Posted tagged ‘banking’

EUROPE’S BURNING!

May 25, 2010

Erle Frayne D. Argonza

Europe is on fire. Save for those who choose to be blind, the Union is going through an incendiary economic burn. How far will the economic burning go, whether it will spread to a larger continental inferno, no one can tell for now.

Before the EU’s creation, welfare policies were prevalent from east to west of the continent. Liberal reforms then arose, commencing with the Tory’s (Thatcher era) wholesale adoption and social marketing of the same, and copied by the conservatives and liberals of the continent alike.

By the turn of the century, upon the commencement of the Euro, liberal reforms already saw the uncontrollable ascent of predatory finance worldwide. Liberalized financial-capital markets paved the way for their immanence.

Among those instruments created by the predators was financial derivatives. To recall, a decade back the derivatives markets were already awash with exposures totaling over $150 Trillion, with 36% of these in the hands of British financiers while 15% were in Americans’ hands.

By 2001, the alarming projection was leaked out that derivatives will be inflated to exceed $350 Trillions within the new decade. At a time when the global economy was producing past the $40 Trillion in Gross World Product or GWP, it was sheer madness to consider debt papers of past $350 that could meltdown the globe in case of a gigantic bubble burst.

Europe was already flat on its back for a straight two (2) decades since after the collapse of the Soviet Union. Periodic stagflations and recessions have seen the rise of poverty incidence and, consequently, the re-emergence of neo-fascist movements.

Being strongly tied up to the U.S. economy, it was not surprising to realize that a contagion of the U.S. recession will surely hit Europe, which did happen. The ugly side of the formula was the aiding of ailing banks that were badly affected by the crisis, an intervention that was flawed and immoral as it entails using taxpayers’ money to aid criminal bank speculators.

Barely out of the U.S. contagion effect, Brussels was shocked to see that a new fire had started within the Eurozone— Greece to be exact. As this was happening, Spain also began to sneeze & cough, as some of its own banks (notably Santander) spiraled down bankruptcy scale. Other member-economies were also having their own financial crucifixions going by the early part of this current year.

If we diagnose what’s going on in the financial sectors of member states, we can easily pinpoint banks as hotspot fire sources. They were heavily into speculative pursuits, with enormous exposures to derivative operations.

Just exactly how that happened can be traceable to certain acts in the North by the mid-80s. Commodities markets have sprung up on that decade, even as a global recession took place then, threatening OECD economies. Liberal reforms were already permeating diverse sectors, and within the backdrop of liberalization, financial derivatives and equivalent portfolios were launched in mass scales.

Banks shed off their previous stance of inhibiting themselves from speculative pursuits. Soon they’d find themselves investing into every speculative games they could lay their hands into, inclusive of hedge funds operations.

Now, to fast track to the present, economists estimate that EU’s aggregate derivatives are within the range of $180-$200 Trillions, estimates that seem conservative. Measure this against the gross domestic product of EU at $13 Trillions, and you would be driven to ask: just exactly where will Europe get the funds to pay the hedged financials in case of bursts and massive bankruptcies?

If all of the hedge funds investors would ask for a forced payment of their total of, say, $200 Trillions more or less, who would pay for such debts? Where will the money come from? Is it morally right to extract taxes from European workers to pay up for the dirty debt papers in case? Is it likewise morally right to impose wage cuts on workers who were not the culprits in the virtual economy game in the first place?

Concerned Europeans should better rethink the Euro and ask whether the new currency really worked for their welfare. It is now clearer that the Euro was a sell-out idea and project, that it was launched to satiate the insatiable pockets of greedy financiers represented by the top financial houses there.

And Europeans better see how silly it is to allocate taxpayers’ money worth $1 Trillion to bail out ailing banks and industries hit by the rising meltdown. For measured against total debt papers of $180-200 Trillions, $1 Trillion would be ridiculously paltry.

Yet another ridiculous intervention is the austerity measure imposed by the IMF on Greece. We’ve had so many precedents of the deleterious effects of such measures on developing economies that aimed at eventually graduating from IMF programs as a salvation measure in the short run. While emerging markets are getting out of a burning house (IMF & austerity measures), Greece voluntarily entered this house. Unbelievable!

