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| ON THE OTHER HAND |
| Deeper in Corruption
By Antonio C. Abaya Written on Sept. 29, 2008 For the Standard Today, September 30 issue In the latest rankings on perceptions of government corruption by the Berlin-based Transparency International, the Philippines dropped ten notches, from 131st in 2007 to 141st (tied with Cameroon Iran and Yemen) in 2008 out of 180 countries surveyed. (Inquirer, Sept. 24) In the 2007 rankings, the Philippines had also dropped ten notches from the rankings in 2006. While these rankings are based on perceptions, not on actual quantitative measurements (which is humanly impossible), anyone who has lived in this country in the past two years at least, knows that these perceptions have a basis in fact. It was during this period that the scandal over the ZTE broadband contract had broken out, in which no less than the economics planning minister (Romulo Neri) had divulged to the Senate that he had been offered a P200 million bribe by the elections commission chairman (Benjamin Abalos), the apparent broker, to approve the deal, and that he (Neri) had reported the bribe offer to President Arroyo herself who, he said, told him not to accept the bribe but to approve the contract anyway. Then President Arroyo herself flew to China the next day to witness the signing of the contract. That the contract was eventually scrapped because of public outrage, not because of any pangs of conscience on the part of the president, is demonstrated by the fact that no one was ever sent to jail for his or her participation in this sordid business. It shows � admittedly without proof beyond reasonable doubt � that the president herself was in the middle of this culture of corruption, as Neri was quoted by two senators (Lacson and Madrigal) to have said to them in a private meeting. So it is not surprising that the Philippines dropped 20 notches in two years in the rankings of Transparency International. That these rankings are based on perceptions rather than on quantitative measurements, as the Presidential Anti-Graft Commission (PACG) says in its defense, is a weak riposte.(Inquirer, Sept. 26). If our rankings had climbed up, instead of dropping down, 20 notches in two years, the PAGC would be buying full page ads in the newspapers and 30-second spots on TV, bragging about its 'accomplishments,' even though the rankings would still be based on perceptions, not on quantitative data. How does the Philippines compare with our immediate neighbors? Out of 180 countries, squeaky clean Singapore is 4th, Hong Kong is 12th , Japan and the US are tied with Belgium in 18th, Taiwan is 39th, South Korea is 40th, Malaysia is 47th, China is 72nd, Thailand is 80th, India is 85th, Vietnam is 121st, Indonesia is 126th The neighboring countries perceived to be more corrupt than the Philippines are Timor-Leste (145th), Bangladesh (147th), Laos (151st), Cambodia (166th), and Myanmar (178th). Of the 39 countries perceived to be more corrupt than the Philippines, 26 are in Africa, five are former Soviet republics in Central Asia, three are in the Middle East, three are in Latin America, two are in Europe (Russia and Belarus). An the other end of the scale, the countries perceived to be the least corrupt are: Denmark, New Zealand and Sweden (tied for 1st), Singapore (4th), Finland and Switzerland (tied for 5th) Iceland and the Netherlands (tied for 7th), Australia and Canada (tied for 9th), Luxembourg (11th), Austria and Hong Kong (tied for 12th), Germany and Norway (tied for 14th), Ireland and the United Kingdom (tied for 16th), and Belgium, Japan and the USA (tied for 18th). Keep in mind also that the Philippines is the only country with two entries (Marcos and Estrada) in the list of the Ten Most Corrupt World Leaders in the Guinness Book of World Records. Some people think that that list will soon include a third Filipino. How do we get out of this shameful moral sinkhole? Definitely not through elections in 2010, even assuming that they push through and are not sidelined by recurrent maneuvers to amend the Constitution to allow the incumbents to constitutionally remain in power beyond 2010. Our electoral system carries the seeds of its own corruption, requiring as it does billions of pesos for candidates for national offices to wage a successful campaign, making them hostages to financiers who will want their pound of flesh � in the form of fat government contracts and/or positions of influence � if and when their candidate/s win/s. As recent events have shown, our justice system is also corrupt, with justices appointed by no one else but the President. If that President is at the center of our culture of corruption, as Neri claims of the incumbent, then all his or her appointees would also be corrupt. So what is the way out? More and more prayers, as my class' mentor in Shakespearean drama, Fr. James B. Reuter SJ, is often quoted in local e-group chatter? I doubt it. If you look at the countries perceived to be the least corrupt, none of them are particularly big on prayers as solution to national problems, with the possible exception of the USA with its army of Christian Evangelicals. Singapore, Hong Kong and Japan are predominantly Buddhist and most of their people do not even worship a personal God. The Scandinavian and Anglo-Saxon countries are predominantly mainstream Protestant and secular, and they observe a functional separation of church and state, even if the Scandinavians pay tax to support the Lutheran Church, in the same way that