I only got back on my feet after being ill since the weekend, hence no recent updates. It couldn’t have been a worse week to get sick: so much is happening!
Some stories and related links must suffice.
1. Cash-strapped gov’t to expand lifestyle check to private citizens. And this: Optimism among elites waning. No connection between the two stories, though.
2. The worldwide market jitters (note that concern had already been widely-discussed in the media; the whole thing, if you recall my March 2 and March 15 and then July 31 entries, that unravelled over the past weeks had begun unravelling then): a string of Financial Times stories telegraphs what’s going on: World’s investors scramble for safety; Banks in dark over cost of credit turmoil; Bank shares rebound but Asian markets fall; Crunch set to prolong US housing slump. End result? Leaders Urge Calm Amid Fresh Market Turmoil even as central banks around the world pumped billions into the markets.
The Economist explains it this way: The game is up: Credit markets and the crisis of confidence in global finance:
The doubts burst into the open on August 9th when central banks were forced to inject liquidity into the overnight money markets because banks were charging punitive rates to lend to each other. At first, the problems appeared more serious among European banks. The pain in America was concentrated in the largest hedge funds, including those run by Wall Street’s biggest name, Goldman Sachs. Increasingly, however, analysts worry about the exposure of American, Canadian and Asian banks.
On Wednesday August 15th shares in Countrywide Financial, a large American mortgage lender, fell 13% after an analyst gave warning of possible funding difficulties. Despite liquidity injections by the Federal Reserve on August 15th, the S&P 500 index fell 1.4%. The heavy selling spread to Asian and European stocks on August 16th.
Every crisis begets finger-pointing, and the blame now is falling on the rating agencies that helped structure these exotic instruments. Currently, they are guided by a voluntary code that aims to tackle potential conflicts of interest. The biggest is that the agencies are paid by the firms they rate. Rating CDOs was a profitable business.
If these securities are now downgraded, banks could be forced to offload lots of illiquid instruments into a falling market—one of the fastest ways to lose money yet devised. But if there are no buyers, banks may have to sell something else to shore up their balance sheets.
Something like this indiscriminate selling has been affecting hedge funds over the past couple of weeks. Faced with more demanding standards from their banks and investors, some have been forced to unwind positions in order to realise cash. That has led to unusual movements in debt and equity markets, which have only got some funds deeper into trouble. Quantitative funds have been hardest hit, as investment models that had made money for ages briefly proved worse than useless.
The Financial Times editorial looks at the credit ratings agencies, which are being criticized by the EU for the jitters going on. Worth a read, because of the role these ratings agencies have played on our shores (first, a crutch for the government, then more recently, a cause of discomfort).
For our part of the world, it’s an Asian Market Panic, says Asia Sentinel. Also in the same online news magzine, Philip Bowring points to problems caused by “The US Market’s Pyramid of Lies”.
William Pesek of Bloomberg says the whole thing’s proof that our region’s economies are still linked at the hip to that of the USA; John Mangun points out that the only thing that’s certain is the high level of uncertainty at present.
For what the term “uncertainty means,” see this blog by an economist (who basically said the same thing Bowring’s saying, but called it a “Minsky Credit Cycle” way back in March): Current Market Turmoil: Non-Priceable Knightian “Uncertainty” Rather Than Priceable Market “Risk”:
Today, the FT cites a market economist at Lehman who said: “We are in a minefield. No one knows where the mines are planted and we are just trying to stumble through it”. A few days ago another market participant put it this way: “It is not the corpses at the surface that are scary; it is the unknown corpses below the surface that may pop up unexpectedly”.
Unknown minefield; unexpected corpses: this is “uncertainty” rather than “risk”. Risk can be measured and priced because it depends on know distributions of events to which investors can assign probabilities. Uncertainty cannot be priced by markets because it relates to “fat tail” distributions and extreme events that cannot be easily predicted or measured. A few days ago the CFO of Goldman Sachs justified the massive ” 30% plus” – losses of the two Goldman Sachs hedge funds by arguing that these were unpredictable “25 standard deviation events” that should occur only once in a million years. The same thing was said by the LTCM “masters of the universe” when their highly leveraged hedge fund went belly up in 1998.