As per reports reaching my focals, Germany had the greatest exposures to Greece’s banking sector, with exposures running to hundreds of billions of euros. British financiers, on the other hand, have their hands full in Spain’s banks.

It isn’t difficult to forecast that the fire in Greece could spread to other eurozone economies. Not even the UK, which decided to stay out of the eurozone, will be spared from the bonfire. Spain is almost there now, and who knows what country will be next.

If banks and industrial conglomerates will simultaneously burn in all of the member-states of the eurozone, with total aid claims of past the GDP of $13 Trillions, then Europe will be on the brink of a continental inferno.

Concerned readers better think for yourself whether Brussels and the bureaucrats do have the right answers to the raging problems of Europe. Poverty incidences are now hitting past the 20% mark in member countries, while massive lootings of the financial and currency markets by predatory financiers take place every day in the continent.

Well, let’s all wait and see for what happens. Let us hope that a mad Nero bureaucrat wouldn’t appear to orchestrate the burning farther to infernal scale. That would bring a new nightmare to the whole planet if it happens.

[Philippines, 20 May 2010]

[See: IKONOKLAST: http://erleargonza.blogspot.com,

UNLADTAU: https://unladtau.wordpress.com,

COSMICBUHAY: http://cosmicbuhay.blogspot.com,

BRIGHTWORLD: http://erlefraynebrightworld.wordpress.com, ARTBLOG: http://erleargonza.wordpress.com,

ARGONZAPOEM: http://argonzapoem.blogspot.com]

IMMORAL U.S. BAILOUT ECHOES JAPAN’S 1990s ‘CRISIS MANAGEMENT’ FLAWS

October 4, 2008

Erle Frayne Argonza

Magandang hapon! Good afternoon!

It’s been some couples of weeks now since the financial downspin in the USA took a further plunge as mega-banks sought help from federal government for rescue. The closure of the Lehman Brothers and the S.O.S. by other big banks that are now in the red rocked the global stock markets to a new round of instabilities and volatilities, even as the US economy is in danger of another Great Depression.

As I’ve already expressed in many articles of mine, the US financial collapse, an event that economists in many parts of the world forecast as early as the 1990s yet, is bound to happen, on account of many factors. The key factor, as this analyst and fellow ‘nationalist economists’ have been saying since 1998 yet (when I was actively involved with a group of economists in Manila called the Independent Review circle), is the widening gap between the (a) ‘virtual economy’ based on predatory finance that produces mere fictitious values and the (b) ‘real economy’ or ‘physical economy’ that produces real values.

The serial liberal economic reforms that began in 1971 yet, which saw the collapse of the gold standard and the dropping of fixed exchange rate (FER) in favor of ‘floating rate’, and onwards through the liberalization-privatization-deregulation-decentralization (structural adjustment policies or SAPs) of the 1980s, and onwards to the GATT-Uruguay Rounds that created the WTO in 1994, took its catastrophic toll on the economies of the planet, but most specially the USA’s.

The Nixon-era financial-monetary reforms and the Reaganomics (SAPs) were the policy culprits of America. They dealt the final death blows on the dirigist policies of New Deal, initiated by Franklin Roosevelt but which was inspired by dirigist policies of earlier luminaries (i.e. Alexander Hamilton, Abraham Lincoln, Friedrich von List), provided the impetus that created the strong, gigantic ‘physical economy’  of the country, and transformed it into a world power economically, politically and culturally. Without dirigist economics (interventionist) and the New Deal, Middle Class America wouldn’t have been possible. The neo-liberal reforms simply wiped out whatever was left of the New Deal by the 1980s, and with the liberalization of the financial –capital-monetary markets, the predatory financiers had their field day of looting the middle class purses under the rubric of portfolio capital and derivatives operations.