they pay tax to support their individual monarchies: both are part of their history. If memory serves, the British also pay tax to support the Anglican Church and their monarchy, also for reasons of history... The only way to root out corruption is to punish those who are found guilty of it. But the Arroyo administration has been notably lax in pursuing open-and-shut high-profile cases pending with the Ombudsman for the past five years � i.e. the plunder cases against Gen. Garcia, Gen. Ligot and Col. Rabusa � because pursuing these cases would expose a number of high-ranking generals and former generals who were complicit with then VP Arroyo in staging a power grab against then President Estrada. In one of my visits to Singapore in the 1990s, the Singapore Embassy in Manila arranged for me to get a briefing from the Corrupt Practices Investigative Bureau (CPIB), an office directly under the Prime Minister (Lee Kwan Yew). The CPIB office was on the 6th floor of a car park on Hennesy Road. As you step out of the elevator, you step into the entrance of the CPIB which is in the form an iron grill door, like the entry to a jail cell. It is psy-war, of course. The message is deliberately intimidating: if the CPIB summons you to its office, you are as good as jailed. According to the CPIB chief then, a Mr. Yeoh, his office had investigated three members of parliament, two of whom were also Cabinet members. Of the three, one skipped the country; the second was found guilty and put in jail; the third committed suicide, leaving behind a note of apology for the prime minister. Prayers or no prayers, this would never happen here, except under a revolutionary government. ***** Reactions to [email protected]. Other articles in acabaya.blogspot.com. Tony on You Tube in www.tapatt.org. To subscribe, send a blank email with the subject heading Subscribe. To unsubscribe, send a blank email with the subject heading Unsubscribe. OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO Reactions to "Deeper in Corruption" More Reactions to "US Capitalism Implodes" More Reactions to "Capitalism and Socialism" 'LaRouche on Bernanke et al' 'Chinks in US financial armor' It is very sad to perceive that our President is in the centre of corruption. What can a nation do with such detestable leaders holding on to power? Rex Rivera, (by email), Gen. Santos City, Sept. 30, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Dear Mr. Abaya, Thank you for that very interesting article. I respect your good opinion but is there a guarantee that the persons who will the installed as leaders of the suggested revolutionary government will be as clean as Lee Kwan Yew? What guarantee do we have that these corrupt politicians (and their relatives) will not find their way back as they did after Erap. And how can we be assured that their spouses (like FG - Father of Greed) will not dip their hands in government affairs or act as "bag-man"? (Did you ask for these guarantees when Cory Aquino led a revolutionary government from February 1986 to September 1987? ACA) Who will choose the revolutionary government's leaders? What will be their qualifications? If the likes of Miriam, the President, ERAP, relatives of Marcos, opposition leaders (fond of movie stars) and company will have a part in the screening process, then forget it. Constitutionally, I believe that the Philippines is beyond salvation. We are in a vicious cycle of corruption with no player wanting to get out: (a) The corrupt politicians need the poor for their stupid votes based on self interest (like rights to squat and sell on sidewalks) or "utang na loob" or sheer ignorance and vice versa. Because of corruption, the poor increases. When the poor increases, the stupid vote increases too; (b) The President needs corrupt officers (or COO's - "Si OO lang ng OO") and vice versa for mutual support and cover-up; (c) The politicians have to be corrupt to buy more votes. (If the Philippines is "constitutionally beyond redemption," what then is the solution? More of the same? Or a revolutionary government? ACA) Personally, I believe that only a miracle can save the Philippines, the kind that installed Cory. The new "Cory" should be a God fearing man (nothing more). From the fear of God, everything good will follow. As the bible says, "the fear of God is the begining of wisdom." (Cory was definitely "God-fearing," but did "everything good follow"? ACA) Perfecto Corpus, (by email), Oct. 01, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww The Philippine system of corruption will never be resolve by religion or election as long as the the court , the military , the government agencies, the municipality, the police , etc accepts bribe. May I relate an unforgetable experience. On one of my visit to my motherland I was riding a public bus then out of curiosity decided to board off the main LTO office at west avenue to apply for a drivers license. I dont need a drivers license but having nothing in my itinerary I decided to spend the time. Upon boarding off a bus in front of the LTO, I was discreetly approached by several friendly fixers before the main entrance of the complex. They were competing to get my attention. I thought they were employees since they carry an ID tag on their chest so I went with one of them who lead me to those small series of shops across the street where they service photocopy, notarys, eye exam & urine test clinics, etc. By then I already know what I getting into. I was already dealing with a fixer but to test my curiosity about my country system