| US Capitalism Implodes
By Antonio C. Abaya Written on Sept. 22, 2008 For the Standard Today, September 23 issue The decision of the Bush administration to inject $700 billion into the credit and finance sectors of the US economy is a tacit admission that American capitalism, especially under the stewardship of the Republican Party, has imploded and unraveled, probably beyond repair. The $700 billion bailout is meant to buy bad housing debts and thus prolong the service lives of banks, credit and finance houses and institutional holders of mortgages, the total collapse of which would no doubt lead to a Global Depression that would dwarf that of 1929. The interconnectivity of national economies, made possible through advances in communications � especially through the Internet � makes almost the entire world vulnerable to the ups and downs of the major players. For once, something positive can be said of the hermit economies like Myanmar and North Korea, that they are somewhat immune to the vagaries of what must now be referred to with supreme irony as the Free Market. The $700 billion bailout is the anti-thesis of that "Free Market," also referred to reverentially as simply "The Market." It runs counter to the sacrosanct Jeffersonian ideology, to which the Republican Party has traditionally genuflected, that the best government is the one that governs least. Suddenly, Big Government is all over the place, like a wayward elephant � appropriately, the symbol of the Republican Party � straying into a studio apartment, now on its second mortgage, which the harassed occupant can no longer afford to pay, and which he or she will soon be forced to vacate in favor of a trailer or the back seat of a car. How did this monumental American tragedy come to pass? The proximate cause is the sub-prime mortgage bubble that burst in July 2007. The crisis showed that millions of Americans had been sold mortgages that they could not afford to pay, leaving dozens of banks holding empty bags, which they in turn packaged with good assets and passed on to other banks and finance houses, not just in the US but all over the capitalist world. I recall that weeks after the sub-prime mortgage bubble burst in 2007, the US Federal Reserve Board, the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan and the central bank of Australia collectively released a total of $325 billion into the banking sector, in a bid to allow the global banking system, which had suffered massive losses, to continue to function and lend money out to businesses and individuals. For a while, that seemed to have staunched the hemorrhaging. But it came back with a vengeance in mid-2008. Some of the biggest names in capitalist banking and finance � Bear Stearns, Merrill Lynch and Lehman Brothers � had to be bailed out, or sold at fire sale prices, or simply allowed to go belly up, followed by the collapse of Fannie Mae and Freddie Mac, the biggest institutional holder of real estate mortgages. The last straw seems to be the death rattle of American International Group (AIG), the biggest insurance/banking/finance company in the world which was in effect nationalized by the Bush administration with an $85 billion buy-out of almost 80 percent of its equity, making the US federal government neck-deep in the business of business, contrary to the deeply held Republican ideology. The rationale was that AIG was too big to be allowed to fail. But there is speculation that, with its many tentacles in every nook and cranny of the globe, the AIG was the financial conduit of choice of the CIA. There is also speculation that the reason President Arroyo suddenly left for New York yesterday, after this trip had been cancelled last August, was to look after her family's supposed investments in the suddenly nationalized AIG.. Illicit funds parked in AIG would now be subject to US anti-racketeering RICO laws. (Sept. 23 Update: Today's Philippine Daily Inquirer reports that while in the UN building in New York President Arroyo will "also have meetings with St. Vincent and Grenadines, St. Kitts and Nevis, and Antigua and Barbuda, all from the popular tourist destination Caribbean group of islands�" (Why is this insignificant piece of trivia being passed off as news at all? Is it possibly to cover a meeting with representatives from those other Caribbean islands, Cayman Islands and the British Virgin Islands, both well-known havens for laundering illicit money?) There is also speculation that the two remaining financial giants on Wall Street � Goldman Sachs and Morgan Stanley � are also in big trouble and are looking for either a buyer or a bail-out. The three US automakers � Ford, GM and Chrysler � are also said to be asking for a $25 billion bail-out. But it is no idle speculation that American capitalism has imploded and must be redefined in the coming weeks and months Since January 1 this year, some 600,000 Americans have lost their jobs, and the job losses continue at the rate of 80,000 a month.. And since July last year, some 1.5 million Americans have lost their homes because they could no longer to pay the monthlies. And the troubles are not likely to end with the $700 billion bail-out, assuming it is approved by a cynical Congress.. Most adult, even teenaged, Americans are up to their necks in debt, either to their credit card providers or to their car financiers, or to both. It is safe to assume that those 600,000 Americans who have lost their jobs, and the 80,000 who will lose their jobs every month, will be an unabated drain on the US economy as they default and lead more banks to bankruptcy. Will this economic meltdown have an effect on the November presidential elections? In Europe, such a debacle would indeed affect the