Had the US policy makers just labored a bit and assigned their staff to scour the world for some related experience of bank-financial collapse, their researchers could have easily ‘discovered’ the experiences of Japan in the 1990s. By the early 1980s, when Japan clearly demonstrated its sterling industrial and technological capabilities as the base for its wealth production, the Zaibatsus and the policy makers decided to go the liberalization way, confident as they were that the fruits of decades-old ‘physical economy’ build up can’t just be easily wiped out by predatory financier operators.

Japanese technocrats (both in Japan and overseas) also theorized that the key to producing a sound, healthy, mighty Japanese economy was in the realm of micro-economics more than public policy. Never mind if the policy environment will shift from the protectionist-dirigist policies of the post-war decades to liberal policies, provided that at the level of production and organization, capacity and internal potency can be demonstrated. The likes of William Ouichi’s ‘theory z’ comes to mind, or ideas that spawned strategies and tools dovetailing on quality control, team building, and decentralized operations. The world was so awe-inspired by the ‘Japan Incorporated’ model that was based precisely on the micro-economic route, and was extolling the Japanese corporate firm to the hilt as the new champion of the globalizing economy.

The USA that had demonstrated its strength on macro-economics—In the terrain of public policy—as the route to economic might, must have been seduced by the Japanese ideological onslaught at one point, that it so sonorously echoed the Japanese technocratic jargon of ‘globalization’. But when Japan’s financial system began to buckle down in 1994, which then impacted on the rest of the economic sectors, the US politicians and technocrats simply didn’t pay attention, fixated as they were to the seductive results of the ‘virtual economy’ (bubble operations) on the GDP of America.

To recall, Japan suffered miserably for the bailout mistake it pursued. Dabbed as ‘crisis management’, the state went on a binge of saving ailing banks and financial houses, the very same measures that the Bush-Paulson team is now embarking on. Alarmed at those events than in Japan, which led to a 10-year recession & almost zero growth, I began to raise howl about the ballooning portfolio investments in the Philippines by 94-95, and was among those experts who forewarned the state officials that Japan’s ‘crisis management’ was seriously flawed, was tantamount to giving incentives to looters instead of criminalizing, them, and should never be enforced in the Philippines or ASEAN in case that the portfolio bubble will burst in Manila and the region (the bubble burst in 1997).

To repeat: Japan suffered miserably from that fiasco. Recession howled like unstoppable forest fires for ten (10) years, and were it not for the high growth of East Asian markets, Japan couldn’t have risen back to appreciable growth by 2005. Interest rate was compelled to be brought down to zero percent, a precedent that many countries affected by financial meltdowns were aloof to emulating. Bankruptcies,  corporate closures and downsizing led to dislocations and unemployment. For the first time in many decades, former decent Japanese executives and employees who lose their jobs and had their remaining mortgaged properties confiscated, were rendered homeless and starving, and forced to reside in the streets as paupers and vagabonds..   

Sitting with my fellows in the Independent Review circle from 1997-onwards, we took turns in exposing the maladies of the neo-liberal reforms, spoke in diverse media (TV, radio) to forewarn the public of the imminent financial collapse in East Asia (the meltdown took place beginning in June of ’97), and by 98 were of the consensus that the USA was next in line for a meltdown of even catastrophic proportions than either Japan’s or South East Asia’s (97 meltdown). The very destructive effects of predatory finance saw the decline of industry (de-industrialization), agriculture (land use conversions, decay), infrastructures (some huge infra were even privatized), S & T (low priority in budgets & education), and transport & communications in the USA. If the neglect of the ‘physical economy’ will continue for another ten (10) years, it will be too late for salving the US economy as a whole. Any catastrophic bubble burst and financial-monetary meltdown could bring the economic house down, collapse consumption, and render the US economy much like unto a Latin American economy past 2010.

 As I recall then, we experts from the Independent Review circle strongly opined that the ‘crisis management’ tactic was immoral and extremely perverted. How in the world could the state ever reward criminals at all? The bankers and financiers looted the Japanese purse by probably worth trillions of dollars, they should have been criminalized for their sordid crimes, and yet they were even rewarded! Unbelievable! This is one excellent narrative for the Ripley’s Believe It Or Not!