of corruption I began negotiating on the amount and ended up bargaining until we agree on the price of Php 2000. A little bit pricey for a small Philippine drivers ID which I have no use but what the heck just $40. The guy named Mike even guarantee me that it can be done within 45 minutes. So I went with the flow , submitted a photo and fill up forms, photocopy my documents, eye exam, urine test. Paid the amount then he and his group leader began texting messages to their contact inside the LTO office. We waited a few minutes then their contact responded thru a text message. They provided me one of their groups runner serving as my guide who accompanied me inside the LTO complex. He told me to be discreet with minimal conversation while walking towards the application processing office. I am sure the security guard knew this guy because the guide was like an ordinary cigarrette vendor wearing short pants and sandals. We sat in the waiting chair where he received a text message then he signaled for me to submit my papers to the new applicant processing window. Waited for few more minutes then my name was called where processing began , question and answer, few more form entries until I finally got my photograph taken and received my drivers ID. No written & no actual driving test. It all happened within 45 minutes at the very heart of the LTO processing office at west ave. Now the next step is to verify if my drivers ID is authentic so I went to an LTO branch to verify and they said it was a legit copy. I was laughing to myself. I opened a bank account and presented my Philippine drivers ID. The bank officer accepted my drivers ID and started processing my new checking account. I went to buy a condo presented my Philippine drivers ID to the realtor office and was honored. For only $40 I can skipped renting a car for the driving test, skipped drivers exam, skipped the long line at the processing window and still get an authentic drivers license. A real experience by a balikbayan on the corrupt system in the Philippine government agency level that is happening at the main office of the LTO. To do the actual processing without a fixer and paying bribe will take you a day or two plus the dismay of dealing with the crowd and the processing staff. Text messaging technology was a breakthrough that provided corruption to become more efficient and effective. I wish I was able to document with a hidden video camera so I can show in youtube. Maybe I will do it next time. Even I do, will the lead officer of the agency resign out of delicadessa. A corruption happening inside his office with him having no knowledge or should I say he is one of them ? Even an illiterate can get a drivers ID in the Philippines. So there goes our traffic problem. Now I am not surprise why some of our local drivers do not follow traffic rules. Nonoy Ramos, (by email), Pennsylvania, Oct. 01, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Hi Tony, When I was asked by a Saudi on how to minimize corruption in the Philippines, I told him that we need a President as strong as Marcos with the honesty and sincerety of Cory Aquino. Presently I do not know if we have one. I believe that there is still hope for us Filipinos when it comes to corruption. Before Marcos time we already have that although it is not as blatant as when Marcos took over and becoming worst now. We have just to do is to launch an information campaign with our voters, to elect leaders which are not so corrupt, most especially that election is 'round the corner. Explain to the voters the mechanics of corruption and how does it affects them economically. That we must elect a strong leader that has the political will to send corrupt people to jail or banish them to hell. One of the sign that a leader is corrupt is when he/she has so many relatives in the political landscape, most especially the President. The more you have relatives, the more you are corrupt. Dynasties do not only promotes mediocrity but most of all corruption. Thanks and more power. Bert Celera, (by email), Oct. 01, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Dear Tony: So the Philippines is deeper in corruption. What else is new? Amado Cabaero, (by email), Oct.01, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww The third most corrupt Filipino might as well be a Filipina. Every time a good friend of mine dies, I can't help saying: Heto na naman; the wrong person has died, and I wonder if there's justice in the universe. Bill Ibanez, (by email), Oct. 01, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww While it is no longer a news, I still find it so heart-breaking to read year after year the dismal and disappointing performance of the country in the fight against corruption. Since we are going deeper and deeper in the hole of infamy, it appears that the present administration is not really serious in clearing its rank of corrupt and unscrupulous officials. Am I right to assume then that the executive office is in fact in the midst of the so called culture of corruption. Just asking. The task of well-meaning citizens of the Philippines is a daunting one, to say the least. However, I could suggest two mini-mini steps for us to take going forward: � Protect the light of hope carried by the Padacas, Robredos, and Panlilios. Don't let it die and extinguish by unnatural cause. Keep the light shining at all cost. At this writing, I understand some forces aided by unknown hand are trying to turn off the light in Pampanga. � Be extra watchful and attentive to what is going in the legislative body, especially the so- called upper house. It will help you a lot in picking the best candidate for the next president of the Philippines in 2010 who could, hopefully, steer us away from the road of corruption. Right now, we have 4 potentials aspirants of the position: 1. a remnant of the dreaded police force during the martial law; 2. pretender to Angelie Jolie's post which was offered by the MILF to the actress as part of their peace initiative; 3&4. Tied to the title of Mr. Palengke. One, I assumed was the one who initiated the market or economic battlecry; while, the other is known as the authentic vendor then; and, now linked to the "double-insertion" issue. So there you have it: if you want discipline choose No. 1; 2nd candidate is posturing to champion peace in Mindanao. 