DIE HARD III
Herman Tiu Laurel
9/19/2011
Just when the Bangko Sentral ng Pilipinas (BSP) has finally found its bearings, certain quarters are again dead set on pushing it off track. Misgivings aside, I have lately begun to appreciate certain BSP top officials’ burgeoning initiative to get the management of our currency and debt back along the lines of national welfare and interest. The BSP just recently recommended to Malacañang its preference for borrowing locally (instead of internationally) to accelerate the prepayment of debts and to “help temper the appreciation of the peso” vis-à-vis stimulating demand for the dollar.
The country’s Gross International Reserves (GIR) jumped 51 percent from $49.95 billion to $75.6 billion year-on-year, with our foreign debt standing at around $60 billion. The Philippines is thus awash with dollars as well as in loanable funds in the Special Deposit Account (SDA) maintained by the BSP, all waiting to be mobilized in lieu of more foreign borrowings in the rolling over of debts or in the funding of PeNoy’s public-private partnership (PPP) projects in infrastructure and others.
The BSP is picking up the wisdom of the way in which many in the private sector are handling their own dollar debts. While the PeNoy government’s prepayment of foreign loans slipped in the first half of the year, with prepayments of medium and long-term foreign loans summed up to $530.9 million or 3.19 percent lower than the $548.4 million recorded in the same period last year, newspapers report that “All prepayments were made by the private sector.”
We have been reading of different major private corporations prepaying foreign loans. And for anyone seeking to avoid the burden and volatility of interest payments amid the currency crisis, this is the only way to go.
Unfortunately, Cesar Purisima (PeNoy’s Finance secretary and also Gloria Arroyo’s), gave the already scheduled prepayment of debts his “thumbs down.” How are we then to perceive such stonewalling of the proposal that many concerned sectors of our economy, led by the BSP, push for?
OFWs, being the largest contributors to the survival and viability of the Philippine economy, have remitted up to $21 billion annually as of last count. Yet the dollars they send to their families, coursed through the BSP, are yielding fewer and fewer pesos; this, as the US currency is being propped up by Purisima’s policy of accumulating more dollars in our vaults.
The export sector, which has just lost another 10 percent in value in the latest reported data, has also been howling in pain over the massive weakening of exports due to the strengthening peso. The BPOs, including call centers and other service providers, have also lost half of their income due to the peso’s appreciation.
Purisima, in his defense, remarked, “Of course we are amenable to debt prepayments but it is a question of opportunity because bulk of our debts is publicly traded already and if their prices are very high it will not make sense for us to prepay… All of these are long-term and very low cost, so it does not make sense at this point to prepay also.”
In response, this was what our Wednesday radio co-host Liza Gaspar, a young UP finance graduate, had to say: “Purisima seems to be looking at the issue only in financial terms; he seems to forget the more positive and concrete impact of cutting the debt (is) in terms of savings on interest payments and principal that could be redirected toward productive enterprises.”
Gaspar clearly makes more sense than the one-time SGV and Hyatt 10 head. Still, we shouldn’t fault Purisima too much as he recognizes only the foreign financial interests as his bosses.
If PeNoy has any idea on the matter at all, which isn’t likely, the conflict from within his financial team seems to be erupting right under his nose. Well, it’s not like he has taken any interest in it at all, which is tragic, as the matter of finance has become the central component in the governance of nations.
Former President Joseph Estrada, who admits to being a novice on international finance, says he resolved such issues during his time by getting members of his financial team face each other off in serious debate while he listened. Then, if a consensus is not achieved, a vote is soon called. But for PeNoy, it seems that, like many other things under his governance, he has allowed Purisima to simply call the shots, even as the Finance secretary already seems to be sabotaging the Philippine peso in the course of propping up the US dollar.
Of course, there is another dimension to the financial and currency issue that is beyond the scope of this column — the restoration of “currency and capital controls” as well as the “nationalization” of the entire banking sector, which the country had in the time of President Carlos Garcia. It is the final solution to the perennial problem of peso volatility that perpetually rocks the economy. That will be the next stage of the debate.