politics. But I am not so sure it would in the US. American voters are being made to choose between John McCain, who confessed early in the primaries that he knew absolutely nothing about economics, and two very talkative lawyers (Obama and Biden) who, from their public utterances, do not seem to know any more or better than McCain.. The only certitude seems to come from Sarah Palin and her Christian Evangelicals who fervently believe that the world is coming to an end soon, as predicted in the Bible. In their closed universe, hermeneutics � the interpretation of Scriptures - is more important than economics. Hallelujah! Simultaneous to the collapse, or the impending collapse, of the credit and financial basis of American capitalism would or should be a rethinking of the Free Trade and Globalization religion and its own gibberish sect, the Free Movement of Capital. Free Trade and Globalization was/is an Anglo-American ideological construct meant to allow the surplus outputs of their economies to be dumped into the global marketplace with the least hindrance from other governments in the form of customs levies and numerical quotas. To some extent, this has succeeded. The pre-sub-prime prosperity in many countries can indeed be credited to Free Trade and Globalization. (The saling-pusa Philippines under President Fidel Ramos was suckered by Opus Dei economists Bernie Villegas and Jess Estanislao into embracing Free Trade and Globalization even ahead of fully developed Taiwan and South Korea, thus decimating many domestic producers who could not compete with a flood of imports and forcing hundreds of thousands of laid-off Filipinos to look for jobs overseas.) But it has also backfired or boomeranged with the unforeseen rapid growth of China � plus South Korea, Taiwan, Malaysia, Thailand, Vietnam, India � as manufacturing centers that took away millions of jobs from the US heartland, leading to its massive trade deficits and a weakened dollar, and becoming hostage to foreign oil. The Asian financial crisis of 1997 was the direct result of the Free Movement of Capital, another article of faith of Anglo-American capitalism, which allowed currency speculators to move in and out of any economy in search of quick profits, even if it meant millions of people losing their jobs and sinking into poverty.. It is not a coincidence that the Asian country which was least affected by the Asian financial crisis was China, which refused and still refuses pressure from the IMF to allow its currency to be fully convertible, which prevented 'hot money' from playing with it. Then Malaysian Prime Minister Mahathir Mohamed specifically castigated Jewish currency speculators � in particular, the Hungarian-American Jew, George Soros � as being responsible for the global debacle in 1997. I have not read any comments from Dr. Mahathir regarding the current debacle, but I would say that the Unbridled Greed that motivated the currency speculators in 1997 is the same Unbridled Greed that motivated the sub-prime speculators who are responsible for the wider debacle of 2008. American capitalism, with or without Jewish speculators, will never be the same. ***** Reactions to [email protected]. Other articles in acabaya.blogspot.com. Tony on YouTube 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 "US Capitalism Implodes" The Financial Meltdown The Wall Street Collapse Dear Antonio, I wish I had said that, but I will, or most of it anyway. Congratulations on a splendid analysis, Regards. Doug Adam, (by email), Sept. 23, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Dear Mr. Abaya, For ordinary people like me and who have just taken three units of a very basic course in economics, Econ 101, I can only recall the law of supply and demand and the definition that economics is a science of scarcity, people having to make do with finite and limited resources our planet can offer. Then the general principle today of world economies is that money has to be spent or circulated to indicate that a nation's economy is growing, measured by basic performance indicator that is the GDP/GNP. Why people today, particularly Americans, are so extravagant, living beyond their means, while the basic principle tells us to be prudent because our resources are limited. Today, people who are most highly educated in economics and finance are the very ones causing the collapse of world economies, aren't they? ( We have a president who professes to be an economist, western educated at that, but our economy is still rickety after more than 7 years in office). Or, are they thinking that with their education, they can really manipulate the reality? (Well she seems to be good in manipulating the people) They can always speculate but everything will go back to basic reality, we are living in a finite world with finite resources. But indeed, against an unlimited wants and desires of society. The market focused on the wants and desires or the "demand" but is ignoring the "supply" just thinking to manipulate everything. Bottom line, I'm still confused but will stick to my Econ 101. Regards, Edel Anit, (by email), Sept. 23, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Dear Sir Tony, With this looming in the horizon, as a plain non-economist expert, I would surmise that it was always best to pay with cash and purchase only what one needs and could afford. We do not have credit cards and never was fond of using them but with our insurances still not maturing, would those policies be affected? A lot of spin-doctors have tried to silence the foreboding future that lies ahead financially and economically and they have been saying all is well. To the lay folk such as myself, if they say so, it must be so... right? I just pray our country