Too bad that these fat tail events do occur more often than once in a million years: the real estate bubble and bust and S&L crisis of the late 1980s; the boom and bust of the tech stocks in 2000-2001; the 1987 stock market crash; the 1998 LTCM debacle; the variety of asset bubbles that ended up into busts from Japan (1980s) to East Asia (1997-98).
Indeed, for many reasons the current market panic has to do with unpriceable uncertainty rather than measurable risk.
How the thing got out of hand is further explained by Roubini as follows (it helps explain The Economist’s article linked to above):
today any wealthy individual can take $1 million and go to a prime broker and leverage this amount three times; then the resulting $4 million ($1 equity and $3 debt) can be invested in a fund of funds that will in turn leverage these $4 millions three or four times and invest them in a hedge fund; then the hedge fund will take these funds and leverage them three or four times and buy some very junior tranche of a CDO that is itself levered nine or ten times. At the end of this credit chain, the initial $1 million of equity becomes a $100 million investment out of which $99 million is debt (leverage) and only $1 million is equity. So we got an overall leverage ratio of 100 to 1. Then, even a small 1% fall in the price of the final investment (CDO) wipes out the initial capital and creates a chain of margin calls that unravel this debt house of cards. This unraveling of a Minskian Ponzi credit scheme is exactly what is happening right now in financial markets.
With a pretty discouraging prognosis:
So combine an opaque and unregulated global financial system where moderate levels of leverage by individual investors pile up into leverage ratios of 100 plus; and add to this toxic mix investments in the most uncertain, obscure, misrated, mispriced, complex, esoteric credit derivatives (CDOs of CDOs of CDOs and the entire other alphabet of credit instruments) that no investor can properly price; then you have created a financial monster that eventually leads to uncertainty, panic, market seizure, liquidity crunch, credit crunch, systemic risk and economic hard landing. The last two asset and credit bubbles in the US — the S&L real estate bubble and bust of the late 1980s and the tech stock bubble of the late 1990s — ended up in painful recessions. The latest credit and asset bubble was much bigger: housing, mortgages, credit, private equity and LBOs, credit derivatives, corporate re-leveraging. So, the current bust and de-leveraging of the financial system is likely to lead to another painful economic hard landing.
For the Philippine stock market, Key index’s gain wiped out (easy come, easy go: Net “hot money” inflow hits $3.6B). another cause for concern is that the market jitters affect the currency markets: Peso weakens further to 46.43 to $1 (also: Asian currencies slide continues, BSP steps in).
3. In the USA, the grey eminence of the Bush administration’s quit: see Spinner Emeritus and Dissecting ‘Bush’s Brain’.
On the home front, politically, Ricky Carandang, after taking a look at Manuel Villar, Jr.’s presidential prospects, looks at the prospects for Manuel Roxas II.
4. Earthquakes! Peru! Los Angeles! Indonesia! Ring of Fire active indeed! And here’s a new thing to learn: Moment magnitude: the way to measure really large quakes.
5. Now, on to Mindanao.
First, some readings. From Miriam Coronel Ferrer, Knotty questions on Basilan:
…let’s start with the facts of the case.
On July 10, an eight-vehicle convoy of more than 100 Marine officers and enlisted men purportedly searching for the kidnapped priest was ambushed in Ginanta. Fourteen Marines were killed, and nine injured. Ten of the dead were stripped naked and gruesomely beheaded. Some of the corpses also lost fingers or legs, thighs were sliced, bones fractured, two penises cut off.
We are told the battle began at 10 a.m. and lasted until 5:30 p.m. Around 11 p.m., Al-Barka mayor Karam Jakilan sent some of his men to secure the area. He, Basilan Governor Jum Akbar and the police chief, followed around midnight and retrieved some of the mutilated bodies.
