|
How is the Philippines reacting to the global
economic crisis? According to Romy Bernardo and Global Sources,
“the Philippine monetary authorities will likely hold policy rates
to keep the local financial system liquid and provide buffer against
the [unanticipated] spillovers of the deepening turmoil in Wall
Street”. The Senate is busy doing whatever it is doing. An article
that the House of Representatives is “set to probe, assess and
study the effects of the current global financial slump on the
Philippines” caught my attention.
As the world economy is caught in
the midst of a conflagration, the Philippines is now checking if its
fire extinguisher is working.
It’s not as if there was no
warning. The International Monetary Fund (IMF) and financial
analysts had warned about the crisis several years back.
In 2006, I came across an
interesting article by Professor Gabriel Kolko, who is an historian
of modern warfare. Let me share some points Kolko raised as he wrote
of “weapons of mass financial destruction” (borrowed from Warren
Buffet, who used the term to describe credit derivatives). He
pointed out that the global financial structure was far less
transparent than it had ever been. He noted that financial pirates
created new products that defied nation states and international
banks, thanks to ineffective global monetary monitoring systems
following deregulation.
In 2006, the IMF released
“Safeguarding Financial Stability,” authored by Garry J Schinasi.
Schinasi warned that global finance, combined with deregulation and
liberalization, has “created scope for financial innovation and
enhanced the mobility of risks.” The framework allowed financial
pirates to ply the oceans of finance unrestricted. The book
advocated for a new monitoring system. Kolko quoted the need for a
radical new framework to monitor and prevent the problems that are
now enabled to emerge, but any success “may have as much to do
with good luck” as with policy design and market surveillance.
Studies have been released about
the problems that deregulation of the world financial structure has
created, that even countries that have religiously followed IMF
guidelines have become “increasingly vulnerable to increased
systemic risk and to a growing number of financial crises.”
“The investment managers of
private equity funds and major banks have displaced national banks
and international bodies such as the IMF.” Conservatism gave way
to profits from greater and greater risk taking. The financial
pirates rewarded themselves on the basis of profits, real or on
paper.
Kolko noted further that the
banking industry quickly forgot the lessons from the financial
crises that hit the developing world in the late 90s. He wrote that
caution was set aside yet again for profit as the banking
industry’s exposure to emerging market stocks and bonds grew
tremendously because of “far higher yields in Zambia or the
Philippines and excess cash.” (Dishonorable mention na naman tayo.)
As the House of Representatives
checks the capacity of the Philippine fire extinguisher to fight the
raging inferno, you and I have no choice except perhaps to find a
way—any way—of coping. Lucky for us, the remittances of our OFWs
will sustain us, according to the economic analysis of Global
Sources.
I have no recommendations on how
to deal with the financial meltdown, except to force a grin and bear
it. Let me help put a tiny grin on your face. Here is a list of new
financial definitions, emailed by a friend.
CEO - Chief Embezzlement Officer
CFO - Corporate Fraud Officer
Bull Market - a random market
movement causing an investor to mistake himself for a financial
genius.
Bear Market - A 6 to 18-month
period when the kids get no allowance, the wife gets no jewelry and
the husband gets no sex.
Value investing - the art of
buying low and selling lower.
P/E Ratio-the percentage of
investors wetting their pants as the market keeps crashing.
Broker - what my broker has made
me.
Standard and Poor - Your life in
a nutshell.
Stock analyst - Idiot who just
downgraded your stock.
Stock split - when you ex-wife
and her lawyer split your assets equally between themselves.
Market Correction - The day after
you buy stocks.
Cash flow - the movement your
money makes as it disappears down the toilet.
Yahoo - what you yell after
selling it to some poor sucker for $240 per share.
Windows - what you jump out of
when you’re the sucker who bought Yahoo at $240 per share.
Institutional investor - Past
year investor who’s now locked up in a nuthouse.
Profit - An archaic word no
longer in use.
|