Fortunately for the Philippines, there was no large-scale bailout of any bank as a result of the 1997 Asian meltdown. Those realty and construction companies affected by the crisis, affected precisely because they over-exposed themselves to ‘hot money’ foreign portfolios that simply dried up as the same portfolios were pulled during the first month of the meltdown, were immediately able to cope up by retooling and re-engineering their strategies and tools. Interest rates were lowered, excess liquidities were flashed out in well managed manner that deserve our central bank accolades from the Bank of International Settlements. In less than a year after the meltdown began, we were back to consumption patterns like there was no recession at all. We didn’t take the Japan route, luckily. By 2001 and onwards our growth patterns were back to appreciable growth, and the local bourse moved up as well.

Today, all over the ASEAN + China-India-Korea (minus Japan), the Asian meltdown seems like an ancient event down memory lane as things have been moving fast. We just can’t believe that our mighty economic partner, the USA, didn’t learn its lessons from the 2001 recession there and from the flaws of the Japanese bailout. ‘Bailing out the rich’ isn’t the issue here, but rather ‘bailing out the criminals’ which is a gross disincentive for the legitimate SMEs and other market players that didn’t receive the same favor.

If we were to seriously search for appropriate short-term tactic for salving ailing financial institutions, the answer lies in a proven approach to corporate ailments: bankruptcy reorganization. The economists Robert Reich (former US secretary of Labor) and Lyndon LaRouche (Executive Intelligence Review) have been airing this solution very strongly, and I am myself bent on accepting this micro-economic short-term solution as an exemplar for the rest of the world. I would not be surprised if the eminent economists Joseph Stiglitz and Paul Krugman would air a similar advisory, and they should better air their counsel strongly.

The entire planet today is watching the horrific bailout in the USA, almost forgetting that this copycat bailout already flattened Japan for a decade at least before. Each one of us should look at our own backyards and make sure that our respective states won’t emulate the rather devious and insane bailout of Japan Incorporated and the Bush-Paulson team.

[Writ 04 October 2008, Quezon City, MetroManila.]

ANOTHER GREAT DEPRESSION COMING AS FINANCIAL SYSTEM ENDS

August 18, 2008

Erle Frayne Argonza

Is the global economy moving downward towards a devastating collapse?

If we employ a long-term Kondratieff cycle to model the world economy, we can see that the period beginning in 1935 approximately (when the big market economies US-UK-Germany moved towards another cycle of growth approximately after the Great Depression, should have ended around 1995 approximately, after which comes another great depression.

As early as 1989, ramblings of a global collapse began to murmur in the US economy. Mexico, Japan, Argentina, and other economies followed in the 1990s, while Europe went through a general low-growth trend that was the most sustainable for the continent as a whole. Then came the Asian meltdown of 1997. Then the USA again went through a recession in 2001, a pattern that has been repeated again from 2008 to the present. It seems that the pillars of the world economy couldn’t get out of a short-term crisis without having to crash back to another episode of short-term crisis altogether.

Is it really a ‘short-term’ crisis in the first place? Or is it in fact a ‘systemic crisis’, and that the financial downspin the Northern economic pillars are going through could very well be the terminal phase of a very long cycle of growth that began after the end yet of the Treaty of Westphalia (1648)? That in fact, several long-wave Kondratieff cycles have already passed over since that time, and that finally the system is DEAD in the wood?

Well, not only the financial system but the whole of CAPITALISM is already on its death throes. Those oligarchs behind the systems now dying won’t see the systems they built die down just that without “bringing down the other houses” with them, it seems. Which means that, right after the terminal phase of the system, another huge, catastrophic war will come, which will later see another Westphalian-type treaty or so that will re-carve the contours of polities into a Post-Westphalian totalitarian technotronic global order.

Below is a briefer from the Executive Intelligence Review that summarizes the issue at hand.   

[18 August 2008, Quezon City, MetroManila. Thanks to Executive Intelligence Review database news.]

End of the Line for Financial System; Bankruptcy Issue Raised

Aug. 10, 2008 (EIRNS)—The death of the financial system was the implicit subject of several articles in the financial press over the weekend, reflecting the way reality is setting in and attitudes are changing.

