DIE HARD III
Herman Tiu Laurel
8/22/2011
Ratings agencies are the financial world’s equivalent of today’s global “fashion dictators,” from Gucci, Dior, to Louis Vuitton, who decide what’s in and hot from the ramps of Paris or Milan. In the same way that fashion aficionados look to these luxury brands for the latest trends, presented in glossy sheen by the leading magazines, high-end department stores, boutiques, and celebrity “fashionistas,” ratings agencies are dutifully followed by the investment world’s big and small fund speculators, investors, and banks.
Down a rung or two, so-called “pirates” — both fashion and financial — from Hong Kong, Bangkok, Shenzhen, or Manila always keep a close watch to get their new line of pirated designs or passed down prognoses of financial ratings agencies, which then enable them to partake of the “killing.”
For them to succeed in mesmerizing the masses whose pockets are the goal, the global mass media is indispensable. Day in and day out, this mass media churns out fashion and financial glitter to keep audiences in rapt embrace.
While I have not followed the fashion scene for quite some time, I get the impression that the dearth of new names making an impact both here and abroad may well be one of the signs of the times of declining economic fortunes and increasing misery.
As I have been following more closely the financial ratings agencies, I have helped in aggressively debunking the myth of their validity, reliability, and relevance for real financial and economic evaluation of the global and national economy. In fact, this space is only one of the very few critical of the so-called big three — Moody’s, Standard and Poor’s, and Fitch Ratings — which mainstream business media consider as the gods of their financial Mount Olympus.
In the past decade, we were among the few voices in the wilderness on this matter; but ever since the Global Financial Crash of ‘08, where these ratings agencies still spouted rosy prognoses of Lehman Brothers, Bear Stearns, AIG, and other financial houses the day before the sky fell on them, the world’s view of them have already taken a negative turn.
For sure, Standard and Poor’s credit downgrade of the US a week ago while Obama and the Republican-dominated House were in the thick of their “debt cap” debates has not helped either, especially since Moody’s and Fitch weighed in with their positive ratings just a few days after American political and financial authorities raised their vehement objections.
As I have written before, both China and Europe have since reacted against these ratings agencies. China set up its own called Dagong after declaring the traditional ratings agencies as “unreliable,” whereas Europe threatened to establish its own after the big three downgraded Portugal and Spain’s credit-worthiness at a crucial moment of the EU (European Union)’s recovery economic efforts. As these ratings agencies are now in disarray, all we can say is “Good riddance!”
Similarly, we also want to call attention to the western “international” news agencies such as Reuters, Associated Press (both British), and Agence France Presse (French). Like the top fashion houses, these major news wires practically dictate the world’s news trends and, when they choose, even the direction of national news stories.
Many Filipino newspapers, broadcast networks, and news writers take these major news wires’ reports as gospel truth and repeat whatever is fed to them over and over until every Juan, Pedro and Maria believe these to be gospel truth.
Let’s take the latest news from the Associated Press (AP) about Libya where its headline says, “Libyan rebels: Key city, oil terminal seized,” as well as Reuters’ “Libya rebels strategic town (Zawiyah) near Triopli” and Agence France Presse (AFP)’s “Fighting erupts in Tripoli as rebels say regime is doomed,” all of which are not balanced by news such as those coming from Russia Today (RT) on statements by the Libyan government’s official spokesman belying these claims, which are never reported by the three major Western news agencies.
