My grievances are still ongoing because some people still demand #SahodItaasPresyoIbaba, no matter how destructive it will be. That's why I use Venezuela as an example, especially during Nicolas Maduro's downfall. Back to the topic, I remember writing a joke post where I said, "Why don't we open #SahodItaasPresyoIbaba stores nationwide?" Of course, if you've read it, then you may have realized that my title was what it was, clickbait. It's because some people have really poor reading comprehension. Poor reading comprehension may be why some people believe that profits and revenues are the same thing. That's probably why such people don't even bother to read about the simple principle of supply and demand! Their brains might be too emotional for their own good!
Reviewing why a #SahodItaasPresyoIbaba Store can never work without external subsidy
- If supply is up and demand is down, the prices go lower.
- If supply is down and demand is up, the prices go higher.
A nonprofit organization (NPO) is one that is not driven by profit but by dedication to a given cause that is the target of all income beyond what it takes to run the organization.Because of this, NPOs receive tax-exempt status from the federal government, meaning they don't have to pay income tax.Nonprofit organizations are often used for trusts, cooperatives, advocacy, charity, environmental and religious groups. Many, but not all, NPOs have paid staff in management positions; almost all use volunteers.Unlike for-profit businesses, NPOs have no owners and any surplus profits after operating expenses are used to further its goals instead of being distributed between members or employees of the organization.
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| Image by Sabrina Jiang © Investopedia 2020 |
Whether we want to admit it or not, the prices of goods and salaries are just the beginning of the worries. This sample income statement, for illustrative purposes, shows that even without the word salaries, there's the cost of goods sold (which also includes people who are selling) and we have salaries related to marketing, promotions, general, and administrative (ex. supervisorfs and managers). If we were to increase the minimum wage even by a peso, the effects would be felt because the increase would be passed on to several employees. For example, let's say that the minimum wage now is PHP 610.00/day x 50 entry-level workers. That means it's already PHP 30,500.00 per day. Now, we take just a peso increase, and we realize that it goes from PHP 30,500.00/day expenditure to PHP 30,550/day expenditure. Now, let's assume that people have a six-day workweek. The PHP 610.00/day salary costs PHP 732,000.00 per month. The PHP 611.00/day salary costs PHP 733,200 per month. It's because we can never remove the multiplier effect.
They finally create the dream job. However, wages are too high without an increase in the prices of products and services. Using Gemini AI (well, AI still needs refinement, as it can make mistakes), my fears were confirmed. Any business without a profit is destined to shut down. One could think about the wealth tax, that is taxing the rich more than usual. However, we need to understand the Laffer Curve. An article by Adam Hayes of Investopedia states the following:
Exploring the Mechanics of the Laffer Curve
American economist Arthur Laffer developed a bell-curve analysis in 1974 that plotted the relationship between changes in the government tax rate and tax receipts. The analysis is known as the Laffer curve.It suggests that taxes could be too low or too high to produce maximum revenue and that both a 0% income tax rate and a 100% income tax rate generate $0 in receipts.Arthur Laffer claimed tax cuts affect the federal budget in two ways: arithmetic and economic.The Arithmetic Impact of Tax Cuts
The arithmetic effect is immediate. Every dollar in tax cuts translates directly to one less dollar in government revenue and it decreases the stimulative effect of government spending by exactly one dollar.The Economic Outcomes of Tax Rate Adjustments
The economic effect is longer-term and has a multiplier effect. As a tax cut increases income for taxpayers, they will spend it. The increase in demand creates more business activity, spurring an increase in production and employment.
That spells out this one fact of life: "When incentives are lost, we all bear the cost!" When rich people have to pay more and more taxes, sooner or later, these things happen:
- Tax evasion in general becomes more and more difficult to combat, in general, not just for the rich but also for the lower class.
- A possible brain drain, such as why some FDI might be leaving China (under Xi Jinping) in favor of Vietnam.
- In extreme cases, local businesses in the Philippines will eventually suffer because they may have price caps like what Maduro did in Venezuela.
How money laundering firms can take advantage of #SahodItaasPresyoIbaba stores instead of FDI
Foreign investment involves capital flows from one country to another, granting the foreign investors extensive ownership stakes in domestic companies and assets. Foreign investment denotes that foreigners have an active role in management as a part of their investment or an equity stake large enough to enable the foreign investor to influence business strategy. A modern trend leans toward globalization, where multinational firms have investments in a variety of countries.
As a continuation, this is how FDI works:
Foreign investment is largely seen as a catalyst for economic growth in the future. Foreign investments can be made by individuals, but are most often endeavors pursued by companies and corporations with substantial assets looking to expand their reach.
As globalization increases, more and more companies have branches in countries around the world. For some multinational corporations, opening new manufacturing and production plants in a different country is attractive because of the opportunities for cheaper production and labor costs.
Additionally, these large corporations frequently look to do business with those countries where they will pay the least amount of taxes. They may do this by relocating their home office or parts of their business to a country that is a tax haven or has favorable tax laws aimed at attracting foreign investors.