  • “Investment banking is dying,” was the blunt statement by William Cohan, in a op-ed in today’s Washington Post entitled “The End of the Masters of the Universe?” Cohan says that the revenue streams of the investment banks are drying up, and that there is genuine fear in the corridors of power on Wall Street.
  • “We have a banking crisis and an agency crisis and a mortgage crisis and a coming credit card crisis. We’ve never seen anything like that before. And it all seems to be coming home to roost at the same time. That’s never happened either,” Charles Geisst, a professor of finance at Manhattan University, told yesterday’s Washington Post. He said the Great Depression was the last time the financial markets were hammered by such a variety of factors, adding: “But we did not even have credit cards in the 1930s; there was no such thing as student loans.”
  • The specter of generalized bankruptcy was raised by Yale finance professor Robert J. Shiller in an op-ed in the New York Times. Citing the failure of Bear Stearns and the government measures to bail out Fannie Mae and Freddie Mac, Shiller asks, “What if the next case is worse? No one in government seems to feel a responsibility for warning about such possibilities and formulating a detailed policy for dealing with them.” Shiller says that “Bankruptcy law is a good place to start. After all, the dreaded financial meltdown would amount to a wave of bankruptcies…. What would happen to the economy if hedge funds had to liquidate, one after another, in a financial crisis? We need to rethink the theory and practice of bankruptcy, given the new complexities.”

Shiller points to the inherent limitations in current bankruptcy laws, which were largely drawn to protect narrow financial interests, and are poorly suited to deal with systemic problems, when a “subsidized system of triage would be needed to identify which companies should be saved, with the main criterion being the possible economic impact of their liquidation.”

These comments, taken as a whole, represent the way discussions of the “unthinkable” are beginning to percolate, and converge upon the outlook of Lyndon LaRouche. Shiller’s mention of triage by bankruptcy echoes the emergency measures proposed by LaRouche, of putting the financial system itself through bankruptcy, protecting the population with a firewall, and freezing the financial paper while we determine what debts will, and won’t, be honored. Whatever Shiller may think about LaRouche’s proposals, he is implicitly admitting that the system is finished, and that we must prepare for its demise, making decisions on the basis of the interests of society, and not merely the narrow interests of financial institutions. Reality is setting in, and reality leads inexorably to the policies outlined by LaRouche. 

US WATCH: CAN THE USA PAY ITS DEBTS?

July 10, 2008

Erle Frayne  Argonza y Delago

Just exactly at what level had the totality of US debts had reached is practically anybody’s guess. So complex is America’s financial system and the mess created by the ‘bubble economy’ over the last three (3) decades, that it takes an enormous amount of research efforts led by top economists and financial consultants to undertake.

One thing is clear though: whoever will be the USA’s next execs must never fail to measure, comprehend, and reverse the debt trends. The estimates today, using combined data from the Fed, the Bank for International Settlements or BiS, and independent researches would put the figure at $50 Trillion.

Measured against the GDP, which stood at around $12.5 Trillion more or less last year, indicates that America doesn’t have the money to pay debts at all, assuming that the bubble bursts and the economy crashes to depression level. Well, the burst began last year yet, the recession is now on, and we need to observe events more closely to determine whether a depression will be at hand.

To say that US savings will salve America’s debt problems is baloney. The savings rate is barely 1%, which accounts for the need for large doses of foreign direct investments and portfolios to cover up for the lack of investible savings. Compare this to East Asia’s average of 30% savings rate, which makes this region’s economy verdantly robust for years to come amid US-EU economic collapse.

On the other hand, to bank on gross international reserves as the source of salvation would likewise bring guffaws. America’s reserves could never exceed $90 Billion at any given time (in real value), which couldn’t even suffice to buy for 1 month’s imports. Compare this to East Asia’s reserves, which range from 4 months imports in RP’s case to at least a year’s for China’s.

So, let us repeat the question, where and how will the US source its funds for salving the debt crisis? What concrete steps will be taken to reverse the debt trap? Who among the political bigwigs in America today possesses the soundest theory and practice for solving the gargantuan debt crisis?