From the accounts, we can surmise that the beheadings took place from around 6 p.m. when the Marines had pulled out of the area, and before midnight when the first official party found the bodies. So who could have been responsible?
The MILF admitted their forces were involved in the battle. Ginanta is known as an MILF-controlled area. Apparently, local MILF forces were threatened by the convoy that stopped by the roadside and the truckloads of Marines that disembarked to secure the troops while one truck was being extricated from the mud. The Marines’ arrival was not coordinated with the ceasefire committee. So, without further ado, the local MILF secured the offensive. In their website (www.luwaran.com), the MILF confirmed five of their own died. They also claimed that 23, not 14 Marines were killed in the encounter and that 17 (the Marines say 18) firearms were seized. But they denied involvement in the mutilation.
From Newsbreak: Poor Planning, Troop Burnout Caused Twin Tragedy in Mindanao:
The AFP has seen better days. In 2003, for example, soldiers captured Abu Sayyaf leaders Mujib Susukan and Galib Andang aka Kumander Robot in Sulu. A resident, Fatmawati Salapuddin, remembers it well: “It was very laudable as the AFP then conducted the operation quietly, they didn’t employ thousands of troops and they didn’t use high-powered artilleries and bombs and no one was displaced.”
In Basilan last year, the military launched successful operations against the Abu Sayyaf, making them flee to the nearby island of Sulu.
Today, the AFP has sent more than 6,000 troops to pursue less then 500 armed elements in Sulu and Basilan.
And now, on to some observations:
1. Late last year I had the chance to talk to Sec. Dureza, head of the peace process. Eventually, we discussed Mindanao and he seemed quite optimistic about the prospects of peace talks. What I found most interesting is that the government takes very seriously indeed, proposals to grant Commonwealth status (with its own Organic Act or a constitution) to Muslim Mindanao. From what I recall, Dureza said there were two major obstacles: first, the Constitution makes no provisions for anything more than its present provisions for regional autonomy; second, there is the desire of Muslim leaders to expand the territory that would comprise Muslim Mindanao beyond the present ARMM. On the other hand, he felt the ancestral domain issue (which would mean compensation for Muslims for territory and resources now settled by Christians) was not far off from being settled amicably.
2. Just a few hours before I finally had to take to my sickbed, I had a very interesting talk with a former official who has an intimate knowledge of both the peace process and the Department of National Defense. Here are some observations made by the official:
a. Conflict in Mindanao is “self-containing,” a curious term which I understand works along these lines: the military undertakes an offensive; the leadership of whatever Muslim group the military is targeting melts away, seeking safe havens in Palawan and Sabah; Muslim families in the affected areas immediately send their families to evacuation centers; the evacuation centers are overwhelmed; the UN begins to speak of a “humanitarian crisis”; foreign media arrives, to cover the humanitarian crisis; foreign and public scrutiny become so intense, military offensives must cease; peace, for the time being, is restored. It is a tired, old, predictable, and tragic, script but one that serves to prevent violence from spiraling out of hand.
b. What happened in Basilan was this. The government has an agreement to respect MILF enclaves, and military operations are told to avoid entering these enclaves, and if they must, it is done with the permission of the MILF. As the Marines were conducting operations to look for Fr. Bossi, it rained and the Marines decided to take a shortcut (it’s unclear to me whether, at this point, permission from the MILF was sought, or not); still, as the Marines proceeded to take their shortcut, it was proceeding without incident until an APC broke down. When it broke down, the Marines instinctively fanned out in formation to secure the APC as it was being repaired. At this point, it seems the MILF got jittery and the firefight broke out. Things got further complicated when, for one reason or another, the AFP was unable to assist the Marines. And yet, even in the case of incidents of violence such as these, there is an SOP followed. The MILF, after the firefight, contacted the Governor and gave a full body count. It’s between the time the fighting ended, and the surviving Marines returned to recover the body of their comrades, that the beheadings took place.
