Consumers' Interest Cost Burden

CONSUMERS DEMAND!
Herman Tiu Laurel
11/21-27/2011



When we buy a retail item such as a pack of tocino, a TV set or a vehicle, we are not only paying for the commodity itself.

A great part of the money we shell out for the things we buy -- as it is too for service -- goes to the interest cost on money, and it’s shockingly far larger than what most people realize.

At every level of the production, distribution, and marketing phases, there are layers of interest charges that are taken for granted and seldom computed.

Layers of Add-Ons
It is only when we look into them that we can begin to realize that these layers upon layers of interest costs can exceed the material and labor cost of the commodity or service that we buy.

For a picture of how shocking the interest cost of commodities is in Western economies, here is a quote from Ellen Brown writing on “Time for an Economic Bill of Rights”:

“According to Margrit Kennedy, a German researcher who has studied this issue extensively, interest now composes 40% of the cost of everything we buy. We don’t see it on the sales slips, but interest is exacted at every stage of production.

"Suppliers need to take out loans to pay for labor and materials, before they have a product to sell.

"For government projects, Kennedy found that the average cost of interest is 50%. If the government owned the banks, it could keep the interest and get these projects at half price.

"That means governments--state and federal--could double the number of projects they could afford, without costing the taxpayers a single penny more than we are paying now.

“This opens up exciting possibilities. Federal and state governments could fund all sorts of things we think we can’t afford now, simply by owning their own banks. They could fund something Franklin D. Roosevelt and Martin Luther King dreamt of--an Economic Bill of Rights.”

Interest-Free Economy
Readers can go to YouTube and watch the video of Margrit Kennedy explaining her ideal of “the interest-free economy,” which Ellen Brown cites as a central argument to her listing of an Economic Bill of Rights -- something we clearly should have in the Philippines too.

It is important to note that even in Western countries, governments also add to the interest charges burden on their consumers and the public.

This is because the US dollar, upon which most other currencies of the world (except the likes of China or Cuba) are based, is a currency based on debt.

The US government cannot print money or issue credit without borrowing through the US Federal Reserve, which is a private bank constituted by 12 District Federal Reserves owned by private banks.

There is really nothing “Federal” about it, and the name is just a cover for one of history’s largest and most successful banking mafia scams (by JP Morgan, Goldman Sachs, et al.).

More than the West's
China’s state banks, meanwhile, are responsible to the Party which is obsessed with public welfare financial management as its responsibility is clear to the public.

Here, Filipinos pay even more interest charges than in the West.

On top of the regular interest charges businesses contract for the goods and services consumers buy, Filipinos have to pay a humongous burden of interest cost on the P4.7-trillion national that is embedded in everything produced in the Philippines, as well as interest on the rollover of principal -- all totaling around P800 billion annually.

At the retail end in the Philippines, when we buy goods such as fresh foods or banana-Q from the palengke or maglalako, we are also paying for the horrendous “5-6” rates that can amount to 500% interest per annum for the market or street vendor.

In between the interest on the national debt and the 5-6 at the lowest retail end, we have the interest charges passed on to us by the farmer or importer of raw materials or the manufacturer-processor, even the interest cost of the wholesaler, distributor, fuel supplier, and gasoline stations that go to transport, before reaching the retail end.

Outright Moratorium
Filipinos must begin to understand the financial system and our money; discovering the role of interest charges in making life so expensive and miserable even for our middle class.

Secondly, we all must begin to clamor for the outright moratorium on our debt in the same manner that people in European countries such as Greece and Italy are demanding form their governments (that’s why there’s been a bankers’ coup against elected leaders Papandreou and Berlusconi, replaced by these bankers’ technocrats).

Then, Filipinos should begin to study the need for state banking to replace the present private banking system which exacts a heavy toll on all Filipino consumers.

The prime example of this is China where, in the midst of the 2008 financial collapse, its banks pumped cheap money to consumers to perk up its economy, unlike in the US and Europe where governments bailed out privately-owned banks.

Ellen Brown quotes Henry Ford in the prelude to her article on “Economic Bill of Rights”:

“It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

Left Holding the Bag
As I read this, I recall the recent exposé of the Lopez companies’ behest loans of billions from the DBP (Development Bank of the Philippines) of which P1.6 billion were written off by the bank.

The companies that benefited were Maynilad, Central CATV, Benpres Holdings, and BayanTel. But they were not alone in ripping off the DBP.

The Ayalas’ BPI also did it for P8.6 billion and the Yuchengcos’ RCBC for P3.9 billion through the SPAV (a law written by Joe de Venecia and Ralph Recto), whereby bad loans (or non-performing assets) are passed on to state banks that are to be left holding the bag.

Philippine public banks are misnomers as they are instruments of the ruling oligarchs that loot them through the politicians they control.

Of course, we need a truly free and independent state dedicated to national welfare before state banks begin to really work.

We do not have space in this column for how Brown’s “Economic Bill of Rights” can be translated in the Philippines setting. But it is imperative that the Political Bill of Rights must be preceded by an economic one to ensure the people’s individual economic independence so as to make political democracy work.

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