Those questions remain to be answered. Let us hope that the two bigwigs McCain and Obama will do their homework well. The electorates’ expectations are enormously high, and meeting those expectations using traditional, flawed approaches and practices would only endanger both the economic and political stability of this once mighty giant.

[Writ 05 June 2008, Quezon City, MetroManila]

US WATCH: THE ‘VIRTUAL ECONOMY’ WRECKED UNCLE SAM

July 9, 2008

Erle Frayne Argonza

So, fellows out there, whatever happened that the once mighty US economy—once contributing to 40% of Gross World Product (GWP)—is now drifting downwards, producing now just 22% of GWP?  That the EU would itself catch up with the USA and equally produces 22% of GWP, though EU’s money is bloodily mightier than Uncle Sam’s once mythical Dollar?

 

As a matter of realistic forecasting, if trends today would continue across the globe, Asia would overshadow both the US and EU, as follows: China will overtake each one of them by 2015; India, by 2022; ASEAN, by 2030.

 

While the US ‘real economy’ keeps on contracting (and the EU’s stagnates), the Asian economies are still expanding. 100 years ago the Western thinkers Oswald Spengler and Arnold Toynbee already forecast so sharply the ‘decline of the West’, while Daniel Bell foresaw in the 1950s-60s the rise of Asia-Pacific and its overtaking of the US 60 years hence (2005-2015 period). No one listened to them.

 

If we all recall, in the 1930s the great statesman Franklin Delano Roosevelt launched the ambitious New Deal. This program initiated gigantic growths in the ‘real economy’, solved unemployment, and led to high-growth and high-wage trends for sustained periods. By ‘real’ is meant the most productive sectors, namely: manufacturing/industry, agriculture, infrastructures, S&T, and transportation & communications.

 

By 1971, with enormous pressures from the financial cartels, the famed ‘gold standard’ was junked, the fixed exchange rate system was likewise junked in favor of ‘floating rate’, and after which serial liberalization of economic sectors and the bureaucracy went on in very radical fashion. This led eventually to the rise of the ‘virtual economy’ led by predatory finance, featuring hedge fund operations and ‘vulture funds’ to salve crisis-ridden financial enclaves more so overseas.

 

The ‘gambling economy’ based on speculation, conceit, lies, rather than based on the real value of consumable articles of trade, became the dominant modality in the USA. Debts and more debts piled up, since having no debt was moralized as bad behavior. Debs quadrupled in just a few decades, resulting to $5 Trillion worth of debts today.

 

How can an economy that churns out merely $12+ Trillion a year pay up for debts worth 4 times the GDP? It’s madness, blatant madness! The US economy is largely now a bubble, so gigantic that when it bursts, it can reveal the real flaws behind the ailments, and the weakness of the ‘real economy’ altogether.

 

The message to the next President & VP of the USA is to take down that ‘gambling economy’ or ‘virtual economy’ and quickly bring back the powerful ‘real economy’ in place. Failing to do that, Uncle Sam will be faced with many mass out-migrations beyond 2010, as true-blue Americans leave for more stable and promising jobs and businesses offshore. They’ve already began doing that in fact.

 

[Writ 05 June 2008, Quezon City, MetroManila]

NY STOCKS LOSES TOTAL $3 TRILLIONS, AND STILL GOING DOWN

June 26, 2008

Erle Frayne Argonza

Since the stock markets began to plunge late last year, downturns that began with the implosion of the housing subprime mortgage bubble, over 2000 points were already shaved off from the Dow Jones index, the prime index of the USA’s stock markets. It’s now down to nearly 11,000 points from its best time total of 13,000+ points last year, representing actually a 20% plunge.

Each point in the Down Jones is worth $1 Billion as the roughest minimum estimate, though this may range up to $1.5 Billion, depending on the season of trading. Using the minimum as the yardstick, a 20% plunge from a total of 13,000+ index represents at least $2 Trillion worth of loses. If we were to add the loses in the other indices notably the Nasdaq, the figure can get us up to $3 Trillions loses.

