A special advantage of being old is having a historical perspective. You read about the Moon Landing; I watched it in real time. You saw the Apple IIe in the “Museum of Antique Computers”; I bought one in 1983 for the 2022 equivalent of $4,000.
That is not to imply in any way that I am smarter because of my decades of experience. But it does mean that I know things first hand and because of that, my perspective is different.
However, if you want to understand how to handle “life,” I suggest disaster movies. I am not talking about “Titanic” or anything with Dwayne Johnson (sorry Rock). I am talking of films with plenty of what some like to call “toxic masculinity” even when the protagonist is a female, as in the Netflix-distributed Norwegian film “Troll.” These stories have two parts. The first is figuring out what is going on, and second how to survive it. “Deep Impact” and “2012” are good examples.
Both of those films, and others, begin with The Government not telling the truth, the whole truth, and nothing but the truth and “Trust us; we will fix it.”
It is becoming obvious that the Covid pandemic and solutions were not exactly what the governments said they were, much like in the film “Don’t Look Up.” But I fear the Covid disaster movie is going to turn out to be much like “Sharknado” to what is coming next.
When trying to figure out what is happening about economics, you must always, always, consider the source. “Goldbugs,” “cryptonauts,” and “bankers” all have personal financial agendas. Egon von Greyerz, founder of Matterhorn Asset Management, has a perfect track record of wealth preservation, keeping clients’ money primarily in physical gold and silver held in its own vaults.
Von Greyerz says that the US dollar will go to zero and/or the US will default on its trillions of dollars of debt. “Printing more money to pay for previous sins has never worked and never will. And this is how money dies.” Buy and hold physical gold.
Brian McGlinchey is a financial journalist who does not offer personal solutions but is the disaster-movie scientist that no one listens to. “In October, the US national debt reached $31 trillion. In FY 2022, the federal government spent $6.27 trillion resulting in a $1.38 trillion budget deficit.” McGlinchey says the “solution” is to reduce government spending like the $11.3 million to tell the Vietnamese people to stop burning trash. Godzilla (monster fight record since 1954 is 45-4-6) and government spending always wins.
Nouriel Roubini, “Dr. Doom,” writes last week, “These developments are coinciding with the return of stagflation (high inflation with weak growth). Today, we are facing the worst aspects of the 1970s (stagflationary shocks) alongside the worst (high debt) aspects of the global financial crisis. Equities will fall by about 30 percent in a mild recession, and by 40 percent or more in the severe stagflationary debt crisis that I have predicted for the global economy.”
How is the Philippines going to avoid the potential of an economic ELE—“extinction-level event?”
Read through the genuine experts’ comments and you find the doomsday factors. Elevated and increasing public and private debt to gross domestic product (GDP) ratio, low debt-fueled growth or no growth, and an increasing government budget deficit.
Private debt to GDP, 49 percent in the Philippines, is better only in Indonesia (29 percent) with Thailand at 165 percent, Singapore at 160 percent, Malaysia at 116 percent and even Vietnam at 130 percent. The Philippine government debt-to GDP is higher than usual but more than manageable at 64 percent.
The economy continues to grow and most importantly, Philippine economic growth is not debt-fueled. Loans for production activities went up by 12 percent in August from last year and accounted for 87 percent of total loan disbursements. The “rich” continue to increase use of their credit cards but the Non-Performing Loan ratio of Philippine banks dropped for a fifth straight month to hit a two-year low of 3.57 percent.
The one ominous negative is the budget deficit from high pandemic spending. The deficit-to-GDP ratio as of end-June 2022 narrowed to 6.53 percent from 7.83 percent last year and is projected at 6 percent of GDP next year (DBS Bank). But if we are to stay out of fiscal problems, keeping the budget deficit in check is vital. Grab the popcorn.
E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.