Solutions are more complicated than the Problems. Take the Christian doctrine of the fall of Adam and Eve and their expulsion from the Garden of Eden. A “momentary” act of disobedience leads to consequences that then take millennia to be resolved through a “Messiah.”
Unfortunately, there is not a messiah available—regardless of your personal religious beliefs—to straighten out the difficulties that the world faces daily.
It is relatively easy from the golden comfort of my palatial mansion to describe and attempt to explain the global condition. It does not take any rocket science intelligence to see what is happening. It often does take extreme effort to filter out the agenda-driven garbage that passes for “news.”
And then comes the question that I avoid answering at all costs: “What does it mean for the Philippines?”
There are two primary issues for the Philippines and every nation—food security and the purchasing power of the local currency both domestically and internationally. Note that a success or failure with these two is equally a matter of the reality of the facts and public confidence in the government’s ability. The fact is that the Philippines does not have any large river networks. Can we have confidence that the government can manage that fact?
The “Four Horsemen of the Apocalypse”—War, Pestilence, and Famine leading to Death—are merely factors that affect the two primary issues and are not always causes of the “problem.” To achieve the “Root Solution” you need to find the “Root Cause.”
Food security does not mean a national rooftop garden any more than you or I can expect to grow all our own food. Japan imports 60 percent of its food and the Ministry of Agriculture, Forestry and Fisheries has defined Japan’s goal as “enabling all citizens to have access to quality food at reasonable prices now and in the future,” not just through production. It means to have a steady supply of food and the money to buy it.
There are three basic tools used to achieve food security: domestic production, stockpiles, and a balanced amount of imports. The Philippines has never reached those goals and the current administration has continued to erode public confidence with its management of agriculture and therefore food security.
If you want to make a problem worse, let the people you lead, be it family, community, or nation, think that you are not up to accomplishing the task. The longer we wait for the appointment of a DA secretary with agricultural management expertise and whose appointment is not seen as political, the more public confidence will grind down. The Philippine agricultural roadmap and its implementation are like one of those smartphone-driving apps that direct you to drive down the railroad track or into a canal.
The purchasing power of the local currency is dependent on government monetary policy and the strength of the banking system. However, government monetary policy is reactionary to conditions and is always subject to criticism as its success varies widely.
As the Agri core Solution to the core Problem is public/private measures that effectively manage “production, stockpiles, and imports,” currency purchasing power depends on a systemically sound banking system.
The Asian Crisis and Global Debt Crisis came down to one factor: Bad risk management and bad decisions by the banks compounded then by the unholy alliances between bankers and politicians.
So, to answer during the current global banking crisis “What does it mean for the Philippines?”—not much. The 1997 Asian Financial Crisis caused the Philippine economy to post a negative gross domestic product in 1998 of 0.6 percent. Indonesia lost 13.5 percent of its GDP that year, and Malaysia saw its GDP plunge 6.2 percent. Finance One, the largest Thai finance company until then, collapsed.
When asked why Philippine banks avoided the 2008 disaster of Lehman Brothers helping bring down the global banking system with defaulting Mortgage-Backed Securities, the head of a major Philippine bank responded, “We do not invest in things that we do not fully understand”. That is “Root Solution” systemic risk management. The Philippine banking system has it; the others do not.
Philippine banks kept the confidence of the people and the financial community.
The Year from Hell will bring much more excitement. In the meantime, go take care of your own business. We have tremendous rebuilding to do from the Covid lockdowns.
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.