Do note that the figure of $3 Trillions is only a conservative estimate. If we use the same figure to compute for the Global Portfolio loses, and multiply this with the number 6 (US’ portfolio capital flows represent 16% or 1/6 of total global flows, using BIS index), the operation would yield a total of $18 Trillions worth of portfolio investments gone down the drain.

It should be stressed that those loses are now gone forever. The stock market investors should better think of other options at this moment, since the plunge hasn’t ceased yet. Those loses of theirs will not return, rest assured. The plunge, per my forecast, will take a long time going yet till middle of next year.

The alarm bells are now up for a total global financial meltdown, and so every concerned fellow of the planet must make necessary preparations for the worst, whatever the worst could be. Corporate social responsibility or CSR may now need to do some contingency re-assessment and re-adjustment of goals and strategies, in the light of the continuing plunge.

Likewise should states rethink their goals and options, recheck their fiscal situation and re-adjust targets accordingly. There has been so much knee-jerked reactions by state players, central banks included, that must be re-examined, including pumping too much liquidities, rescuing ailing or bankrupt banks the erroneous way, and re-allocating budgets for populist welfare subsidies that would, in the short run, only lead to serious fiscal problems in the short run.

What is surfacing much clearly is that the old tools being applied—to salve the crisis—don’t seem to work as much as expected. The search for sound options is a tough challenging one, and the expectations from consumers, who have already slowed down consumption generally, are intensifying. Let us watch out for more contingent events.

[Writ 26 June 2008, Quezon City, Manila]

RECESSION STAYS, SPIRAL POINTS TO GLOBAL MELTDOWN

June 18, 2008

Erle Frayne Argonza

The recession stays, the downward global economic spiral will continue for an indefinite time. This is the pattern that we can now see across the globe.

Stock markets have been crashing, going through a freefall for couples of months now. In Manila, the Philippine stock market is down at 2,500+ points as of this morning, or 800 points short of its best performance of 3,300+ late last year. The pattern is true in other stock markets as well.

One thing is clear: this is a global meltdown going on, and the spiral’s turn-around towards more positive gains in the succeeding months. Trillions of dollars have already gone down the drain, loses that may never be recovered again.

Many pockets are getting badly hurt, both from the fund-rich hedge funds and portfolio financiers to ordinary middle class investors. Just about two (2) years ago, everything was bullish in world stocks, most especially in Asia. That situation had since evaporated.

Unfortunately, the harbingers of liberal dogma are still banking on liberalization policies that have proved to be so bankrupt they are, in fact, the very cause of this global meltdown shaping up. The ‘virtual economy’ unleashed by liberalization resulted to looting sprees by fund managers and hedge fund operators, the same money that they partly utilize for corporate social responsibility.

Now the oil price hikes and currency market volatilities have compounded the recession. It’s just mid-2008 by the way, and there’s still the bombing of Iran that we all await as the non-surprise ‘surprise attack’ from neo-cons and Zionist fascists, which will guarantee higher prices for oil and better dollar leveraging power. This will come sooner or later.

Forecasting has been made simpler by anarchic events at this moment. There is no end in sight to the recession, oil prices will still move up, and the recession will lead to a deeper meltdown of the liberal financial-monetary system of casino-style looting by financier operators.

Better do some belt-tightening if you haven’t done this yet. Let’s continue to watch the horrible unfolding of events. Madness and unparalleled greed have shattered the financial-monetary system, the ‘virtual economy’ of predatory financiers.

[Writ 12 June 2008, Quezon City, MetroManila]

IMF-WORLD BANK MERGER’S A HIDEOUS MONSTROSITY!

May 27, 2008

Erle Frayne Argonza y Delago

Plans are now afoot at merging the World Bank and the IMF, the two economic pillars of the post-war alliance of nations to foster cooperation and development. They came straight out of the Breton Woods agreement, and were rightly called the ‘Breton Woods Agencies’ then.

