (stocks). Be aware of the fees involved, which is usually a percentage of the principal, which could eat up your interest or income earnings.

While, as the usual disclaimer says that "past performance does not guarantee future performance", it is desirable to at least know the consistency of performance of the fund in the past. Later on, you might want also to assess the performance of, and know its fund manager.

If you have them, you're lucky. I am green with envy.