Tuesday, 9 February 2010

The candidates are not ready to lead

John Mangun
Business Mirror

Global polities and global economics seem so very far away from our daily lives. Attention in the Philippines is, of course, centered on the upcoming national elections.

The presidential candidates are parading to the various forums, choosing to appear when they believe it will gain them some positive coverage.

I realize I have said this so many times that it is becoming boring, but our leaders seem to be completely out of touch of what is going on in the rest of the world. The closest they seem to get to some understanding of the outside world is only when it might affect Filipino overseas workers’ jobs, as in the case of the Dubai debt failure. I find it amazing that someone who wants to lead the Philippines does not have an adviser on the staff that can bring the candidate up to speed about the dynamics of the global economic situation and what it means to the Philippines.

Over the last week, the peso depreciated against the dollar by about 50 centavos. The comments from “experts” and candidates alike had no basis in reality.

The euro came under massive selling last week in what can only be described as an attack on that currency. This is completely reminiscent of the attack on the British pound by George Soros nearly 20 years ago. Contrary to what we believe in Asia, there are only three major currencies in the world; the US dollar, the euro and gold. Nothing else—yen, yuan, Swiss franc—matters.

Last week’s fall of the euro created a rising dollar because hundred-billion-dollar hedge funds are able to borrow dollars for zero interest and sell euros. Late in 2009, a slow, steady attack on the dollar created rising gold and rising euro.

The peso fell last week because local bank currency traders reacted as they always have when the dollar goes up in the international markets: sell the peso. These traders do make money for their employers but, unfortunately, they too do not have a clue about the financial world of 2010.

The insular, provincial and narrow mindset is pervasive.

One candidate for vice president has a great idea every couple of days to provide another government program to end poverty, save the environment or increase the “quality of life for all Filipinos.” No mention, of course, is ever made how the government would pay for all these blessings. The reason for that is, previously, the government could borrow a ton of money from the international bankers because they wanted to loan to the Philippines as the interest rates we were paying were much higher than in the West. Those days are over. Regardless of what you might think, global banks are out of the lending business. Now what they do is speculate because the profit potential is great and, more important, if their gambling fails, their governments will bail them out.

Despite the impression you may get from the newspapers, the government has significantly increased its borrowings from the domestic market, which is one of the reasons this economy has stalled. Local banks would much prefer to lend to the Philippine government rather than to you to expand your business. You are too risky.

Every new government program that takes money out of the economy is counterproductive because the private sector can do more in the long term to increase the standard of living than the government could ever do. This VP hopeful does not have a clue about the financial world of 2010.

Global warming/climate change (GW/CC) is a hoax without any unmanipulated, unbiased or verifiable data to support its claims. The recent summit meeting in Copenhagen had nothing to do with this discredited theory. It was about Western governments raising taxes to bail out a completely failed banking system and complexly failed government financial policies. The people would not accept new taxation so the West hoped that the GW/CC scare might get the sheep into paying more.

Notice what happened. Governments like the Philippines, China and India understood that new taxes in the West would further hurt non-Western economies. So they demanded that they either be excluded from the new rules (China, India) or get a piece of the money pie (Philippines). The Western leaders that were screaming GW/CC doom suddenly walked away. Raising taxes to fight GW/CC and then giving that money to Manila was not part of their global plan. And I am still getting political e-mail telling me that Antipolo will be beachside property soon unless you pay more taxes to “fight” GW/CC.

Candidates jumping to take credit for the Philippines’ success in outsourcing are clueless, too. The No.1 reason outsourcing is thriving in the country is you. Because you did not feed your children the nonsense
nationalism that speaking English was anti-Filipino. Because you paid for that computer and Internet. Because you encourage a broader global view. And if you asked any of the candidates about the future of outsourcing and, specifically, what the country should do better, I doubt if you would hear one creative thought like using publicly owned broadcasting stations to actually teach better English a few times a day.

I will not predict who will lead this nation for the next six years, but I will guarantee you this: Before the new administration has been on the job for one year, there will be another global financial crisis that will make 2008/2009 seem gentle. Based on what they are saying and doing today, my confident prediction is that they will not be ready for it.

E-mail comments to mangun@gmail.com. PSE stock-market information and technical analysis tools provided by CitisecOnline.com Inc.

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