(Tune in to Sulo ng Pilipino/Radyo OpinYon, Monday to Friday, 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 “WTC’s Building 7: The Key to Exposing the ‘Inside Job’”; visit http://newkatipunero.blogspot.com for our articles plus TV and radio archives)
Monday, September 19, 2011
Sunday, September 18, 2011
Oil Price Stabilization Fund: What happened?
I was in the House of Representatives at the time when the very big surplus of the Oil Price Stabilization Fund (OPSF) caught the greedy eyes of our congressmen and senators, particularly Cong. Tony Diaz of Zambales and then-Senator Maceda.
There was, if I can recall correctly, about a ten billion peso (P10B) surplus in the OPSF at that time and the oil companies could not raise the prices of their products due to this big surplus in the OPSF. So, the oil companies approached our greedy congressmen and senators and "suggested" a big fund source for them to get as their pork barrel and this was, you guessed it right, the OPSF.
And so, our greedy congressmen and senators passed a law which transferred the surplus of the OPSF to the general fund (as the OPSF was a trust fund which could not be intermingled with the general fund) and designated it as a fund for the "rehabilitation of Mt. Pinatubo-ravaged areas."
As it turned out, it was our legislators who "ravaged" the fund, together with Saint Cory (who is said to be "not corrupt") and Cong. Andaya, Sr. who was then the corrupt Chairman of the Committee on Plunder este Appropiations!
Tony Diaz presented as part of his liquidation of his fund allocation (from what used to be the OPSF surplus) official receipts from Furusato Japanese Restaurant whose manager was his crony and the amount was staggering, to say the least!Apparently, Diaz had a lot of ghost purchases from Furusato Japanese Restaurant in order to pocket the funds allocated to him (in cahoots, of course, with the manager of the said restaurant).
I do not know where Maceda "invested" his loot; I believe Andaya Sr. bought a mansion in Ayala-Alabang from his share of the loot (the OPSF surplus).
The OPSF comes directly from the consumers and not as a subsidy from the government as Evil Almendras would have us believe. When the price of oil in the world market is low, the price here in the Philippines is not lowered, in order to build a fund (the OPSF) so that when the price in the world market is high, the oil companies can draw from the OPSF (under the strict watchful eyes of the Commission of Audit in Marcos' time). However, during Cory's time (when there was allegedly no corruption), the CoA was instructed by Saint Cory herself to go soft on its audit of the draw-downs of the oil companies from the OPSF. The objective was to deplete the OPSF and "show" that it "does not work" so that it would be abolished. But the OPSF kept on having surpluses so the "bright boys" of Cory came up with the idea of using the OPSF surplus for the "rehabilitation of the Mt. Pinatubo-ravaged areas."
It was ravishing to ravage the OPSF surplus. After the OPSF was wiped out by a "Republic Act," Cory announced that the OPSF was a "failed mechanism" and should be abolished. She then pushed for the deregulation of the oil industry which finally happened under Cory's forced "President" on the people - Fidel Valdez "Deregulation, Globalization and Privatization King" Ramos.
(Anon)
There was, if I can recall correctly, about a ten billion peso (P10B) surplus in the OPSF at that time and the oil companies could not raise the prices of their products due to this big surplus in the OPSF. So, the oil companies approached our greedy congressmen and senators and "suggested" a big fund source for them to get as their pork barrel and this was, you guessed it right, the OPSF.
And so, our greedy congressmen and senators passed a law which transferred the surplus of the OPSF to the general fund (as the OPSF was a trust fund which could not be intermingled with the general fund) and designated it as a fund for the "rehabilitation of Mt. Pinatubo-ravaged areas."
As it turned out, it was our legislators who "ravaged" the fund, together with Saint Cory (who is said to be "not corrupt") and Cong. Andaya, Sr. who was then the corrupt Chairman of the Committee on Plunder este Appropiations!