c. The MILF, according to the official, retains formidable formations on the ground. Therefore, they have the capacity to make a mess of things in their areas, which discourages aggressive AFP operations. The official gave an example involving the last time fighting broke out between the MILF and the AFP. The MILF embarked on systematically blowing up and tearing down electric poles over a large swathe of territory: so while the fighting could be sorted out, and peace restored relatively quickly, the damage to infrastructure -and thus, the damage to the local economy- took months to repair.
d. The MILF, the official said, also has something the Abu Sayyaf lacks: it can engage in reprisals if conflict escalates. If an offensive were launched against the MILF, the immediate result would be bombings in Davao, the Visayas or the ferries, and Metro Manila: the MILF has the network and the means. The Abu Sayyaf, on the other hand, has been heavily hit (but not knocked out) and so cannot retaliate. While there may be individual fighters or groups of fighters, who may be MILF, MNLF, or Abu Sayyaf, or all three, depending on the circumstances, in general, there are two issues and it isn’t helpful to blur the two: handling the MILF with kid gloves (the OIC and neighboring countries are also involved, after all) can’t be imperiled by going after the Abu Sayyaf, and vice versa.
e. There is the question of military procurement. An offensive justifies emergency appropriations and sooner or later it has to be asked whether the emergency release of funds benefitted the troops or not. Say a mortar round, fresh from the factory and thus at its prime, costs 30,000 pesos. That will be its listed price. But the same mortar round, close to its expiration date, can be found on the open market for, say, 1,500 pesos (put up for sale by foreign militaries updating their inventory). Therefore, in an emergency situation, a clever arms purchaser for the AFP can source mortar rounds for a fraction of their listed price. The official explained that the military being what it is, you can be sure that every single mortar round purchased during an emergency procurement will be used up, even if the military has nothing left to shell except the forests. A conscientious military command would only purchase fresh mortar rounds and not send about-to-expire rounds to the troops; but that is presuming the command is conscientious; an unscrupulous military command, on the other hand, would be poised to make a fortune from buying cheap ammunition.
f. There is the question of whether the AFP is providing the soldiers on the ground the best leadership. An effective military has systems in place to constantly evaluate the effectivity of commanders, and to demand accountability of officers whether at the front or at HQ. At the very least, as soon as the firing stops, if it’s shown that soldiers died because of a communications or other snafu, someone needs to get the axe. Combat is as Darwinian as a situation can get: only the fittest survive, and only the fittest should remain in command. A lot of finger-pointing is going on, which excuses everyone, in the end, and results in zero accountability. This can lead to false bravado on one hand, or sagging morale on the other.
g. Because of point “a,” and “e” and “f”, there is a limit to the effectiveness of combat operations. Since war is the pursuit of politics by other means, whoever is President sets the overall strategy, with which the armed forces has to comply: its responsibility is direct the tactical side of things. Strategy can be arrived at through a process of wargames, or brainstorming, involving both civilian and military officials. A President who talks more to the generals than to prudent civilian leaders, is much more susceptible to errors in judgment arising from lapses of judgment down the line, among the officers. We often hear of administrations divided between “hawks” and “doves,” with Presidents refereeing the two: often this is how the way out of a rapidly-unraveling situations gets to be identified. If the “hawks” dominate an administration, however, then it’s very easy for any President to succumb to the temptation to give in -even when an escalation of the conflict can have grave consequences.
h. A President beholden to the military is in a weak position to apply the brakes, or determine the political framework under which military operations will take place.
