Mejia is right, after all.

mondongo

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Jan 1, 2002
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In an interview I read at hoy.com.do, Lic Rafael Calderon claimed that goverment spending under Mejia is less than under Fernandez, inflation adjusted. As a percentage of GDP in DR$, Mejia spent less in 2003 than Leonel spent in 1999.

I checked Calderon's claims at the Central Bank website.....and lo and behold......Rafelito is corret.
 

BushBaby

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Jan 1, 2002
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So THAT is why Hipolito has been working so hard to get inflation up - so that he can turn round & tell everyone he is spending less (RD $ for RD $) than Leonel was!! What a pity that we have to pay for it all in US $ as the money paid out was against US $ LOANS!!!!!

As has been said many times before, "there are LIES, DAMNED Lies & STATISTICS"!!!! Mejia & most of his administration are true experts of ALL three!! - Grahame.
 
Apr 26, 2002
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GDP Lag

Yes, but that statistic was probably derived ignoring growth trends and GDP lag. In 1999, Leonel was spending based on a constantly growing GDP (with, as Bushbaby notes, limited inflation). For 2003, we don't know what the GDP number really is, and won't for some time. But, I suspect, in the third quarter of 2004, when we learn what the real GDP has shrunk to, Hippo's statistic, as useless as it already is in principle (as Bushbaby points out), will turn out to be false on its face as well.
 

Chris

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Oct 21, 2002
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Spending is

one side of the coin. What did he spend on? Growth related efforts, or gas subsidies? One is a good thing, the other is probably not a good thing.
 
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Mondongo, I enjoy your economic posts. They are very enjoyable and chock full of knowledge. What are your predictions for the DR in the next year or so?
 

DCfred

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Jun 19, 2003
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All Missteps Aside, Maybe.....

How can government spending be less, specially when you factor in the servicing of the foreign debt incurred under Mejia and the spending to bail out depositors, equaling 2/3 of the national budget, not too mention the exponential growth in the payrolls. Maybe a better statement would be: all missteps aside, spending is in line with that of the previous administration. The official was hablando babas...LOL. I love the dr
 
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look at the source

So, if I understand it correctly, the DR governemental official #1 says something in the newspaper. You check this against DR governement offical #2 who says the same thing on his website. Well it must be true then!

Did you also believe that all Russian party leaders under communism were always chosen by 99.9%of the votes and that voter turnout was always 100%. That was in writing as well......

Look what really happened.

1) One of the IMF criteria to renew help to the DR is that the government cuts it spending. Hippo agrees and then turns around and buys the electrical suppliers. The IMF immediately cut him off again.

2) A major bank goes belly-up and all accountholders are protected up to a certain limit. Instead of honoring that limit, Hippo applies a special ruling that all commitments will be honored, thus spending a huge amount of governement money on his special friends.

I'm having trouble wondering where his fingers are attached to because the hole in his hand is bigger than his palm.

MD
 

Golo100

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Jan 5, 2002
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Mondongo

I cannot believe you of all people made a statement like that. I believe you will also accept the statement that DR has no borrowing limits and that we still have a long ways to go before we cross the line with loans.

As Hippo inflation goes, his percentage of spending vs GDP may be so low as to reach zero. Has the Cantral Bank included the cost of buying off Baninter certificate holders in their figures?

TW
 

mondongo

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Post intentionally left in mid-sentence...

Note how we interpret information. The original post claims that government "spending" under Mejia in conmensurate with spending under Leonel. Note that I said "spending". I did not say goverment "income" or "intake".

Lets take a look at how we can detemine if spending is indeed what the Central Bank claims. Since I do not have access to insider, I will have to rely on the critical economic articles I read in the DR newspapers.

GIVEN:
It is accepted that:
1) Mejia has increased payroll substantially. Many economists, Frederic included claim that the payroll is > 30% bigger than it should be. I feel that this number is even larger than 50%.

2) Now lets take a look at what has happened to wages paid in DR$. My guess is that the average pay has not increased significantly. From what I gather through my readinds, wages have not kept pace with inflation.

3) Inflation under Mejia has increased by 70%, according to the Central Bank. Most of you living in the DR might even say this is a low estimate.

THEREFORE:
If inflation has increased the budget by 70%, but the pay has not increased anywhere this much.....then the only conlusion is that more people have been hired....which is exaclty what has happened.

MEJIA THE GENIUS
The claim of controlled spending borders on genius. He can claim fiscal conervatism (which the IMF and West like), by claiming that spending is under control. He can employ twice as many people by keeping wages low and using the power of inflation. The claim is true....but it is designed to mislead.
 

mondongo

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Porfio, even though I am not all that confortable predicting DR GDP, chances are that there was contraction in recent quarter. I think I will educate myself a little more on how the DR Central Bank calculates GDP.

Don't be surprised, however, if the loans that Mejia is taking out end up adding to DR GDP. I can see how Mejia can take part of the proceeds of the loans and build stuff (roads, dams, airports...etc). The act of building these projects adds to GDP. It does not matter to Mejia whether or not these projects ever become productive. The short term effect is that GDP is seen increasing at the expense of DR balance sheet (more debt).

This temporary benefit is the goal. This is what the lenders want to see. Neither Mejia nor the international banks really care whether these projects even finish....never mind if they ever become productive. This type of management eventually catches up with you...as Mejia and Malkum are finding out as the the Central Bank Certificate sales reach fever pitch.
 

mondongo

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Jan 1, 2002
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O&C, the DR is experiencing extreme growing pains as it transitions into a democratic, free market society. It can take several generations. The key is to keep from relapsing into some form of autocratic government, which is what Mejia desires.

Hippo sucessfully performed a US$2+ Billion heist. It is as simple as that. He got away with it. As I have posted over the last 1 1/2 years, this money has been mainly stolen from the low to middle class. One of the reasons I make this claim is inflation. Prices have nearly doubled, but incomes have not. Those whose worth was in DR$ were screwed.

Unless you can round up Hippo and his friends and force them to give up the cash, there nothing you can do to get that money back.

What concerns me for next year is that workers will demand income increases to compensate for inflation. The only way this can be done quickly is by printing more money, and therefore igniting real inflation.

WAGE INFLATION
Per Alan Greenspan, wage inflation is the real monster. This is beacuse it is a recurring price increase. It becomes a sel-regenerative process: you get a higher salary, your company increases prices, you ask for another salary increase, and so on...this is the cycle that the DR cannot fall into. If it does, then the sky is the limit for inflation.

LEONEL
If Leonel and the Legislature do not give into these pressures, then I think next year will see marked improvement.