3rd & 4th represent economics; and, economics with double insertion, respectively. What they represent is self-explanatory. Good day and cheer, Tony. Keep on writing. Arcy F. Sibal, (by email), Sta. Maria, Bulacan, Oct. 01, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Greetings from spectacular Sydney, Mr Abaya! Would you consider the Transparency International perception of corruption surprising? Most Pinoys seem to have allowed/ accepted that many of their government officials � judges included � engage in appallingly 'corrupt' conduct. Many Filipinos seem to have set the bar too low in relation to standards of behaviour, integrity and personal accountability of their public servants. Hasn't the 'mas' factor been the measure by which many so-called public officials appear to operate � 'mas' corrupt, 'mas' magaling magnakaw, 'mas' malinis mandaya, 'mas' maraming kabit, 'mas' pino manloko, 'mas' walang silbi, etc.? Is it a cause for justification to be aligned with the 'most' corrupt rather than with the 'least' corrupt countries in the TI listing? The Philippines is a so-called Christian country and most Pinoys do turn to prayer to solve their problems. But doesn't prayer involve personal responsibility too? If all Pinoys who profess to be Catholics/ Christians followed the Ten Commandments and required their so-called leaders/public servants to do the same, then perhaps the country's ranking in the TI perception of corruption survey would be up there with the 'least' corrupt. St. Theresa of Avila comes to mind when she wrote: "� it would trouble me more to have committed a venial sin than to be descended from the lowest and vilest men in the world'. Perhaps Pinoys may need to revisit The Decalogue and hopefully 'revolutionise' their attitudes and value systems to rid the country of any perception of corruption. Accountability, after all, starts with self. Check the following links: <http://au.youtube.com/watch?v=wU8lV2_NZo8> <http://au.youtube.com/watch?v=5Kp8yXDpNaQ> Cheers, Evelyn A. Opilas, (by email), Sydney, Australia, Oct. 01, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Re: The only way to root out corruption is to punish those who are found guilty of it. ~ True. With the lame department of ombudsman, even the Marcoses and their old cronies still serve the country and still bank our tax money in their own pockets. Re: Port Irene ~ That's so clear! And no one jumps on it. Not even Senators Escudero, Legarda, Trinalles, etc. LOL. Everyone is afraid of this old horsepower, even the media and so-called tough columnists:) LOL. Hush hush and it died down� Where are the media, leftists, rightists and CBCP? re: Senate budget insertions ~ That's so clear! And no one jumps on it. What happen to the P200 million/senator per year. Where are the media, leftists, rightists and CBCP? Lacson made a point. Everything should be in a magnifying glass. The question is, is Lacson really clean? But he made a point on senate budget insertions. re: Judges ~ That's so clear! And no one jumps on it. Where are the media, leftists, rightists and CBCP? Re: Quarry � Lapids Inc. ~ That's so clear! And no one jumps on it. No follow up:) LOL. Where are the media, leftists, rightists and CBCP? Re: Revolutionary government ~ Who will lead it? Trinalles? Is there any Manchurian candidate you know about? The problem is, if you find a clean one to lead the so-called revolution, do the rest of the Generals, Judges, supporters, CBCP, and etc. CLEAN too? The bad thing is, these people will just use this "chosen leader" as the innocent face while the real powerful crocs will carry and grab the wealth in the background. It's the same. If all aren't clean, then I think, PGMA is the best and tough president we've got. Of all screwed ones (ALL politicians), she's the best leader we've got. I mean, the toughest one even with uncle Sam's butt beating here and there, and here and now! Re: chacha ~ if you couldn't find the CLEAN recipe of Revolutionary government, then forget it� because it will go back to one (those in power will be stuffing wealth from scratch again:). We're better off with PGMA. Re: Leftist in Congress ~ I think, it's a great addition to balance the power. With Beltran's death story (fixing his old house by himself � meaning he doesn't put the pork barrel on buying personal stuffs, sex toys, jets, ocean liners and mansions), then we need more like him in congress as long as they won't support arms. I'm more inclined to China's style of government � Capitalism with strict government. Firing squad for the culprits! Salamat po! LF, [email protected], Oct. 02, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww TONY ABAYA : SPEAKING ABOUT " WELL WRITTEN ARITLCES " , THIS ARTICLE TOPS THE LIST