can be "slightly affected" if this affects everyone on the global scale. Our country can only handle so much and we have our share of greedy people siphoning money out of our country and into their own private Cayman Islands bank accounts. I wonder where they'll use it in hell once this planet implodes as well. I hope it is not too late to save what we can save here, we need to be self-reliant and stop importing. If we can get out of the global market and just use our own resources - I know a lot of importers and exporters will be badly affected but at the risk of getting swept away with the rest of failing economies - shouldn't our country come first above everyone else? We ask where our sense of nationalism is - can we put the needs of this country and it's people first before we focus on the outside world? Could we keep our own resources 80% for just the Filipino people? And those resources are EVERYTHING being exported out like food, fruits, minerals, fuel sources, even people. I know someone will say - there's no high paying jobs here, food is getting to be very expensive, the purchasing power of the peso is down etc, etc, etc. But then you see hospitals without that many doctors or nurses, too many poor people are going hungry, its no longer feasible to be a farmer, factories are closing shop because they have no clients, clientele prefer branded imported stuff over local, no health benefits to the poor, free medicines are being sold... and it isn't because we don't have any - its not being seriously delivered to the people, professionals leave the country for higher pay, we convert arable lands to subdivisions for the rich and people often have "what's in it for me" crabby mentality. Farmers are getting screwed and no one is teaching them to be self-sufficient for fertilizers and pesticides. Irrigation was funded on paper and the money pocketed. There's no immediate justice available and one is often jailed before being proven innocent after years of being in jail. What then is wrong within the country? What does the Filipino do for the meantime since the ripples of this economic crash of the US has yet to be fully felt in the country on top of everything we are already suffering from? Could anyone offer any thoughts on that? I'm really sorry I'm asking questions but I look at my young children and I wonder - what have we done to their future? It's a sad day for me and thank you once more for your articles. Keep writing. Best regards, Jenifer Aquino-Xavier, (by email), Sept. 23, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Here's my two cents given my experience in both capitalism and communism: There is no perfect system and whenever greed rules or when one overextends disaster strikes, i.e., the fall of successive empires past. The current global financial crisis is no doubt a product of greed and unfettered capitalism; which comes in the heels of the American Iraq debacle. I have spent (living and working with ex-communists) most of the last 5 years in Eastern Europe and one reason was because of my curiosity of what socialism was really like. I had already made friends in China having been involved in negotiating JVs with communist leaders, and even invited some of them to New York if only for them to appreciate how the other system looks like. And I don't mean anything sophisticated, for instance: I wanted to observe how a Chinese communist leader would take to an American-office cafeteria. To my surprise, this Chinese took out his video camera and recorded as much as he could of our cafeteria. And then announced that for our new JV facility in China, he would be taking personal responsibility and ensure that the cafeteria would look like an American cafeteria. Fast forward several months, when I visited our China facility, my friend pulled me straightway to the cafeteria. OK, in the beginning I had a subtle message: let's make sure we meet fundamental hygiene in the cafeteria. Does this mean that an American cafeteria is the gold standard of hygiene? No, because in Tokyo every restaurant would put a typical American restaurant to shame given the Japanese ultra-high standards of hygiene. Back to Eastern Europe: over the last 5 years I have seen how ex-communist corporate-types (an oxymoron, not too long ago) marveled at how they could extend commerce beyond their small country to nine others. Of course, some of their grandparents would still wish to have the old social system when they had their daily share/ration of food made available to them. But the younger ones would not have anything to do with it. This is notwithstanding experiencing presently how inflation can rear its ugly head when an economy is growing at an accelerated pace. Why? They have moved up from Ladas to Toyotas, from communist-built apartments to western-influenced flats and townhouses to western-style cafes and bars; not to mention designer jeans and smart phones. As they begin to appreciate inflation and knock-down style competition against western global companies, they are learning some Anglo-Saxon instincts: you can make mistakes and be beaten but you can and must always quickly pick up the pieces and devise a new game plan. Don't stick to the old routine and expect a new outcome; that is how TQM gurus define insanity. Romeo Encarnacion, (by email), Bulgaria (?), Sept. 23, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Hello Kuya Tony, A prophecy says: Woe! The U.S. dollar will become worthless...Is it coming? Leona Guera, (by email), Australia, Sept. 23, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww (Copy furnished) Dear Auggie and Friends: With due respect to Mr. Abaya, the American economy is not on a death watch. With all its difficulties, the United