While some are trying to calculate how many political “angels” can fit in 1 square meter at an election rally and others are trying to determine how many Facebook “Likes” it takes to win a presidential election, what is happening in the financial and asset markets defies adequate description.
One anonymous “bespoke consulting firm” has made a remarkable effort. He who calls himself “Chicken Little” turns to Stephen Hawking and his 1988 book A Brief History of Time.
Mr. Little compares what is happening now to Chapter 3. Hawking writes about the concept of a gravitational singularity as “a condition in which gravity is so intense that spacetime itself breaks down catastrophically.” “This means that even if there were events before the Big Bang, one could not use them to determine what would happen afterward, because predictability would break down at the Bang. Correspondingly, if we know only what has happened since the Big Bang, we could not determine what happened beforehand. Time had a beginning at the Big Bang.”
In other words, if we knew what happened before the Big Bang, it would not matter because those events have no effect on what happens after the Big Bang. And all the events after the Big Bang are not part of what happened before the Big Bang. The Big Bang is a spacetime singularity. Nothing before matters; nothing after can be predicted.
Are we going through an Economic Singularity when the beliefs that created the foundation of international economic system breaks down?
The Russian invasion of Ukraine—and the Philippine election—once again highlights the human need for feeling morally superior in standing on the side of “good” versus “evil.”
Which action is “good” and which is “evil?” A train is racing down the track to a fork in the rails. Unknowing of the danger, stopped on one track is a prison bus carrying five convicted criminals. On the other track is a stranded train worker. You must turn the switch to send the train to one track or the other. Decide who lives and who dies.
The point is that regardless of right or wrong and what should or should not be done for the Ukraine situation, there may be a high chance that we are witnessing an economic singularity event. Nothing matters before and we have no idea what comes after you decide to pull the lever on the railroad track.
India is one of the largest buyers of Russian arms with 60 percent of its military hardware inventory from Russia. The US is deciding whether to sanction India because of this. “December 8, 2021: the down payment for the Philippine Air Force Russian-sourced heavy-lift helicopter acquisition program will be released soon.” “January 15, 2022: Philippines to acquire missile system from India for $375 million.”
Could the Philippines ever be on the sanction list? And what would the US require from the Philippines in the future? Maybe a military base or two?
“March 8, 2022: McDonald’s Corp. said it would ‘temporarily’ close all 847 of its restaurants (84 percent company owned) in Russia. The company has 62,000 Russian employees.” KFC, Pizza Hut, Burger King, Subway, Papa John’s, Starbucks and Domino’s Pizza operations are owned by local Russian franchisees. How will this impact future foreign direct investment both for the investors and the receiving countries?
The US and its allies are cutting off the Russian central bank’s access to most of its $630 billion of foreign reserves. If you cannot access it, do you really own it? Italy is confiscating hard assets of Putin-friendly Russian oligarchs. What sane foreign asset owner including major corporations of every country wouldn’t at least consider liquidating assets now and onshoring what wealth they can preserve?
“We are seeing a polarization of the global economy into at least two camps—the West in one and Russia/China/Iran/Saudi Arabia (accounting for 30 percent of total global economy) plus aligned countries in the other.” Even if the war ends tomorrow, outrageous damage to the global economic system has already been done.
Economic self-sufficiency for the Philippines is impossible no matter what the politicians say. But we need to start banding together with other Asean members. Otherwise, realistically, the elephants will crush the mice.
E-mail me at firstname.lastname@example.org. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.