A military high command which is not held in high regard by the soldiers on the ground will be ignorant of the soldiers’ real needs, or lacking in the capacity to give effective orders -not least, because fellow officers at the front and GHQ, or at both, won’t feel the pressure to perform. They can’t even be sacked, which is the ultimate trump card the President or the chief of staff should possess over subordinate officers. If the military high command feels it can act with impunity, because it can bully a President, or ignore their commander-in-chief, if the the commander-in-chief, in turn, lacks the means (usually, people) to get an accurate reading of the pulse of the officers and enlisted men, then you have a rudderless war.
i. If, further, you have an officer corps more interested in making a fortune out of a conflict, and in lining its pockets and not doing its work, and which therefore sees financial and political opportunity in a conflict: it can make money from emergency appropriations; it can increase its strength, politically, by telling the commander-in-chief things are worse than they are, and require more extreme measures than necessary; and which likes the fact the enlisted men, who are in the line of fire and are eager to avenge their fallen comrades; and so, for the duration, will want to pursue the enemy, never mind their outstanding grievances about the causes of woefully bad command-and-control and lousy equipment: then you have a recipe, if not for disaster (things are self-limiting, after all), but for the debasement of the armed forces.
j. Jolo, militarily, is a “black hole.” Nothing is gained by pouring in troops in an area where the martial culture is so ingrained, and the AFP so hated, men, women, and children all engage in taking pot shots at the soldiers. Pouring in troops only turns the entire population against the government. Putting a lid on outbreaks of violence, and engaging in more stealthy tactics (smaller groups of highly-trained soldiers, with lots of cash to pay for information), or getting local leaders to sort things out, is more effective.
Points to ponder. If the official is right, then so long as hostilities against the MILF don’t ensue, things will settle down once CNN starts showing footage of a humanitarian crisis in Mindanao. By then, a lot of lives and treasure will have been wasted, and at the end of the day, those being buried will be the enlisted men, with no senior officers any the worse for wear, and possibly, much richer and more politically powerful than before.
A final thought. See Patricio Diaz‘s latest column. There contending forces and political frameworks in the area. There are the traditional notions of Muslim identity, based on royalty and local allegiances to ruling families; the more secular notion of a Bangsamoro; and the more fundamentalist idea of a larger pan-Islamic cause, to set up a regional fundamentalist state or which aims to restore the Islamic Caliphate; and the warlords and gangsters simply interested in loot. Against them is arrayed the idea of a secular, multi-ethnic, multi-religious Republic.
Technorati Tags: media, military, mindanao, philippines, politics, society, surveys, war
Welcome back, I had thought you had gone on a vacation
But you also missed the ongoing Malu Fernandez controversy…
The funny thing is that those funny papers were given investment grade ratings. because the loans were based on mark to model instead of mark to market so that even if the real estate market was going down their value on paper remained the same.
Welcome back Manolo!
On the Stock Market, we may have finally reached another Wile E. Coyote moment.
Good to hear you are feeling much better. Welcome back Manolo!
This is a funny idea:
A loose coalition of political activists running the gamut of the political spectrum has started a petition to add ‘None of the Above’ as an option on every ballot, so that a voter can reject all candidates if he feels none of them represent a viable option. If ‘None of the Above’ wins the election, a new election with all-new candidates would have to be held.
Devil,
Remind me of those long long ago when we had a protest party, the Rhinoceros Party who had all the funny programs who invited voters who can’t make any mainstream choice to vote for its candidates. The dissolved the Party upon agreement with Electoral body that all protest votes, by crossing the whole ballot with a BIG X should also be tallied and counted. That protest really worked in some very funny way…
I hope you are doing well now,Mlq3!
Advance Happy Quezon Day!
in the US, in credit card applications,credit score is one of the most important factors.
having failing housing sector means that the average joe can’t apply for a card, or the credit card holder would be suddenly classified as a risk based client.
This is so,because in asessing credit score all loans icluding mortgages are included in the assesment.
This is a double edged sword on the credit dependent mainstream america.
Buti pa dito credit cards are used sparingly,we use cash,microlending,5/6 or whatever,and yes because of which,we too are credit dependent.But I think we also have a legislation on a credit agancy as proposed.
Thank God for remmittances of OFWS.