FOR 2008 ! UNFORTUNATELY THE FACTS OF THIS ARTICLE ARE DEPRESSING FOR FILIPINO - AMERICAN PROFESSIONALS. PROBABLY THAT IS WHY ANYBODY WITH GUTS , DETERMINATION AND A COLLEGE DEGREE CAN RUN FOR THE PRESIDENCY . THE PHILIPPINE REPUBLIC MUST HIRE PROFESSIONALS SUCH AS A TONY ABAYA TO GUIDE IT TO INDUSTRIALIZATION IMMEDIATELY. HOPEFULLY THIS WOULD HAPPEN IN 2010. MABUHAY KA, TONY ABAYA ! Gabe Bautista, (by email), Oct. 02, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Sir Tony, Where else can you find a certain head of the GSIS, whose office was perceived to be most corrupt and now refusing to divulge where it spent its members' money, spearheading a campaign to villify a company whose last centavo is being scrutinized by the ERC, the SC and SGV ? Dean Sempio, (by email), Oct. 03, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww More Reactions to "US Capitalism Implodes" (Sept. 23, 2008) Tony, Why don't we go further and call a spade a spade. The decline of any empire is precipitated by greed. However the world has never known the likes of American Greed. It is in a class by itself. Remember it is imbedded in the history of America because George Washington had no money to subsidize an army so he sanctioned privateers "mercenaries" who could keep what they conquered in lieu of pay. In 1999 Greenspan convinced Clinton to lift the restrictions imposed by FDR in 1932 after the collapse of the stock market in 1929 caused by the conflict of interests in the bank's role as a depository and a leveraged risk taker. Greenspan was convinced by his Wall Street friends that 1) they were losing out to the investment houses 2) they could easily institute safeguards like default swaps and other thereby insuring the bonds composed of bundled mortgages against the average rate of failures. Great! Except those average rate of failures or foreclosures was based on the "A" class bonds. What these banks did was securitize these mortgages into bonds classifying them as "A" instead of junk, arguing that they were settling aside "insurance" against failures. Great, but these bonds were junk and should have been insured or covered for a much greater percentage of failures than those with genuine "A" rating. By doing so these syndicators were able to reap billions in profits discounting junk as "A" grade. Now that they were allowed to double-deal, instead of a debt/equity ratio of 3:1, they were allowed to go as far as 12:1. Was there fraud? Of course!! How come no indictments? Well first you will have to indict Greenspan for sheer stupidity! Then you have to indict all the lobbyists in Washington who were concealing the extent of the problem even as it was becoming ruinous as early as late 2004, early 2005. Of course those lobbyists hide under the skirt of their "Godfather" Republican Congressmen/women. So you have to indict some Republican members of Congress as well. Then you will ask why the SEC and other regulators outside the FED were "brain dead" all that time? So now you also have to indict the President and his infamous Vice President because it would take the kind of influence they wield to keep this under the rug for so long. Then and only then can you indict the crooks that made those billions. Right now the credibility of America as the pinnacle of finance is about ZERO. Lynn Abad-Santos, (by email), Washington, DC, Sept. 28, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Tony, Why did the US government bail our AIG? Didn't I tell you sometime ago (No you did not. ACA) just as the Russians used Aeroflot to provide a facade for their intelligence gathering, so does the CIA use AIG? What is insurance but risk assessment. What is risk assessment if not intelligence gathering. SO HOW CAN THEY ALLOW THAT TO FAIL? The value of world wide intelligence gathering at the grassroots level of AIG, cannot be duplicated by any other entity with such ease, and "legitimacy" Sure the corporation itself might be generally credible, but it is the "other" use which is more important. Remember in the insurance business you get to know who owns what, what it's worth, and what types of business are either flourishing or languishing. Most important is why, and to what extent politics influences success or failure. In what areas is any country most vulnerable? How much pressure is enough to get the attention of the leaders? Knowing that you know what buttons to "push", "how far to push", and "who's buttons" So was that worth the $ 75 B bailout? Why? How much is the CIA budget, and what about the accumulated savings of the CIA since 1946 which is never disclosed to anyone? What is power today but "trade and politics" right? How better a way to get that with such ease than this way? Lynn Abad-Santos, (by email), Washington, DC, Sept. 17, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Dear Tony, I thought that you may want to read this comment that I received from a friend. Regards, Jerry Quibilan, (by email), Sept. 24, 2008 To: [email protected] Subject: US Capitalism Implodes Hopefully this will be my last forward on this matter; now beaten 'red and blue' and battered 'left and right' by partisan finger-pointing. Someone or somegroup surely must have hidden this skeleton of problems in a closet somewhere. Any 'implosion' usually show telltale signs of an organizational malfunction since it builds up from within. It appears however, that no one will accept any responsibility in contrast to the tradition of the great, and also one of the most underrated presidents of the U.S.; Harry Truman who said, 'the