Each morning, after perusing all the major national newspapers on the Internet, I shift to reading Press TV (official news wire of Iran), RT (Russian cable news), Prison Planet (a dissident Web site in the US), GlobalResearch or the Centre for Research on Globalization (an anti-globalist Web site), China Daily, and Asia Times. When I turn on my Destiny Cable, I go immediately to RT and CCTV 9, and only scan CNN, BBC and Al Jazeera briefly. You’d be surprised at the utter Western media bias. For example, it is only from RT that I get this report:
“Independent journalist Lizzie Phelan says the reports are an effort by Natp to create panic. ‘The only gunfire that we are hearing is celebratory gunfire,’ she said. ‘And the only explosions that we are hearing are Nato air strikes or Natp sound bombs, which are clearly designed to create a sense of panic in… Tripoli.’ Phelan said that the Libyan rebels created fake footage of themselves in Zawiyah and Tripoli, and were aided in disseminating the footage by, among other media outlets, Al Jazeera. The Qatar-based satellite television station… has been at the center of the media conspiracy against Libya. The Western mainstream media, she continued, in turn picked up these reports and repeated them, creating a sense of panic among the Libyan people. Later… a number of armed gangs emerged… sleeper cells of rebels… (which) began firing randomly and threatening ordinary people… ‘They then took footage of the empty streets, which created the sense that they were in the process of capturing the city.’”
Al Jazeera, financed by a Western-controlled potentate, the Emir of Qatar, has been at the forefront of the disinformation campaign against Libya, starting with the fake news of Gaddafi’s jets bombing demonstrators back in February — news which CNN and BBC then repeated endlessly. Like fashion czars and financial ratings agencies of the West, these major news wires are mere tools of foreign financial predators. Time for the public to wake up!
(Tune in to Sulo ng Pilipino/Radyo OpinYon, Monday, Wednesday, Friday, 5 to 7 p.m., and Tuesday, Thursday, 5 to 6 p.m. on 1098AM; Talk News TV with HTL, Saturday, 8:15 to 9 p.m., with replay at 11 p.m., on GNN, Destiny Cable Channel 8, on “Coconut vs. Alzheimer’s”; also visit http://newkatipunero.blogspot.com for our articles plus TV and radio archives)
Monday, August 22, 2011
Sunday, August 21, 2011
Monopolies and regulatory agencies
BACKBENCHER
Rod Kapunan
8/20-21/2011
All these years, we were made to believe that capitalism thrives on competition, and it is in that condition where we extracted the substance of freedom as the elan vital that makes that system work. Our belief was reinforced by the theories on comparative advantage forwarded by British economist David Ricardo and given refinement in a different perspective by the German economist Karl Marx. It is on this basis why traditional economists subscribe that competition helps bring down the prices of goods and services, although it is also the market application of the Darwinian precept of survival of the fittest.
However, this column is not about to judge capitalism as a carnivorous economic system, but would just state it as an imperfect system. This we say because not all that is allowed to operate under the rules of free competition would bring about the desired result of lower prices and an efficient service. Let alone, capitalism would end up in a bloody cutthroat competition. Like the hierarchical order in the animal kingdom where there is that what we call “alpha male” that leads the pack, capitalism too has its own “alpha industries.”
In that instance, those that fall into the category of “alpha industries,” are by necessity, accorded the privilege status of a monopoly or oligopoly, as the economic condition would warrant. But allowing that kind of arrangement would invariably cause us to react, much that it is contrary to the principle of free competition.
We say this because capitalism, for all its buntings of free competition, still needs a degree of monopoly as well as oligopoly in some sectors of our industries. They are in fact needed to ensure that fair competition would work among the numerous downstream industries, especially those engaged in the production of consumer goods. They could radically reduce the cost of production for our local manufacturers to fight back the onslaught of foreign competition.
Only by having a system of regulated monopoly and oligopoly industries could we possibly solve the perennial problem that has plagued most secondary and downstream industries. The grant of franchise is the contract that assures them of a fair return on their investment. This explains why a franchise is given to industries engaged in the generation and distribution of power and electricity, in the production and supply of oil, in water utilization and distribution, in telecommunications and transportation industries, and in the construction and operation of modern highways.
There was much wisdom in that decision to take over these industries, and that was evident in the US during the time of US President Franklin Roosevelt, and in Great Britain before the advent of Thatcherism. The need to own and control those industries stem from the logic that net profit earned by them is always bigger than revenue derived from taxes as hooted those seeking their privatization.