Tony Diaz presented as part of his liquidation of his fund allocation (from what used to be the OPSF surplus) official receipts from Furusato Japanese Restaurant whose manager was his crony and the amount was staggering, to say the least!Apparently, Diaz had a lot of ghost purchases from Furusato Japanese Restaurant in order to pocket the funds allocated to him (in cahoots, of course, with the manager of the said restaurant).
I do not know where Maceda "invested" his loot; I believe Andaya Sr. bought a mansion in Ayala-Alabang from his share of the loot (the OPSF surplus).
The OPSF comes directly from the consumers and not as a subsidy from the government as Evil Almendras would have us believe. When the price of oil in the world market is low, the price here in the Philippines is not lowered, in order to build a fund (the OPSF) so that when the price in the world market is high, the oil companies can draw from the OPSF (under the strict watchful eyes of the Commission of Audit in Marcos' time). However, during Cory's time (when there was allegedly no corruption), the CoA was instructed by Saint Cory herself to go soft on its audit of the draw-downs of the oil companies from the OPSF. The objective was to deplete the OPSF and "show" that it "does not work" so that it would be abolished. But the OPSF kept on having surpluses so the "bright boys" of Cory came up with the idea of using the OPSF surplus for the "rehabilitation of the Mt. Pinatubo-ravaged areas."
It was ravishing to ravage the OPSF surplus. After the OPSF was wiped out by a "Republic Act," Cory announced that the OPSF was a "failed mechanism" and should be abolished. She then pushed for the deregulation of the oil industry which finally happened under Cory's forced "President" on the people - Fidel Valdez "Deregulation, Globalization and Privatization King" Ramos.
(Anon)
Saturday, September 17, 2011
Origin of the debt economy (Part 2)
BACKBENCHER
Rod Kapunan
9/17-18/2011
Deregulating portfolio investment
If Karl Marx condemned capitalism for alienating man from his labor, maybe he had his consolation, for then, capital was used to mass produce goods to create additional wealth. Today, the capital he condemned has become an instrument to create a much bigger surplus value in an economic system fueled by usury and monetary trading.
Like the workers whose labor was reduced to commodity by the value of their wage, today the capitalists are seeing their capital reduced to commodity by a new class called “money traders” to produce a much greater profit without producing a single product! Thus, if the workers lost control of labor as their property to the capitalists, the capitalists today are losing control of their capital to the usurious money traders!!!
This explains why the usual economic plans for development and industrialization with the government spearheading in constructing strategic industries to serve as base in generating capital, in giving incentives and protection to the manufacturing industry, or in embarking on import substitution were all stultified because the deregulation of interest and the convertibility of the local currency to any foreign currency resulted in the melting of whatever local capital the country could use to create wealth.
To ensure that the new system of money market trading would work unimpeded, the international oligarchy, through the same financial institutions of the World Bank and the IMF, insisted that countries, as a condition for financial assistance, have to pass another law that would strictly prohibit the government from regulating portfolio investment.
Although most of these foreign-imposed laws again take their cover of enticing investment, the bottom line remains that to allow these international hustlers disguised as foreign investors to enter freely, the country paradoxically has to assure them that they are free to take out or remit not just the whole amount they invested, but including the “juice” generated out of that unorthodox method of investment wholly confined to stock and money market trading. That guarantee was made to assure that money traders could bring in and out unhindered their unique commodity.
That then implanted the rules on how to convert our economy to one big casino. But unlike the casinos in Las Vegas, Monaco and Macao where it would take gamblers a zillion dollars to bring to its knees the “dealer,” here our government practically assured them of winning.
One good example is our grant of that humiliating tax exemption to portfolio investors, while treating harshly our own who are engaged in the actual business of trading and production. This has put the government on the defensive, and unable to explain why, despite the huge capital inflow that is recorded and traded daily in the market, the economy continues to slide down to the precipice of bankruptcy.