buck stops here'. I have no doubts that even if the finger-pointing goes on unresolved, this present crisis will find an American leadership that shall guide it succesfully through these problems, which as this OP-ED article by a Filipino writer notes, is potentially global in scope. I find this writer's treatise substantive, succinct, sober, sufficiently informed and global in perspective. Although maybe a bit satirical in tone, I think it reflects the general feeling of the global community towards America at present and its hopes for what America may be in the 21st Century. I shall shut my own ramblings and try to put this matter to rest; with hopes that, in turn, a leadership will take hold of this problem and put good solutions to work. wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww More Reactions to "Capitalism and Socialism" (Sept. 25, 2008) I don't think it's an issue of capitalism failing but rather the finance strategy that was misused or mismanaged. They went too far and didn't listen to scholarly analyses, because they were enjoying the fruits to much. Typical western arrogance and self indulgence. Tough lessons but not hopeless. The bailout plan will not be the perfect solution, and even better ones will have dire consequences as well. Whichever way they turn to get off its' quicksand, the Americans will have to bite the bullet, humble down, and be as resilient as the Filipino is. Victor Manalac, (by email), Sept. 29, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww (Forwarded to Tapatt by Aurora Pijuan LaRouche on Bernanke et al.: Caught In His Rotor Blade By Lyndon H. LaRouche, Jr. September 19, 2008 The most essential fact of the present monetary moment, is that the world's present, international monetary-financial system would have been declared already dead and rotting, had the pathologist arrived on time. That system, being already dead, will never recover. The proverbial king is dead; a replacement is needed, ere the kingdom goes the way of its departed monarch. However, Washington, D.C. is not the only case of a mentally ill regime in the world today. Consider those foolish governments, from around the world, which had heralded the onrushing U.S. financial collapse with the assertion: "Yes, the U.S. is sick, but it won't really hit us here." The crash of the U.S. dollar is the crash of every financial-monetary system in all continents of the world. It is the present international monetary-financial system which is incurably bankrupt, and, therefore, virtually dead. Reviving the dead was never a sound policy. Now, they are all dead, because the financial-monetary system within which they were situated is now dead. The word to the wise is, therefore, the following.Economic value was never truly contained within money. As the U.S. government of President Franklin Roosevelt understood in its practice, the only true economic values are physical-economic, not monetary values. The increase of the net productive powers of labor, per capita, and per square kilometer of national territory, is the only true measurement of value. Furthermore, since progress occurs under inevitable conditions of attrition under currently continued, fixed standards of practice, an economy which is not increasing the per capita, net physical productivity of its production, as measured per capita and per square kilometer of its total territory is already lurching along the rotting trail toward collapse, unless it changes its ways back toward progress. The U.S., in particular, has been collapsing, in real (i.e., physical) terms, per capita and per square kilometer since U.S. fiscal year 1967-68. The Nixon reforms wrecked the U.S. economy, and the Trilateral Commission-controlled Carter Administration, unleashed a systematic destruction of the wreckage which the Nixon and Carter Administrations had created. What was done by Prime Minister Thatcher and her side-kick, President Mitterrand, done in complicity with a corrupt U.S. President George H.W. Bush, wrecked the remains of the physical economies of the U.S.A. and Europe over the course of the 1990s. Mrs. Thatcher's Brutish Imperialism, the process of so-called "globalization," the new "Tower of Babel," leading into Maastricht, has become virtually treason against the entirety of the human race. It is U.S. complicity with that process of "post-industrialism," "globalization," which has been the crucial factor, added to the Nixon follies of 1971-1973, which has made possible the present global breakdown-crisis of the world's now rotting IMF system. Sick monetary-financial systems which have entered their terminal phase, as the present world system has done, can not be brought back to life by the likeness of garage mechanics. They must be replaced. The view to be adopted to provide the needed replacement, is to recognize that it is the physical- economic system which government must act to save, as President Franklin Roosevelt demonstrated that approach. The financial monetary system which caused the collapse, must be reformed in a sufficiently radical way, by aid of reforms in bankruptcy, to allow the real part of the economy, the physical economy of a scientifically and technologically revolutionizing practice of and among nations, to function by debriding the economy of the hopelessly sick monetary-financial elements. Under these present conditions, what should one say of Representatives Barney Frank and Nancy Pelosi, who insist on their proposals to solve the problems of human society by funding a program for teaching dead