In fact, allowing several companies belonging to the same industry to compete and operate in one area would be ruinous and costly to their investment. That would not result in the reduction of their rates, fares, or toll because their concern is to safeguard their huge investment from unnecessary competition. This explains why regulatory agencies like the Energy Regulatory Board, the Oil Industry Commission, the Land Transportation Franchising Regulatory Board, the Toll Regulatory Board, the Maritime Industry Authority and the Civil Aeronautics Administration were created. Their rightful role is to regulate profit and oversee that franchised monopoly and oligopoly industries conform to the standards required by the industry.
Unlike the non-monopoly market players where the invisible hand of competition is the one that regulates to bring down their prices, that mechanism does not exist or can operate in a monopoly or oligopoly situations. The grant of franchise is the government’s sort of guarantee to protect their investment. Despite that, our regulatory agencies, which we copied en toto from the US, do not know what their role is all about. Those in charge have no idea why their agency was created. Possibly none of them know that it was the US regulatory agencies that came out with the novel idea of fixing the return on investment or profit those companies are supposed to earn.
This explains why industries that enjoy a franchise cannot use as their argument for a rate increase plans to expand their operations, improve their services, or upgrade their facilities. To allow that would result in their captive customers putting up the investment, while they rake in profit with only their saliva as capital. Nonetheless, even if there is a legitimate need to expand, improve or upgrade, regulatory agencies in the US and Europe have already made it a principle in law that capital investment should come from savings generated from their profit, if that would not be enough for them to secure a loan.
“Technical consultants” sent by the World Bank, US-AID, EU, ODA to advice local operators of monopoly and oligopoly industries on the various schemes to deregulate their price like their substitution of the ROI with the so-called “return on rate base”, now called “performance-based rate”, and their recommendation to cut to pieces the National Power Corp. are all subterfuge to render useless the role of regulatory agencies. Effectively, the concept of franchise that was supposed to stand in lieu of all taxes could no longer be traced as to which of the dismembered companies should pay; whether it should be the generation company, the transmission company, the public utility distributor, etc.
Even in that, they succeeded in converting franchise tax as synonymous to value added tax, which reason why they were allowed to pass on the burden to the consumers. On top of it, they added the currency exchange rate or CERA, thus rendering the once fixed rate impose by regulatory agencies as entirely flexible.
This now explains why our regulatory agencies have lost track of their role. Instead of harmonizing competition, they have become the tool to destroy whatever comparative advantage that is left in our local industries. In the end, the deregulation effectively rendered meaningless the ratio decidendi why they were in the first place created.
(rodkap@yahoo.com.ph)
Rod Kapunan
8/20-21/2011
All these years, we were made to believe that capitalism thrives on competition, and it is in that condition where we extracted the substance of freedom as the elan vital that makes that system work. Our belief was reinforced by the theories on comparative advantage forwarded by British economist David Ricardo and given refinement in a different perspective by the German economist Karl Marx. It is on this basis why traditional economists subscribe that competition helps bring down the prices of goods and services, although it is also the market application of the Darwinian precept of survival of the fittest.
However, this column is not about to judge capitalism as a carnivorous economic system, but would just state it as an imperfect system. This we say because not all that is allowed to operate under the rules of free competition would bring about the desired result of lower prices and an efficient service. Let alone, capitalism would end up in a bloody cutthroat competition. Like the hierarchical order in the animal kingdom where there is that what we call “alpha male” that leads the pack, capitalism too has its own “alpha industries.”
In that instance, those that fall into the category of “alpha industries,” are by necessity, accorded the privilege status of a monopoly or oligopoly, as the economic condition would warrant. But allowing that kind of arrangement would invariably cause us to react, much that it is contrary to the principle of free competition.