And damn,what happens in wall street,has to happen worldwide. that sneeze and cold thing again.
welcome back, mlq3, hope you’re feeling better. i like the idea of lifestyle check for private individuals. it sounds like a re-invention of the traditional bir “net worth” method of auditing one’s income. some of our accounting experts here may further elucidate on this subject.
having said that, i think the main thrust of the inquiry should be on all retired or separated employees of the government, government agencies (including, especially, the military) and government owned or controlled entities. this should extend to all relatives, possible dummies, and trusted alter egos of these former government personnel and agents.
every income, asset, item of wealth, and luxury activity including, but not limited to, foreign travel or “study”, must be justified and backed by legitimate paper trail. “unexplained wealth” must be presumed ill-gotten, and subject to forfeiture. there must be no statute of limitation on actions against erring individuals in matters of graft and corruption.
a strict enforcement of such a measure would require real political will. no sacred cows, no mercy, no political protection.
Dang. Now I can’t work.
Malu Fernandez. She’s overweight, forgive her. A Tim Yap wannabe.
Malu Fernandez. She’s overweight, forgive her. A Tim Yap wannabe. Get it? “Tim Yap” wannabe!
Wonder from where the culture of impunity comes? Look at how these mestizo rich get away with anything.
just to make it clear, “employees of the government” include both elected and appointed officials, from president, congressmen, senators, judges and justices, to the lowliest janitors, aka, “sanitary engineers”.
“a strict enforcement of such a measure would require real political will. no sacred cows, no mercy, no political protection.”
Forget it. There’s not an iota of intent to have political will. Even worse there are no plans to have intent to have political will.
Not a bit of imagination to have plans to have intent to have political will.
“a strict enforcement of such a measure would require real political will. no sacred cows, no mercy, no political protection.”
Bencard,
Forget it. There’s not an iota of intent to have political will. Even worse there are no plans to have intent to have political will.
Not a bit of imagination to have plans to have intent to have political will.
brian, you seem to be too young to be so cynical. if half the people who pay lip service to clean and honest government will make support for such a measure a condition sine qua non to casting their vote for a candidate, it might yet come to pass. pgma, who is not hindered by a need for re-election, can leave that as a legacy to the people and ensure her place in the history of our nation.
You said political will and I replied accordingly based on my opinion on political will re this country. I never mentioned the voters. Not cynical about the voters, but cynical about politicians who apparently do not fear the voters.
Besides, having limited expectations will probably the correct attitude for thinking Filipinos in the near future. Sprinkle sopme arrogance on top of that and you’ll have a revolution.
low expectation, yes. lukewarm effort, definitely no!
Bencard,
This is not the boy scouts. It’s about the economics of feelings (emotions). People rarely feel compelled to make an effort for what they perceive is a lost cost. You need to enlighten them about the possibilities and give concrete proof. I suppose, none is more concrete than a dead body splayed on hard concrete in a public place. But you get the point.
i think we are not on the same wave length. i’m talking about finding evidence of graft and corruption, not proof of murder. think before you argue. “enlighten them” about what?
In additioning to the sub prime lending.
Lending below the prime rate which is give or take 8 %
Just to get new customers and the old customers suddenly asking why is my interest rate so high and the new ones are way too low. I have been your cutomer for 20 years.
20 years of debt trap they mean.
I don’t know call it stupidity or small mindedness. At the end of the day it is still a business.
That is mainstream America for you.
Now who will suffer,when credit card companies,housing lenders shut down.
Business over politics??the politicians allowed it to happen.
If corrections are available, I am willing to hear it.
Correction to my barokness
I should have said, In addition.
Ang pangit pakinnggan.
The rest, as long as my message is understood…
But I need insights from financial people and economists.
I just openned the topic up.
About Mindanao…
Who is this long time defence minister,now a senator,suddenly doubting the preparation of our troops.
I know he is only part of it,but who allowed the defence budget to be blocked,who is part part of killing softly the modernization of the AFP.(More than once)
I know we don’t need wars,but why deny that we are in one,as we speak.
