Philippine banks stable?

The Central Bank of the Philippines boasts that we have nothing to fear since local banks are financially stable despite global fears of a US recession. Economic advisers of Gloria like defeated Senatorial bet Ralph Recto says banks are "liquid" , meaning, they have money to spend and give out as loans to the people. Now, if these banks need some more funds, the BSP has enough dollar reserves to back them up.

Here we go again. They just simply don't get it.

What people fear about this US sub-prime crisis is its effects on the performance of the global economy. A slowdown will affect export production, and this will not spare Philippine industries. Yes, the US Senate already approved the $700 billion bailout and this will help mitigate the $1.7 trillion needed to slow the effects of a recession. Yet, companies in the States will be hard put accepting all these exports from us, simply because consumer spending will simply slow down due to recession fears.

I think this pronouncement is more political than anything.

Just to show the world, particularly the Philippine opposition, that the Arroyo regime has enough spunk, government is being used to allay fears of a definitive slowdown. When politics enters the policy-making functions of governance, it bodes ill to the people whom it vows to serve.

Global Tensions Rising

The United States military has deployed a regular army unit inside the US mainland to deal with local insurgencies and possible civil unrest. This is the first time that the US government did this. The US State Department has considered contingency measures in the event of a possible outbreak of violence due to the worsening economic crisis.

Over at the US Congress, US Treasury Chief Paulson reportedly pleaded with Democratic congressmen not to reveal the close door theatrics displayed by politicians and financial experts discussing the $700 billion bailout proposal. Republicans are up in arms over the proposal, saying that it's still a raw deal, which could not possibly end the increasing financial tensions. US President George Bush has said that the US is in for a long and painful recession, should Congress fail to pass the proposal. At this time though, things over at Washington seem to have turned from bad to worst, with politicians and officials fighting against each other. 

While the US tries to put out its financial fires, the Russian military has sent its fleet to South America, obviously as part of its global strategic military plan. In Iran, the tiny nuclear Islamic Republic is reportedly preparing for war, possibly against the United States and its allies. Analysts say, conflicts could possibly escalate after Ramadhan. Meanwhile, North Korea has banished nuclear inspectors and indicated a possible revival of its atomic energy programme.

Obviously, the enemies of the US are starting to flex their muscles. This financial crisis is more than a sneeze--its a serious illness which the world's superpower could find hard to cure. While the strong man remains bedridden with financial woes, enemies are now in the midst of preparing themselves for possible confrontations since historically, the US resorts to its war machines when faced with extreme economic difficulties. War provides the needed push for its industries and the US could do the same thing given the seriousness of the crisis.

US as the world's only financial superpower

Regulation, says former US President Bill Clinton is the solution to the US sub-prime crisis. Speaking at Dave Letterman's show, Bill blames the American's penchant for making money out of money which created this pyramidal financial web that now threatens the economy. What's needed, says Bill, is for the Fed Reserve to infuse life in the economy, by absorbing the toxic debts, and enabling banks to free their books and expand their loan portfolios. That will allow American enterprises to still borrow money and support expansion of their businesses. Without expansion, the economy will continue to remain laggard and could seriously lead to depression.

Or, Washington could allow mortgagees to restructure their loans, making payments reasonably low to enable them to at least pay those amortizations. In this way at least, money would pour in instead of the present situation where there's nothing coming in.

And Washington seems to be the obvious winner in all of these. By infusing $700 billion into the financial system, it would control most of the global financial institutions through loans. That will, in effect, make Washington the world's biggest financial institution.

Some Americans are worried that the US will lose its global dominance due to this crisis. Yet, it's the opposite. The US government, through the Federal Reserve, will now become the world's only financial superpower should the US Congress allow Paulson and Bernanke's bailout proposal.

If that happens, then the world has entered a New era of neo-imperialism. Scrumpeter maybe right that obviously capitalism dies within a cycle of 50 years, then, slowly comes to life through creative deconstruction. What we are now seeing is the death not of capitalism per se, but the rise of regulated capitalism. What will be the effects of this newer kind of capitalism? We will never know, says Bill Clinton.

Remember September 21

Two days from now, we'll commemorate the imposition of dictatorial rule. The once strongman Ferdinand Marcos, one of the most intelligent yet the second most despised Philippine leader (based on recent survey, its Gloria who tops the list of the most despised), declared martial rule and from that year on, 1972, he ruled the country with an iron-fist. He was only deposed 14 years after with a mammoth rally in that fabled avenue, now known as Epifanio delos Santos (EDSA) avenue.

Now, talks are rife that Gloria is poised to declare martial rule herself, just to prolong her regime beyond 2010. Malacanang is tight-lipped on its incidious plan, even denied the allegations made by its former defense secretary. Former secretary Avelino Cruz said the People should be vigilant against attempts at imposing a de-facto martial rule, saying that Gloria has the "tendency" to go that route. 

However, New Philippine Revolution thinks otherwise. The palace is really not hot on the idea, since this will further erode public trust and could even lead to a massive destabilization. Cruz is right--Gloria has ruled this country for so long, more than enough to effect damage to government institutions. It does'nt take an intensification of the Mindanao conflict to actually justify an emergency rule. Since 2004, the country has been under tremendous seige from big-time operators, unscrupulous government officials and profiteers. Government has been doing a balancing act eversince and it has done a very good job, to the detriment of the People.