We say this because capitalism, for all its buntings of free competition, still needs a degree of monopoly as well as oligopoly in some sectors of our industries. They are in fact needed to ensure that fair competition would work among the numerous downstream industries, especially those engaged in the production of consumer goods. They could radically reduce the cost of production for our local manufacturers to fight back the onslaught of foreign competition.
Only by having a system of regulated monopoly and oligopoly industries could we possibly solve the perennial problem that has plagued most secondary and downstream industries. The grant of franchise is the contract that assures them of a fair return on their investment. This explains why a franchise is given to industries engaged in the generation and distribution of power and electricity, in the production and supply of oil, in water utilization and distribution, in telecommunications and transportation industries, and in the construction and operation of modern highways.
There was much wisdom in that decision to take over these industries, and that was evident in the US during the time of US President Franklin Roosevelt, and in Great Britain before the advent of Thatcherism. The need to own and control those industries stem from the logic that net profit earned by them is always bigger than revenue derived from taxes as hooted those seeking their privatization.
In fact, allowing several companies belonging to the same industry to compete and operate in one area would be ruinous and costly to their investment. That would not result in the reduction of their rates, fares, or toll because their concern is to safeguard their huge investment from unnecessary competition. This explains why regulatory agencies like the Energy Regulatory Board, the Oil Industry Commission, the Land Transportation Franchising Regulatory Board, the Toll Regulatory Board, the Maritime Industry Authority and the Civil Aeronautics Administration were created. Their rightful role is to regulate profit and oversee that franchised monopoly and oligopoly industries conform to the standards required by the industry.
Unlike the non-monopoly market players where the invisible hand of competition is the one that regulates to bring down their prices, that mechanism does not exist or can operate in a monopoly or oligopoly situations. The grant of franchise is the government’s sort of guarantee to protect their investment. Despite that, our regulatory agencies, which we copied en toto from the US, do not know what their role is all about. Those in charge have no idea why their agency was created. Possibly none of them know that it was the US regulatory agencies that came out with the novel idea of fixing the return on investment or profit those companies are supposed to earn.
This explains why industries that enjoy a franchise cannot use as their argument for a rate increase plans to expand their operations, improve their services, or upgrade their facilities. To allow that would result in their captive customers putting up the investment, while they rake in profit with only their saliva as capital. Nonetheless, even if there is a legitimate need to expand, improve or upgrade, regulatory agencies in the US and Europe have already made it a principle in law that capital investment should come from savings generated from their profit, if that would not be enough for them to secure a loan.
“Technical consultants” sent by the World Bank, US-AID, EU, ODA to advice local operators of monopoly and oligopoly industries on the various schemes to deregulate their price like their substitution of the ROI with the so-called “return on rate base”, now called “performance-based rate”, and their recommendation to cut to pieces the National Power Corp. are all subterfuge to render useless the role of regulatory agencies. Effectively, the concept of franchise that was supposed to stand in lieu of all taxes could no longer be traced as to which of the dismembered companies should pay; whether it should be the generation company, the transmission company, the public utility distributor, etc.
Even in that, they succeeded in converting franchise tax as synonymous to value added tax, which reason why they were allowed to pass on the burden to the consumers. On top of it, they added the currency exchange rate or CERA, thus rendering the once fixed rate impose by regulatory agencies as entirely flexible.
This now explains why our regulatory agencies have lost track of their role. Instead of harmonizing competition, they have become the tool to destroy whatever comparative advantage that is left in our local industries. In the end, the deregulation effectively rendered meaningless the ratio decidendi why they were in the first place created.
(rodkap@yahoo.com.ph)
Saturday, August 20, 2011
Talk News TV with Herman Tiu Laurel
TOPIC: Franchising: Strengthening Filipino MSME's
Guests: Teresa Laurel and Tess L. Ngantian, President (2004-2005) of Association of Filipino Entrepeneurs, Inc (AFFI)
Guests: Teresa Laurel and Tess L. Ngantian, President (2004-2005) of Association of Filipino Entrepeneurs, Inc (AFFI)
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