The casino economy
Capital holders then began to rely more on gambling their capital than in using them to invest in production. It is gambling, much that the trading of money with other currencies bears profit out of intangible transactions, yet it rapidly grew alongside with the decline in production. Having its own realm of demand and supply, countries became helpless in fending off the depreciation of their currency much that their money became more and more dependent on how its value would command at the stock and money market, and not that there has been an increase in production, or positively that people have more money to buy.
Realizing that indeed gambling is lucrative, the government decided to put up its own casinos. In every major city, gambling casinos sprouted like overnight mushrooms. Casinos proved to be profitable because the rate of return is astronomical that the revenue from gambling is almost gaining parity with the revenue generated by the remaining government-owned and controlled corporations. Time will come that instead of taxes and duties, the government will be depending more on proceeds from gambling for its annual budget. That then would put truism to the saying of “only in the Philippines!”
Poor man’s credit card
Before those credit cards were peddled by those neatly-dressed salesmen similar to what vendors do to sell their cheap wares on sidewalks, only a few enjoyed that emblematic seal of financial exclusiveness. They were honored by international banks, and their card denotes they have solid cash deposits, or to put it differently, liquid at all times. Thus, American Express, Visa Platinum and Master Card became their identification as indeed belonging to that “super-select” entitled to be billeted in five star hotels, to enjoy a vacation in first class resorts, to spend time on luxurious cruise ships, or to dine in exclusive clubs and restaurants.
With the legalization of usury, credit cards were soon “doled out” that almost everybody has it now. Banks have to repackage the system to suit to the demands of the wage earners without telling them they were walking straight into the gauntlet of a debt trap. By creating a poor man’s version of a credit card, the banks were in effect tapping a reservoir of funds that could reduce to puny the amount they traditionally collected from the so-called “super-select.” The instrument of credit card made easy for the middle class wage earners to buy expensive items and appliances they could not otherwise afford to pay in cash. The easy installment plan was their gambit.
However, what these eager-beavers failed to foresee is that there was no way they could pay the credit they obtained by the purchase of those goods inside those big malls. Many of them were awakened to find out they were already nose-deep in debt. The logic is simple: the cost of goods they purchase kept on increasing every minute because of interest plus the cost of inflation, while real wages kept on decreasing. It would not take a genius to compute the formula why many of them ended up bankrupt. Aside from the interest and charges, the charges themselves bear interest and computed on a compounded basis.
It is not even a question that their wage remained static, but of the fact that the real value of wage was moving much faster towards the opposite direction. It therefore came as no surprise to see why almost 70 percent of those who were gypped into getting those credit cards failed to pay their obligation. Many ended up poorer than before with the less fortunate losing their dwelling, their car, their appliances, encountering marriage problems, and at times ending up in court answering estafa cases filed by the usurer's collecting agency represented by shoddy law firms.
(rodkap@yahoo.com.ph)
Rod Kapunan
9/17-18/2011
Deregulating portfolio investment
If Karl Marx condemned capitalism for alienating man from his labor, maybe he had his consolation, for then, capital was used to mass produce goods to create additional wealth. Today, the capital he condemned has become an instrument to create a much bigger surplus value in an economic system fueled by usury and monetary trading.
Like the workers whose labor was reduced to commodity by the value of their wage, today the capitalists are seeing their capital reduced to commodity by a new class called “money traders” to produce a much greater profit without producing a single product! Thus, if the workers lost control of labor as their property to the capitalists, the capitalists today are losing control of their capital to the usurious money traders!!!
This explains why the usual economic plans for development and industrialization with the government spearheading in constructing strategic industries to serve as base in generating capital, in giving incentives and protection to the manufacturing industry, or in embarking on import substitution were all stultified because the deregulation of interest and the convertibility of the local currency to any foreign currency resulted in the melting of whatever local capital the country could use to create wealth.