Sure education will uplift poverty.Does it stop there? Will cheaper medicines,and simple automation of our systems,put an end to these systemic problems?
the laundrylist of the systemic problems runs not only in the military,but the whole system itself.
Mr. ghostwriter benigno (Poor,Teddy man),Inject your unfinished solution framwework here,otherwise that framwework,will remain a framework with out recommendations.
Usually, tax Amnesties are granted only to evaders whose tax evasion don’t involved assets proceeds from Crime, like Corruptions , extortions and the likes. Here’s a Government planning to become a complicit of criminals just to raise Funds. Declare any assets, however acquired, even from kidnaping, from smuggling, land grabbing, stealing of government funds and pays 5% of value in taxes and Gloria is your Ninang.
bencard,
Evidence in graft and corruption.
Trick of illussionists is to let people, overlook the obvious.
As I said,like in Transformers,It’s more than meets the eye.
Smoke does not mean fire,anymore now a days.
As to the red light being presictable,what do you do,to make it unpredictable is to have enforcers there,hiding and coming out from no where,and you haggle your way to prevent tickets just because you are in a rush.
That discussion with I.N.E was not as simplistic as you have said.
Oh you were to talking to BrianB this time,how foolish of me to overlook the obvious!
“When the people of any particular country have such confidence in the fortune, probity, and prudence of a particular banker, as to believe that he is always ready to pay upon demand such of his promissory notes as are likely to be at any time presented to him; those notes come to have the same currency as gold and sliver money, from the confidence that such money can at any time be had for them.†Adam Smith, from An Inquiry into the Nature and Causes of the Wealth of Nations. What is amazing is that he wrote these words almost 250 years ago.
Unfettered finance reshapes the global economy
“In Rome everything is for sale.†– Prince Jugurtha in Sallust’s Bellum Jugurthinum
“Yes to market economy, no to market society.†– Lionel Jospin, French Socialist ex-prime minister
“It is capitalism, not communism, that generates what the communist Leon Trotsky once called “permanent revolutionâ€Â. It is the only economic system of which that is true. Joseph Schumpeter called it “creative destructionâ€Â. Now, after the fall of its adversary, has come another revolutionary period. Capitalism is mutating once again.”
“Much of the institutional scenery of two decades ago – distinct national business elites, stable managerial control over companies and long-term relationships with financial institutions – is disappearing into economic history. We have, instead the triumph of the global over the local, of the speculator over the manager and of the financier over the producer. We are witnessing the transformation of mid-20th century managerial capitalism into global financial capitalism.” Martin Wolf economist of the Financial Times
The dollar is backed up by the full faith and credit of the Republic of the united States. The Federal Reserve is the lender of last resort for most of the world. The bank of all banks. The word credit comes from the Latin word, “credo,” which means I believe. Faith and belief.
In the metaphysical world of financial capitalism the quasi- banking institutions of the world are having an old fashioned “bank run.” This is the component of money creation (credit) that makes up M-3 money supply from M-1 plus M-2. I believe I once asked and shared the details of a congressional hearing in which Alan Greenspan confessed that he was having problems with the current definition of money in the new world of finance capitalism. Last night Bernanke finally put in the Bernanke ‘put.’ He cut the federal fund rate.
It seems in this metaphysical world contagion was “fear” getting contagious and the threat of fear moving into the world of M-2 and M-3 money supply process, could probably cause a more serious liquidity problem to mutate to a drought for the physical economy. That would mean a hard landing, euphemism for depression.
The fear factor was moving up the risk value chain. From sub-prime to the prime markets for mortgages. All jumbo mortgages are now impossible to get. Even for credit worthy households. By the way jumbo mortgages mean those mortgages above the Fannie Mae and Freddie Mac limit which are implicitly guaranteed by the government. (A product of Roosevelts New Deal)That means all asset backed paper is due for a re-pricing. That means the market for highly leveraged debt has disappeared over the last few days. Since the U.S. is highly dependent on foreign savings the risk is spread all over the world. Debt markets are due for a massive shift in perceptions and a repricing of risks for all types of debts in a highly leveraged and integrated financial world is in the offing.