lemmings to fly? *****) wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Chinks in US financial armor By Eduardo H. Yap September 26, 2008, Philippine Star The world came closest to a financial system Armageddon on September 18, 2008, now called Black Wednesday, when markets were faced with the possible collapse of global insurance titan AIG, which followed on the heels of the sale of Merrill Lynch (America's broker) and bankruptcy of Lehman Brothers, both the 3rd and 4th largest investment banks in the United States, bailout of mortgage giants Fannie Mae and Freddie Mac a few days earlier. The news triggered one of the worst stock plunge and credit seizures since the Great Depression of the 1930s, as banks refused and continue to refuse to lend even to one another, on fears of further bank collapses. Its occurrence exposed the fragility of the US financial system brought about by unfettered laissez-faire deregulation and policy flaws, including a prolonged period of multi-decade low interest rates and Reaganite free-market capitalism anchored on globalization, free trade and deregulation. The emperor is found without clothes and his castle built on a mountain of debt. The changed landscape of the US financial services sector and forthcoming reform measures will have profound consequences on the world. Free market capitalism under fire The now assailed Reaganite policy, continued in succeeding Republican and Democratic administrations, allows the weak and uncompetitive to fall or be absorbed in the name of productivity and competitiveness. These policies are made real in the transfer of US manufacturing know-how and capacity to lower cost countries such as China, resulting in a massive transfer of wealth and jobs to the rapidly developing economies. Free trade coupled with deflation from the newly integrated eastern countries into the global economy produced a tsunami of imported cheap goods to feed the insatiable appetite of US consumers that overwhelmed and decimated US manufacturers. Consumption now constitutes two thirds of the US economy. Critics charge that America has become a nation of burger flippers and box-store sales clerks with low paying jobs, inadequate health benefits and low-income growth. Structural imbalances A source of instability is the structure of US trade and fiscal policies that results in massive and intractable imbalances. The external trade stubbornly incurs shortfalls that have grown to $800 billion a year. Inclusive of services, the deficit is still $700 billion. Its tax structure is incapable of generating sufficient revenue to cover its massive expenditures and $400 billion a year debt service. In 2008, the projected fiscal shortfall is estimated at $481 billion, excluding the cost of guaranteeing $29 billion in Bear Stearns risk, $85 Billion in bridge loans to AIG, $200 billion to effectively nationalize Fannie Mae and Freddie Mac, plus up to $700 billion to buy illiquid mortgage assets from US financial institutions to unclog credit markets. Massive transfer of wealth The twin fiscal and trade deficits have resulted in a massive transfer of wealth from the US to the rest of the world, particularly Asia that is unprecedented in history. Many poor nations have grown rich. China alone has amassed almost $2 trillion in foreign exchange reserves, which it in turn uses to purchase US Treasury bills and bonds the US government issues to fund its funding shortfalls. As a result, the US has become the most heavily indebted country in the world, with a projected $11.8 trillion in public debts. This insatiable need for funding and the willingness of foreign governments with large current account surpluses to supply the US with credit has created imbalances such as record low interest rates that create asset bubbles and stoke inflation, disequilibrium in currency exchange rates, and tension in financial markets and friction with major trading partners of the US. China in particular is under regular pressure to revalue its currency. Providing massive funds to the US diverts resources needed to finance growth in poor countries. Sensitivity to interest rate movements The heavy debt load of Americans and reliance on credit has rendered US consumers extremely sensitive to any diminution in their income such as from inflation, taxes and high interest rates. As a result, the US Fed routinely uses monetary tools to regulate the economy and control inflation. The record 40-year low interest rates instituted by Fed chairman Alan Greenspan over a prolonged period after the stock market bubble burst in March 2000, led to uncharacteristically risky behavior by homeowners and financial institutions. This produced a massive housing bubble. The subsequent steep rise in rates burst the bubble in late 2005, producing the toxic mortgage securities and their derivatives that is the primary cause of the massive losses of financial institutions throughout the world, including some Philippine banks. Recovery hopes dashed by inflation Inflation reared its ugly head after energy prices spiked up to unseen highs from May to June 2008 and sent a chill on already hard pressed consumers. After the capital markets had shown optimistic signs of being at an inflection point in April, hopes were dashed for an earlier recovery in the housing market and the economy. This development soured the prospect of stability in the prices of mortgage securities. The losses in the financial sector deepened and the meltdown followed in September. Deregulation and consequences Due in large part to