States is self-sufficient in food and actually produces a lot of crude oil and natural gas from within the continent and the continental shelf. It is true that the American manufacturing base is having problems but when for instance the automotive industry retools, it will be back as the industry leader. Bobby M. Reyes, (by email), Sept. 23, 2008 (Why don't you re-read and understand my article? I specifically wrote that "American capitalism is not dead. It merely needs a blood transfusion and, perhaps, a heart transplant and a lobotomy." The $700 billion bail-out is a blood transfusion. ACA.) wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Tony It is even worse. Why bail out the banks that created this mess? And why bail out the banks not the victims who are the homeowners unable to refi their bloated loans? Worse, some of the lenders were foreign financial institutions, so do they get a free ride at the US taxpayer's expense too? Why $ 700 B Who gave this figure? How was it arrived at? Why was it not a bi-partisan effort? And lastly why did the financial community express a no-confidence vote as seen by Monday's 4% decline in the DOW JONES, and the flight to commodities causing a $ 15 spike in a barrel of oil? Gold to unheard of levels? Why the rush to approve this bailout/ who's interests are sought to be protected? Can't be because of restoring credibility because the public just thumbed down this latest effort? There are no worse crooks than these Republican cronies of Bush. They redefine the word greed to levels never before seen. The world is telling Bush he is an incompetent buffoon. There should be an 11th commandment: "Thou shalt not be a Republican." Lynn, [email protected], Washington DC, Sept. 23, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Hi Tony, You are right, US capitalism, and not only this, will never be the same anymore. But I think, the problem started long ago, when world leaders and Central Banks bosses changed the monetary system from fixed exchange rates to floating rates. Instead of the one time a year possibility for insider speculation, when they knew in advance what would change at the next meeting, the floating system allows permanent speculation and manipulation (e.g Bangko Sentral when intervening on the Peso rate), making money from a stable, calculable economic basis to just a commodity like oil, metals, foods. In addition, banks and other financial institutions can now trade money, and therefore manipulate its value, because billions are electronically transferred and returned in seconds. Even the seller does not have the amount in reality and the buyer could not buy it in reality. But on electronic transactions can money being used which belongs to customer accounts for to manipulate the rate and return the money after the transaction ended with profit for the speculator. Banks even allowed their brokers to make personal profits as long as the bank made more profit with them. In the "good" old times, money to transfer had to be existing real, not only as electronic Bits and Bytes in computers. And even if a transfer took much more time, the value at arrival was still the same as on the first day of transfer. Now, even you transfer money from a foreign account in minutes, you are not sure that its value is still the same when you want to pay with. Or when a seller makes a price, say in dollars, he does not know if the payment will have the same, a higher or lower value than what he used to calculate the price in his local currency. The usual result, prices were increased, adding a "safety margin" for to be sure the payment will match the calculated profit. Who suffers most? The common and the poor earners. While big speculators make millions out of only promille changes of exchange rates, free market money is just a good for sale, not a fixed basis of trade and economy. Regards, Kurt Setschen, (by email), Tagbilaran City/Switzerland, Sept. 24, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww But John Nery seemed to beg to differ. Here's the link to his September 23 column, 'The end of capitalism' http://opinion.inquirer.net/inquireropinion/columns/view/20080922-162277/The-end-of-capitalism Arvin Antonio Ortiz, (by email), Sept. 24, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Tony, I have been following your columns for quite some time and I think that you are one of the few sensible writers left in our country. Indeed, your column is the only sensible reason left why Manila Standard should remain in circulation. But this time I think that you did not do your homework so well. The collapse of the housing market here which triggered the impending downfall of the entire US economy could not be fairly pointed straight to the doorsteps of Republican leaders. Do you know that Freddie Mac and Fannie Mae is a creation during the Clinton administration? (True, but did Clinton and his assignees run them � to the ground � until 2008? ACA) and the top CEOs of these two giant companies are (were?) appointed by Bill Clinton and are now serving as top economic advisers of barck Obama. It is the Democrats that wanted every americans to have a house of their own irregardless of their financial capacities. The Republicans want only those who are hardworking and are qualified to be able to have access on these housing loans. In fact, this is my main qaurrel with my next door neighbor here. He is a hardworking republican who has to wait for 15 years and has to put up 20 % of downpayment before he was able to own his first house. On our part, we were barely a year here and we got qualified with zero downpayment, and our contract stipulates that in case of default of payment, our loan is guaranteed by the government. This is