Moving on, I thought about how POGO enterprises would create a powerful cover through #SahodItaasPresyoIbaba stores. The stores don't even make a profit. Let's just say that the basic conditions of the store are to sell rice at PHP 20.00/kilo regardless of the brand and PHP 1.00/piece regardless of the type of egg. It would ignore that Lion Ivory half sack is already PHP 1,350.00, and that salted egg costs more because of the additional ingredients to get the salted egg, well salted. However, because some Filipinos tend to think economics can be legislated or resisted, they are bound to fall into euphoric mode when the goods sell below cost. If rice and eggs are sold below cost then what else is sold below cost? Would premium bread like Maison Ichipan be sold for even less than 50% of the purchasing price? Would gourmet ham now be sold for PHP 100.00 when it should cost
The same can go for those who are paid PHP 1,250.00/day. It's already enough to get anyone into euphoria when Ganador is sold at PHP 20.00/kilo and salted egg is sold at PHP 1.00/piece. Prices are low, and salaries are high. However, the general rule of business and finance is that "If something's too good to be true, reject it." It's just like the promise of near-overnight wealth with stuff like cryptocurrency or any pyramid scheme. The PHP 1,250.00/day salary here is too good to be true, given the nature of the work and the supply/demand market. Salaries are only supposed to increase when there's a higher demand for labor, as companies that can pay more will naturally offer more, and that labor must be paid. The demand for labor will naturally decrease the supply of labor, leading to an increase in labor costs!
However, because the company doesn't make any profit, it's destined to crash. But the best subsidiary is through money laundering firms. James Chen writes in Investopedia that this definition of how money laundering is done:
What Is Money Laundering?
Money laundering is an illegal activity. It makes large amounts of money that are generated by criminal activity, such as drug trafficking or terrorist funding, appear to have come from a legitimate source. The money from the criminal activity is considered dirty, and the process “launders” it to make it appear clean.
Financial institutions employ anti-money laundering (AML) policies to detect and prevent this activity.
How Money Laundering Works
Regulators often describe money laundering as having three phases that show how illegal money enters and moves through the financial system.
- Placement: Injects the “dirty money” into the legitimate financial system.
- Layering: Conceals the source of the money through a series of transactions and bookkeeping tricks.
- Integration: Laundered money is disbursed from the legitimate account.
Today, anti-money laundering efforts do not see these phases as a strict sequence. Instead, they focus on spotting suspicious actions, inconsistencies, and transaction patterns that could point to illegal activity.
Money laundering activity may involve cash-intensive businesses, complex ownership structures, cross-border transactions, or rapid movement of assets. Modern AML frameworks are designed to detect unusual behavior across these areas rather than rely on static lists of known methods.
Since #SahodItaasPresyoIbaba might be asking for donations to the cause, they are indeed at a really high chances of being smurfed. The Regula Forensics article by Nikita Dunets gives this definition of smurfing, which in turn could be how a #SahodItaasPresyoIbaba store could be subsidized by a money laundering firm.
Smurfing is a deceptive financial technique where large sums of illicit money are broken into many smaller transactions to evade detection by regulators. It exploits the fact that banks in many jurisdictions only flag cash movements of over $10,000, and makes sure no single transaction goes over that threshold.
Smurfing typically occurs during the placement stage of money laundering, the initial step where dirty money is introduced into the financial system. Drug trafficking, illegal gambling, and corruption are the most common sources of such money—and none of them can be openly deposited without arousing suspicion.
In a typical scheme, each smurf may simply deposit an amount just under the limit that requires a report (for example, $9,900). If they are willing to further fragment the activity, they may visit different bank branches or ATMs, or use a mix of financial instruments like money orders and prepaid cards.
Once the placement is done, the funds move into the layering stage. Each smurf’s account may wire its balance to a central account abroad, or purchase monetary instruments and then consolidate them. This way, they create a dense web of transactions that makes it very labor-intensive for investigators to trace the fund’s origins; by the time the web is untangled, the money will have already been withdrawn.
This would create a network that could theoretically support #SahodItaasPresyoIbaba stores. However, there are also red flags that we need to watch out for, namely, according to Dunets:
Smurfing in banking may be hard to spot, but it is, ultimately, still a pattern one can trace. That’s why vigilant institutions can often spot the clues if they know what to look for:
- Multiple low-value deposits that aggregate to a large amount: For example, there may be dozens of cash deposits just under the $10,000 threshold within a short period. A classic sign is a customer making frequent deposits at $9,500 or similar “round numbers” just below the report limit. The bank’s systems may notice that, over a week or a month, the total amount far exceeds $10,000, even though no single deposit did.
- The same person or group using many locations or accounts: Smurfing often means deposits at different bank branches or ATMs on the same day to avoid attention. If a bank sees one client’s accounts receiving cash at three branches across town in one afternoon, or a set of new customers all depositing in one branch, then quickly wiring money out, it should raise suspicion.
- Transactions inconsistent with the customer’s profile: If an account that was low-activity suddenly starts receiving numerous small deposits or transfers, it could also indicate smurfing. Common examples include a modest salary account that has daily cash deposits from unknown sources, or a small shop that operates with amounts far beyond its normal revenue.
I decided to quote sources and put the risks because of one thing. The reality is that opening #SahodItaasPresyoIbaba stores requires a ridiculous amount of capital. It's practically predatory pricing. It's also a business model that needs constant infusion of capital because there's no profit to keep the business running. The ultimate irony is that in seeking the Filipino First Policy, aka Pinoy Pride Economics, another socio-economic cost is that it has allowed foreigners involved in money laundering another foot forward in the Philippines instead of giving Filipinos, legitimate jobs!