The merger is among the responses of the technocratic-financier-political elites of the North to the crashing global economy. The ‘virtual economy’ based on financier speculation and worthless bubbles, or otherwise ‘casino economy’ of the wealthy, had burst so badly. The implosion of the financial system had seen the closure of big banks and the alarming loses of others most specially those that had enormous exposures to the subprime realty market in the USA.

The question is whether this merger is really the appropriate response to a system problem. Many experts and quarters the world over have been clamoring, since way back 1990s yet, for the convening of a ‘new Breton Woods’ and the institution of a new global financial architecture. I was among these experts on the Philippine side, and many of us are inside government as executives and legislators.

However, an IMF-World Bank merger is farthest from our mind. The IMF particularly has this notoriety for prescribing shock treatment on economies in crisis, particularly the developing countries or DCs, that do not at all mitigate the long term impact of structural problems. On the contrary, the austerity pills of the IMF were shown to have caused further contraction, depression, and deterioration of once thriving emerging markets.

Let’s face it, the IMF and World Bank are largely the institutional agents of the global financial cartels. They do not represent the true interest of sovereign nation states, do not exercise any accountability at all except to the financier sponsors behind the backs of the IMF-World Bank boards and leadership, and are instruments to encumber nations into perpetual debt peonage. The IMF-World Bank group represents the forces aimed at destroying sovereign nation-states and no less.

The North does not have a monopoly of wisdom in salving the ailments of the global economy, and so we peoples of the south  may just have to push for actions that would see how the catastrophic impact of the global economic implosion will be mitigated. Let the OECD propel their own oligarchs’ self-aggrandizing actions, while we patriots of the South move on to save our people, nations, environments and institutions from further predatory onslaughts by the greedy global oligarchs.

The IMF-World Bank merger is a hideous monstrosity. Be forewarned!

[Writ 26 May 2008, Quezon City, MetroManila]

ANY OLIGARCH JAILED AFTER SUBPRIME BUBBLE BURST?

May 14, 2008

Erle Frayne  Argonza

Hail the financial cartels! Hail the Grand Oligarchs of the North! Thus spoke Zarathustra.

They came, they saw, they looted…and got unpunished. This is the fact of all facts, the ‘praxiological core’ (to use a philosopher’s thesis here in Manila), of the oligarchy’s gargantuan looting of the public purse everywhere. “We are children of Zeus, reside in Olympus, and are beyond the Law,” said they.

Let’s go back to the subprime bubble in the USA, and the post-bubble burst stage. As soon as the housing bubble began in the aftermath of the recession in the USA (2001-02), I was among those analysts who were alarmed at the flawed strategy that the US state officialdom to shore up an ailing economy.

The strategy was no different from the dot.com speculation of the previous years. So much propaganda hype was done to intensify the tenor of the dot.com revolution, which led to massive financier speculation in this sector. Result: the bubble burst, almost bringing the entire US economy down with it in 2001.

Seemingly unmindful of the bad economics that took place, the fed and monetary authorities permitted the bubbling of another sector, housing this time, to ‘prime up’ the ailing economy, coupled with ‘tax cuts’. I’m sure if Franklin Delano Roosevelt were alive yet, he will be squirming at the terribly flawed strategy and would prefer to just die pronto rather than see voodoo economics destroy his nation in the short run.

Bubbles burst in due time, and so the oligarchic game is that before the burst happens, fatten your purse in as rapid a manner as possible. The derivatives market is the best purse fattener, all other instruments being secondary.

Soon enough, the bubble did burst, and banks across the Atlantic (USA, EU) squirmed the most over the bankruptcy-inducing crash from the burst. Horror of all horrors, once mighty financier groups such as Bear & Stearns got badly bankrupt overnight, was sold for cheap dirt price, and simply evaporated.

And to add horror to the horrors, no oligarch or exec was ever jailed for that crime of massive looting of the consumer purse. Holy Maria!

My God! Oligarchs are the Holiest of all Hollies! We ordinary consumers are the filthy pariahs, the Damned Outcastes who are treated as mere members of an amorphous ‘Eater class’ by the Holiest. Hail the Oligarchy!

[Writ 13 May 2008, Quezon City, MetroManila]