What we need is an emergency plan to insulate the country against global financial attacks, in the light of the US sub-prime crisis. The next few months would truly be challenging, especially to Small and Medium sized enterprises, real estate companies and even manufacturing firms. A slowdown in economic performance is expected from all of these, but, it will not lead to a systemic breakdown, no, not yet. 

A breakdown will happen after 2010, when housing mortgages mature and the financial sector finds it hard to convert these into financial instruments. That breakdown unfortunately will be quite hard to solve, even by transfusions from the national government. 

Tipping Point

Governor Joey Salceda, Gloria's fair haired Boy (?) responsible for keeping the economy afloat, says that we're still lucky. Only 4.3 million families are affected by the worsening economic crisis. However, he told us that the worst is yet to come. The full-blown effects of the global economic recession has'nt been fully felt yet. If government fails to act immediately, he said, the entire nation could face a catastrophe worst than the Chinese quake.

We actually are facing three big problems: one, rising food costs. Two, rising unemployment. And three, rising oil prices. These things are interlinked, in the sense that oil prices dictate inflation. A rise in inflation means some businesses closing, resulting to unemployment.

We are in a very precarious situation. We are surviving in the barest of threads. Consider that people are suffering now when we have'nt felt the full-blown effects of the US sub-prime crisis. I shudder to think of what will happen to us if we're hit by a strong earthquake or a typhoon. What if a natural disaster destroy our critical infrastructures? Will we be able to rise above it?

And how about a war in the South? Can we afford such an event from happening?

As I've said in previous entries, this country faces the most challenging situation in its history. This government could fall under the weight of this economic crisis. It would not be very long before we see the entire superstructure self-destructs.

What's the solution to all these things? Do we need a change in government now? Or do we stick with this government while we weather this man-made calamities?

There are no hard and fast rules to this.

What's clear is this---things would get worse before it gets better. That's the natural cycle of things. Question remains--is government strong enough to survive the worse effects of these multiple crises?

Worst is yet to come

HI READERS,

As I wrote here in this blog and in redbluethoughts.today.com, this report validates our economic prognosis in the Philippines. What this government should do is:

1. Institute austerity measures. Undertake fiscal discipline in all areas of governance.
2. De "cartelize" industries of basic commodities
3. Institute price controls in the name of "economic emergency". Mrs. Arroyo should declare a state of national emergency due to the expected economic crisis
4. Institute a well-thought food security plan.

If this government institutes these measures, it will ease up the expected slowdown of the Philippine economy.

Economists: Worst is yet to come


Filipinos still need to tighten their belts for the next six months as economists predict that the worst is not yet over.

Economic experts said prices of rice and petroleum products would continue to soar in the next few months.

The average price of petroleum products this March has reportedly reached US$96 per barrel as compared to the US$90/barrel in February.

Meanwhile, the cost of rice, a staple food in the country, is also climbing because Thailand and Vietnam’s harvest weakened. The Philippines is importing rice from Thailand and Vietnam.

Experts said the price of the rice and oil will continue to increase because of the big demand in China and India.

Cause to worry
"We have on one side the picture of a very rapid growth of the Chinese and Indian economy. As they double a lot of their supply of coal, wheat, oil and rice, these things are going to be very expensive in the Philippines. We're beginning to see it in the case of rice," said Dr. Felipe Medalla, dean of the University of the Philippines, School of Economics.

"Obviously there is worry especially about prices. Prices obviously are having a strong pressure upwards because of oil prices and again this global rise in food prices is really with us," Dr. Cielito Habito said.

Medalla and Habito were former socioeconomic planning secretaries.

Long-term uncertain
Medalla said it would be hard to stop the price increase particularly since the country is facing external factors, political problems and poor governance.

"Is a government mired in all sorts of scandals to be trusted by the people? Suppose the government says I'm an honest government, I'm telling you we have to have a slight rise in price to encourage farmers to produce. Who will believe it?" Medalla said.

They however advised the public to prepare as the long-term effect to the country is still uncertain.

"Let's prepare for the worst, let's be ready to tighten up our belts because definitely the worst things are coming but then again, not to lose hope. In the end, the economy is only as good as the people who make up the economy," said Habito.

Reuters poll - RP econ to slow
Philippine economic growth will slow this year from a three-decade peak in 2007 dampened by weak exports, slowing private investment, as well as rising inflation, a Reuters quarterly poll showed.

But government spending to rehabilitate and upgrade public infrastructure after years of neglect should provide some support, analysts said.

The median forecast of economists polled was for gross domestic product (GDP) to expand 5.8 percent in 2008, slower than 7.3 percent growth in 2007.

Lower than Dec poll
The latest 2008 growth forecast is lower than the 6.1 percent estimate in a similar poll conducted in December and is lower than the government target of 6.3-7 percent growth this year.

"The expected slowdown in the Philippine economy is really externally driven," said Frederic Neumann, an economist at HSBC.

"Aside from exports, remittances will also take a hit on the chin, which means slower consumption growth."

Fears of an abrupt US downturn loom large in the Philippines, where 16.2 percent of exports are bought by Americans, and where an estimated 30 percent of overseas Filipino workers' remittances come from.
With reports from Bandila and Reuter