exactly what messed up the housing turmoil here. And, don't you know that providing everybody a house to live is deep in the agenda of Democrats. The Republicans believe otherwise. I think you could do your readers a special favor should you do more research on this. Use the google. But I am very happy about how you attacked the Republicans. I am a Democrat. The thing is you are not staying very objective on your last piece. And I wish you don't stray away from objective writing as an opinion writer. Remember, you are an endangered specie now, most of our writers back there now simply sucks. Edelyn Badillo, (by email), Sept. 24, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww So now capitalism is bad. Free market is bad. So are communism and socialism. So what's now the best economic ideology? Jun Valenzuela, (by email), Naga City, Sept. 24, 2008 (Try capitalism moderated by a social conscience, as in Western Europe in general, Scandinavia in particular. ACA) wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww I agree, Tony. What a frightening world faces us. The Super-Power is mired in debt and in a losing war. Meanwhile it insists on planting more bases abroad. Regards, Fernando 'Butch' Zialcita, (by email), Sept. 24, 2008 Faculty, Ateneo de Manila University wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww philippines is not the only catholic country in asia, east timorese republic is 95 percent catholic. how many times i'll be going to correct the pundits about this. and when it comes to christianity, armenia is 90 percent orthodox, georgia 60-40 catholic and orthodox, lebanon, although battered land for christians has a stable 40-50 percent christian population. kuwait and UAE has a sizesable christian popluation, they are not being counted because they are not citizens of the kingdom, but they have the slim majority over the muslim natives. mind you, south korea is transforming its face in favor of christianity. so philippines is not the only catholic or christian country or nation in asia. James Pelobello, (by email), Sept. 24, 2008 (According to the 2008 World Almanac and Book of Facts, South Korea is 49% "no affiliation" and 26% Christian; Lebanon is 39% Christian, 60% Muslim; Kuwait is 85% Muslim; UAE is 96% Muslim. Transient populations are rightly not counted. (The division between Europe and Asia is becoming hazy. Turkey, 90% of whose territory is in "Asia" is being considered for membership in the European Union. Georgia [84% Orthodox Christian] is being offered membership in NATO and will no doubt join the EU if Turkey is admitted, so also will Armenia [94% Armenian Apostolic]. So where does Europe end and Asia begin? (I stand corrected on Timor, but it has only one million people and became an independent state only in 2002, so it tends to be overlooked except by the Timorese. ACA) wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Dear Mr. Abaya, I totally agree with your views on those greedy Americans. I hope that the real estate industry here does not suffer the same fate as in the USA. More power to you--keep the faith! Joemar Carlos, (by email), Sept. 24, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Tony, What is totally missing in your article, but which will I'm sure be taken up within the next month or so, is the whole attempt of the American cabal to take over power from the American people, beginning with the false-flag operation, 9/11, moving through the wars of regional dominance in Afghanistan and Iraq, and then through the restriction of constitutional rights � all in the name of a bogus anti-terrorist campaign engineered by Bush, Cheney, the CIA, FBI, and other American intelligence and military agencies. AIG was not only the bank of choice for the CIA but the major funder of the 9/11 "inside job," as investigators will learn. Your analysis is an empty shell without any of that information in it. Get with it, Tony. Steve Beckow, (by email), Canada (?), Sept. 25, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww AND . . . GMA AFFECTED ON THE US ECONOMIC MELT DOWN??!! WHY? WHY MAKE A VISIT TO USA AFTER IT WAS CANCELLED LAST AUGUST? PLS SEE BELOW, 12TH to 14TH PARAGRAPHS OF THE ARTICLE. US $700B worth of bail out?? This could just be a drop in the bucket to save the US economy. It's a common knowledge that US having the lead victorious army after War II has a lot of covert spoils of war as reserve assets to spare for any eventuality. It started as a secret political action fund right after the war to fight the perceived communist menace and then, utilized for other purposes to serve the US national interests esp. on national security. At $700/troy ounce of gold in the world market, the bail out amount is just equivalent to 32k MT or 4-ship loads of 8k MT of GOLD WAR BARS per ship. The authors, Seagrave couple, in their book "Gold Warriors" and other writers have revealed historical accounts how these spoils of war from Germany (like the Holocaust gold, Nazi horde) and other Japanese treasure war loot buried in the Phils and elsewhere were retrieved secretly and brought in numerous ship & plane loads to US for federal govt (Pres & CIA) to treat as a secret fund hidden in the vaults of Fort Knox and other places, in hundreds of covert deposit forms like in Swiss and multinational banks, etc. in more than 40 countries. If this is not hidden and declared esp. the gold assets of the federal govt, the price of this precious metal in the world would collapse. So, US has become indeed a powerful nation with a lot of flexibility to stabilize her economy. Certainly, this bail out fund shall not be deployed so soon as to result to inflation. It's a plan to be laid out properly. Tito Payumo, (by email), Sept. 25, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww " . . . has imploded and unraveled, probably beyond repair." Am quoting from your column � it does not say "the end" but "beyond repair" is "beyond repair." Thanks. Romeo Encarnacion, (by email) Sept. 25, 2008 (I'm not sure I understand your message, but if you're asking if "beyond repair" is the same as "the end," my answer is No. "Beyond repai"r means it cannot revert to its former self, but it can still redefine itself. ACA) wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Dear Tony, The US economy is resilient and too big to fail. The current financial crisis cannot be compared with the Great Depression of the 30's. Today's problem is more complex and its affect could be felt outside of the US. Soverign capitals will come to the rescue; China, Japan and countries awash with petro dollars will infuse capital to stop the system from freezing. .US has had terrible experiences with SNL, and with the dot.com bursts and other forms of bailouts. With this housing bust, US will survive economically bruised but stronger than ever. Dr. Nestor P. Baylan, (by email), New York City, Sept. 25, 2008 (If the US economy is really resilient, why does it need a $700 billion bail-out? Why not just let it straighten itself out alone? China and Japan do not have petro-dollars because they do not export petroleum. Their hordes of dollars come from merchandise trade surpluses. ACA) wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Tony, Allow me to give my share after your enlightening piece. Credit Purchasing Power The collapse of the sub-prime mortgage market with a large population of what some people call "NINJA" for No INcome Jobs, & Asset is like the "accident waiting to happen" in the busy capitalist economic freeway where the green light is always on and speed limits lifted by lending conduits out to earn their commission. Behind the credit system is the profit motive, the main propellant of democratic capitalism. From Economics 101 I had my misgivings about the capitalist economic system with its intrinsic character of laisez faire, where market forces are allowed to move unchecked like without or least interference from government control or regulation. At most, the Democratic Capitalist concept may have a longer lifespan or period of sustainability but if allowed to go at high speed, an imbalance between supply and demand, the critical elements in a market economy, is likely to occur resulting in a bubble burst that brings everything back to zero. My thesis is borne out of the fact that because Capitalism is basically driven or motivated by profit, GREED is not far behind pushed by the insatiable nature of man to accumulate more and more to keep himself "secure". Further, given the power (specially purchasing power), man has a tendency to indulge in bacchanalian consumption as shown by the so many fatsos in Western economies who own fat bank accounts too. The Working Middle Class A large part of the middle class, the work force, the regular 8 to 5 earners including the blue collars who carry the tax burden (that fuels the bureaucratic machinery and provides the pork to politicians) are also caught in the credit or financing trap and are now moaning for higher wages to be able to make both ends meet. It is an ugly picture with the backdrop of the CEOs and COOs with their scandalously huge emoluments, a graphic image of inequity and their equally scandalous perks as we see in the Meralco bosses and those in large corporations including those in GFIs enjoy. They do not feel the crunch despite their high-financed lifestyles in their eagerness to reward themselves for their role in keeping the wheels of progress rolling. It makes sense to recall 2 Papal Encyclicals on preferential option for the lowly laborers and workers, particularly in Third World countries who are exploited by big business whose top honchos feast on the fruits of their labor to feed their desires. Rerum Novarum (1891) and Quadragesimo Anno (1931, on the 40th anniversary of the former), warns of the evils of exploitation of the poor laborers (particularly at that time) while the latter, on the restoration of the social order, explained the immorality of keeping economic control in the hands of a few.While it recognized the principle of subsidiarity which held that higher levels of authority should act only when lower levels can not deal with a problem, it did not say Authorities can not impose preventive measures to forestall abuse. Industrial Efficiency for More Profits The age of mechanization and technological breakthroughs have pushed manufacturing efficiency at an all-time high. But its success is actually driven by greed to produce more, not much to cut costs of production resulting from economies of scale, but actually to accumulate more profit in a shorter period of time. But the resulting surplus filling warehouses to the brim also has accumulating "carrying costs". Thus the need to create ways to dispose it at a faster rate in the market through attractive (zero % interest, long term credit, re-structuring, etc) credit ploys. A craving or want is developed by whetting consumer appetite creating desires that 'must' be satisfied with the power to buy through credit. These desires (pulled by advertising and promos), rather than actual needs that can be delayed as in postponing gratification until the next payday comes, indeed helped stimulate the economy with future mortgaged income. That led to the "Culture of Commercialism" borne out of a Supply-driven economy. Note that the capital used to sustain high production output is also borrowed with its corresponding interest costs. This is offsetting a large portion of the benefits of the economies