deregulation, regulators did not put a check to the increasingly reckless behavior of lenders and US homebuyers. The Clinton era Gramm-Leach Biley Act of 1999 repealed the stringent regulations imposed by the Glass-Steagall Act enacted in 1993, after the stock market crashed in 1929, to prevent speculation and safeguard depositors' funds. Self-regulation allowed mortgage loan originators to adopt imprudent lending practices such as "No Money Down" or "No Income Verification". Financial services deregulation provided the environment for financial product innovation to package mortgages into increasingly complex financial products and derivatives such as collateralized debt obligations (CDOs) and credit default swaps (CDS) that were developed and traded over-the-counter, Unfettered, US banks established offshore special investment vehicles (SIVs) outside their balance sheet to purchase debt securities until the massive losses forced the banks to absorb them. The unregulated and opaque market in credit default swaps (CDS) reached an astounding $50 trillion and brought the near downfall of an otherwise sound insurance titan AIG. Wall Street firms like the failed Bear Stearns and Lehman Brothers massively leveraged up their balance sheets by buying these securities and funding the purchases with short-term loans that evaporated when counterpart financial institutions balked at lending them more money. This magnified losses when the value of the securities collapsed. Influence of lobbyists A weakness in the US legislative process is the influence lobbyists exert on Capitol Hill. The US Congress was repeatedly warned of systemic risk posed by excessive exposure of the undercapitalized government sponsored enterprises (GSE). Despite the warnings, legislators did not exercise the political will to rein in the largest housing GSEs, Fannie Mae and Freddie Mac, and instead raised the loan limit to enable the GSEs to purchase more mortgages until they owned or securitized over 50 percent of outstanding residential mortgages. Reports have it that legislators received large sums donated by registered lobbyists working for the GSEs and implied that this may have been a factor for legislators' failure to control the GSEs. But it is also clear that doing so would have deprived low-income constituents from the opportunity to buy their home, a prospect that would affect the political fortune of legislators. By Sept. 7, the two debt bloated GSEs were tottering into bankruptcy and the US government was forced to take control with a $200-billion bailout. Pendulum to the opposite The crisis, including the staggering $700 billion cost of the latest rescue plan, find US politicians and the public heatedly engaged in the blame game. They are looking for the culprit who was "asleep at the switch", and examining the policies responsible for their dire straits. Given the dark mood of Americans and a new US administration a few months away, the prospect of reforms looms large in the horizon; some of these may have profound effects on the rest of the world. The growing chorus to "keep jobs at home" may lead to more protectionist policies, which may cause governments from China and Southeast Asia to further de-emphasize export oriented growth models and rely instead on domestic consumption and intra-region trade to fuel economic growth. It is also possible to envision further changes in the financial landscape, to the detriment of the primacy of the United States. Already, Goldman Sachs and Morgan Stanley have changed their business models into bank holding companies, accepting US Federal Reserve oversight and lower leverage; while European and Asian financial institutions purchase the remains of Lehman Brothers. The increase in risk aversion and the de-leveraging of financial institution balance sheets will make capital funds harder to source; unless emerging market financial institutions and capital markets mature to provide the needed funds for economic growth and development. At the same time, the recent events in global capital markets may accelerate diversification away from US dollar assets as the reserve currency of choice. All this may signal the end of the US's dominance as the world's economic and financial powerhouse. (The author, a certified public accountant, is a property developer and former chairman and president of the Subdivision and Housing Developers Association (SHDA, member of the Management Association of the Phils. (MAP) and Financial Executives of the Phils. (FINEX) ). He presented an analysis of the 1997 Asian Financial Crisis at a forum by the Human Development Network on Nov. 4, 1998; published "A Tax-less Economic Growth" on Oct. 22, 2004, an analysis of the principal cause of the drastic decline in fiscal revenues that was cited by the Asian Development Bank in its 2004 Philippine Yearend Economic Review and "Is the Economy Overtaxed" on Dec. 1, 2004; featured in "Financial Analyst Proposes Novel Fiscal Measures" on Sept. 30, 2005,"The 1997 Asian Financial Crisis and 10th Anniversary Market Crashes, April 2007, "The Panic of 2007", Sept. 3, 2007, in The Philippine STAR. Signs of Market Inflection Point after Flirting with Financial Armageddon, April 30, 2008, Phil. STAR and the quarterly July 4, 2008 issue of Zurich based International Association of Financial Executives Institute.] For comments: [email protected] OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO Reactions to [email protected]. Tony on YouTube on www.tapatt.com. 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