To ensure that the new system of money market trading would work unimpeded, the international oligarchy, through the same financial institutions of the World Bank and the IMF, insisted that countries, as a condition for financial assistance, have to pass another law that would strictly prohibit the government from regulating portfolio investment.
Although most of these foreign-imposed laws again take their cover of enticing investment, the bottom line remains that to allow these international hustlers disguised as foreign investors to enter freely, the country paradoxically has to assure them that they are free to take out or remit not just the whole amount they invested, but including the “juice” generated out of that unorthodox method of investment wholly confined to stock and money market trading. That guarantee was made to assure that money traders could bring in and out unhindered their unique commodity.
That then implanted the rules on how to convert our economy to one big casino. But unlike the casinos in Las Vegas, Monaco and Macao where it would take gamblers a zillion dollars to bring to its knees the “dealer,” here our government practically assured them of winning.
One good example is our grant of that humiliating tax exemption to portfolio investors, while treating harshly our own who are engaged in the actual business of trading and production. This has put the government on the defensive, and unable to explain why, despite the huge capital inflow that is recorded and traded daily in the market, the economy continues to slide down to the precipice of bankruptcy.
The casino economy
Capital holders then began to rely more on gambling their capital than in using them to invest in production. It is gambling, much that the trading of money with other currencies bears profit out of intangible transactions, yet it rapidly grew alongside with the decline in production. Having its own realm of demand and supply, countries became helpless in fending off the depreciation of their currency much that their money became more and more dependent on how its value would command at the stock and money market, and not that there has been an increase in production, or positively that people have more money to buy.
Realizing that indeed gambling is lucrative, the government decided to put up its own casinos. In every major city, gambling casinos sprouted like overnight mushrooms. Casinos proved to be profitable because the rate of return is astronomical that the revenue from gambling is almost gaining parity with the revenue generated by the remaining government-owned and controlled corporations. Time will come that instead of taxes and duties, the government will be depending more on proceeds from gambling for its annual budget. That then would put truism to the saying of “only in the Philippines!”
Poor man’s credit card
Before those credit cards were peddled by those neatly-dressed salesmen similar to what vendors do to sell their cheap wares on sidewalks, only a few enjoyed that emblematic seal of financial exclusiveness. They were honored by international banks, and their card denotes they have solid cash deposits, or to put it differently, liquid at all times. Thus, American Express, Visa Platinum and Master Card became their identification as indeed belonging to that “super-select” entitled to be billeted in five star hotels, to enjoy a vacation in first class resorts, to spend time on luxurious cruise ships, or to dine in exclusive clubs and restaurants.
With the legalization of usury, credit cards were soon “doled out” that almost everybody has it now. Banks have to repackage the system to suit to the demands of the wage earners without telling them they were walking straight into the gauntlet of a debt trap. By creating a poor man’s version of a credit card, the banks were in effect tapping a reservoir of funds that could reduce to puny the amount they traditionally collected from the so-called “super-select.” The instrument of credit card made easy for the middle class wage earners to buy expensive items and appliances they could not otherwise afford to pay in cash. The easy installment plan was their gambit.
However, what these eager-beavers failed to foresee is that there was no way they could pay the credit they obtained by the purchase of those goods inside those big malls. Many of them were awakened to find out they were already nose-deep in debt. The logic is simple: the cost of goods they purchase kept on increasing every minute because of interest plus the cost of inflation, while real wages kept on decreasing. It would not take a genius to compute the formula why many of them ended up bankrupt. Aside from the interest and charges, the charges themselves bear interest and computed on a compounded basis.
It is not even a question that their wage remained static, but of the fact that the real value of wage was moving much faster towards the opposite direction. It therefore came as no surprise to see why almost 70 percent of those who were gypped into getting those credit cards failed to pay their obligation. Many ended up poorer than before with the less fortunate losing their dwelling, their car, their appliances, encountering marriage problems, and at times ending up in court answering estafa cases filed by the usurer's collecting agency represented by shoddy law firms.
(rodkap@yahoo.com.ph)
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