of scale. Good Money After Bad? The US$700B bailout is a bold attempt to infuse rolling capital as stop gap to what did not come on time thus upsetting cash flow to very critical levels. The world wait with baited breath that this infusion will provide the shot in the arm that, hopefully, will stabilize the American financial system. Let us all hope and pray that it does not turn out as putting good money after bad even as we know it can really be done quickly - by printing currency! Will that quickly lead to inflation? Perhaps not if used to "mop up" excess goods in the market place. "Sounds so crazy it might just work!" as the economists at Sesame Street might say. Good money after bad? Let's hope not, for our own sake too. The Diminished Glitter of Gold Printing more currency will cause inflation if it results in more money in circulation with less goods to chase in the marketplace. That is the conventional conclusion in economics. This recalls the Gold Standard as agreed in Bretton Woods after WW2 where currencies were regulated based on it against the propositions of J.M. Keynes. The Gold Standard, where other currencies were convertible to the US dollar "that was in turn convertible into gold" was finally thrashed in the early 70s under the financial strain caused by the Vietnam war. In a way Keynes was proven right about the uncertainty of pinning the value of currencies to the gold reserves each country holds. What glitters now is oil, the liquid diamond that is now in great demand. By the way, more and more currencies are pressured to move away from the US dollar as the main currency in the oil trade. Between gold and oil easilly one sees which has more real use value. There is Hope Hope lies in the capacity of the Democratic Capitalist economic system to reconfigure or rebuild itself from debacles caused by its own excesses. We have seen how the "Real Deal" (You mean, New Deal. ACA) of FDR allowed the American economy to rise like the phoenix from the ashes of the Great American Depression of the 20s. But that was after a period of recovery that did not come without pain. It might help if we include God in our life economic equation. God bless. E. J. T.Tirona, (by email), Paranaque City, Sept. 28, 2008 (There is nothing wrong with Greed as long as it is moderated by a social conscience through the mechanisms of social legislation and appropriate regulations. As for God, the officially God-less (atheist) governments of China and Vietnam have generated the fastest economic growth rates in the world for the past ten years. And some of the lowest crime rates and the least corrupt governments in the world can be found in the secular societies of Scandinavia, even if citizens nominally pay taxes to support the Lutheran Church. ACA) wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Understanding the Financial Meltdown (Copy furnished) Hi. I got this email today and thought of sharing it with you. Basically it boils down to the fraudulent and predatory nature of American politics and business, particularly the Bush administrations (Sr. and Jr.). Connecting the dots will be everyone's pasttime to see to what extent this raging fire will consume the global economy. Naysayers say that the Philippines is essentially safe; doomsayers say that the country is in grave danger. I'm no rocket scientist but I'm willing to bet that if the global economy melts down, there go our exports and overseas workers. Talk about crimes against humanity.... Meanwhile, back here at the ranch, I've come across text messages that say that GSIS had up to $1-B invested in Lehman Brothers and that it lost about $300-M. Will the financial whiz kids in this email list please play detective and find some evidence to warrant a criminal investigation? Some of us are GSIS members, or were at one time, and we should know the veracity of these text messages considering its impact on the pensions of the entire government bureaucracy, past and present. Assuming it is true, $300-M at today's exchange rate is roughly P14-B. Add to this its predatory tactics to gain control of Meralco that brought down the value of its shareholdings.... GSIS couldn't have done this without the blessings of people above who, collectively, never bother about the consequences. It's called hubris. Dante has a special place in Hell for people like these. It looks like the Mafia's modus operandi have morphed into government SOP's. It takes your money and uses it to make more money for itself and when things go wrong (since it is grounded on fraud), they'll compel you to pay for it too. And they'll use legitimate levers of power to protect, if not bail out, themselves, their syndicated businesses and their criminal networks. In the States, former New York Gov. Spitzer thought so and got politically assassinated in the process. What do you think? Jeers, Raffy Alunan, (by email), Sept. 22, 2008 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww (Forwarded to Tapatt by Louie Fernandez) This is hilarious. http://www.youtube.com/watch?v=SwRFoxgEcHc&feature=email wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww The Wall Street Collapse Dear Tony: McCain is starting to slip behind Obama in the polls due probably to the global financial meltdown caused by the greed of these Wall Street financiers. I just wonder whether Obama will prevail in November. Perhaps he can pull it off. A McCain-Palin election victory would be an absolute global disaster for peace and justice, including human rights! By the way, it's absolutely frightening what has just happened on Wall Street and what is still happening. Alejandro Lichauco articulated it so well in his brilliant article below. We have decided to take drastic measures in light of this global financial meltdown by buying land in the Philippines as soon as possible . Very chilling situation! Shalom, George Bradford Patterson II, (by email), Quezon City, Sept. 18, 2008. Free market economics and the Wall Street collapse By Alejandro Lichauco, Daily Tribune, Sept. 18, 2008 The slaughter at Wall Street last Tuesday, where $700 billion � repeat, billion � of stock market wealth evaporated in one sitting � was long overdue. It was long overdue because for almost a decade now, the American economy had been functioning virtually without a manufacturing base and without that base, commercial banks and investment banks were deprived of the most productive outlets for the lending and investment operations. And because lending and investment constitute the main business of commercial and investment banks, they were forced to look to what is known as "sub-prime" borrowers on whom to unload their cash, whether as loans or investments. The financial institutions in brief didn't have any choice, if they were to continue in the business of lending and investment but to pound on the doors of potential borrowers even if these borrowers didn't have the ability or capacity to pay. In brief, even if those potential borrowers were "sub-prime" and since they did turn out to be really sub-prime, they simply couldn't pay when the loans fell due. It's really as simple as that. What the Wall Street collapse demonstrated, however, was the unimaginable, fantabulous extent to which the entire financial system of the United States had been involved with these sub-prime borrowers. Investment banks, like Lehman Brothers, for example, it turns out, had invested heavily or bought just about all sorts of "financial instruments" based on sub-prime loans issued by the mortgage banks and commercial banks. And to think that these bankers had for years and years, and in fact ever since time can remember, been identified with the term "financial prudence." They are supposed to be the models of "financial prudence." What transformed them into, as we now see, reckless, irresponsible speculators? Only one answer to that really. As mentioned above they simply ran out of worthy borrowers to lend to. And so, they had to turn to unworthy borrowers and force these unworthy borrowers by every persuasion possible to borrow. Otherwise, the banks would have to close shop. For if banks can't find borrowers, what else can they do? They exist precisely to lend money and if there isn't any one to lend money to, well, the banks simply lose their reason to exist. To phrase the theme in another way, the American financial meltdown, which is now so shaking the global community, is fundamentally rooted in the meltdown of the American manufacturing sector and the question which everyone should be asking is: What caused the meltdown of the American manufacturing sector in the first place? And the answer lies in free market economics. It was free market economics, with its obsession for free trade, deregulation and privatization, which melted the once all-powerful manufacturing sector of the United States. That theme has been advanced by a host of American economists, business writers and political leaders, all of whom had as early as the late 1980s, warned of the dangers of full-blown liberalized trade on the American economy. But, to this writer, the most authoritative and documented was a book authored by prize-winning New York Times editor Martin Tolchin, titled Selling Our Security and published as early as 1992 by Alfred Knopf of New York. In that 345-page opus, Tolchin, together with co-author Susan Tolchin, cited case after case of American manufacturing industries � the crown jewels of the American economy � literally drowned to death by a ceaseless flood of cheap imports. He cites former Rep. Richard Gephardt, then majority leader, who remarked that "While the free market has great value, it places no (repeat, no) special emphasis on our national security, it does not take into account our standard of living and it does not adequately value the national interest." The book also quotes a finding of the Center for Strategic and International Studies that 80,000 companies engaged in the production of strategic defense products and materials had been driven out of business by imports. Defense officials reportedly went out of their way to say before a congressional committee that free market policies "could spell disaster for our fighting force." "Finally," the book continues to say, "in the waning months of the Reagan presidency, the Defense Department issued two reports warning that national security was being compromised by the (Reagan) administration's laissez-faire policies." That was nothing less than a frontal assault by the Pentagon on the free market ideology which America's "traitor class" had pressed down the throat of the American people, and of peoples the world over. And now, in the Wall Street collapse, we are seeing the karmic payback, for as it is turning out the United States has become the principal casualty of its own ideology. You remember the Asian financial crisis of 1997? That was a crisis which was triggered by the financial meltdown of Thailand. And you know what it did to the Philippines. It drove the peso-dollar rate from P28:$1 to P56:$1. We are now looking at a financial crisis triggered by the US no less. Just bear that in mind, and you will have a fair idea of what is in store � all on account of a wrong economic ideology they teach in our schools. ***** OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO Reactions to [email protected]. Tony on YouTube on 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. |
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