When even Goldman Sachs is affected almost no one is immune in the short run. The exception off course is China whose capital markets are isolated from the world. Their all domestic equity markets are still going like gang busters. Hence when Goldman owned hedge funds issued bonds based on leveraged positions, the paper got a high credit rating. Because of contagion they will have to be repriced. So that means a triple A rating is not bullet proof.
In my line of work I almost have to watch the financial markets 24/7 as this is could be a defining historical event in the new millenium.
No algorithm (software)has yet been invented to mimic the human emotion of fear to be embedded in programs. Hedge funds are normally geared to use these highly sophisticated programs to trade on the equity and bond markets of the world. They are thought to be sure thing formulas by their mathematical whiz creators until they blow up.
Economic theorists together with financial theorists use these type of mathematical models dependent on computers to project future events. Ten to fifteen years ago this was not possible. So now all the high IQ math mavens have been dealt a serious setback. After the Long Term Credit fiasco whose formulas were constructed by two Nobel economic whizz’s blew up everyone thought the bankers would have learned their lessons.
Now guess who rides to the rescue? The devil or monster of all free market theologians. The State. The mavens of Wall Street had to genuflect after Mad Dog Jim Cramer practically begged on their behalf on T.V. to the guardians of the states power to create money, the Federal Reserve. Yesterday to pacify the herd they acted.
Thanks to “stuff happens” Rumsfeld you can group knowledge into three fields of ignorance.
Known Knowns. The flat earther who already know all that there is to know.
Known unknowns. Those who question why?
Unknown unknown. Those who accept that it is impossible to know and understand all there is to become aware off.
The financial markets have moved from known knowns to unknown unknowns. Hopefully they will move back to known unknowns soon.
That is really scary especially when people still do not and can not explain the law of supply and demand. God help us all.
Now,about the semi encompassing,such an oxymorion and
if you say all encompassing it becomes redundant.
About that what ever scope of amnesty to the enemies of the state,in a middle of this mindanao problem.
Very timely and how very first aid it is,at least he cannot be accused of not giving first aid.
Now as to that budget for development of mindanao.
Show me the money,now that the rest of the world is in a panic on what to do with their monsy.
Never mind,tomorrow is just another day,another story,another issue.
Correction: Bernanke cut the discount lending rate of the Federal Reserve by 75 basis points (0.75%) to 5.75%. Lending rate to banks in need of cash and not the Fed Fund rate of 5.25%. (interbank rate)This rate is the rate that banks charge to each other to keep their reserve positions neutral at best.
The Federal Reserve lends money by buying paper held by financial institutions to include asset backed mortgages.
“i think we are not on the same wave length. i’m talking about finding evidence of graft and corruption, not proof of murder. think before you argue. “enlighten them†about what?”
The givens are these: cheating, graft, corruption, intimidation, patronage politics, racism, media manipulation, etc.
The solution: people reacting for their own welfare
Result: half the population are masses, another big slice are the middle class that are, to the latest survey, on the brink of anomie… the emotional economics boils down to progress not through complex Power Point economic outlook sort of a thingmajig. The result is rebellion of the ruled against their rulers. I see a moral rebellion, which can be complex (and you can be sure the Church will only serve to obfuscate). I see a racial rebellion, which can be easily quelled by reason. I see class rebellion, which is probably the most efficacious and will bring the most and the quickest results.
The enlightenment: Someone famous or popular fights for the masses and gets cut down.
I’ll have to think further on this. See, I don’t base my thinking on some antiquated philosophy like Karl Marx’s.
Sorry to be so Wittgensteinian.
nick, cjv, jove, kg, bencard, many many thanks.
“When there is blood on the streets buy, buy, buy.”
Not in the financial markets but in the conflict areas of Mindanao. For conspiratorial theorists. Find out who was, is buying land or the control of land in the conflict infested areas. It is a good long term bet to take. Big Mike and GMA and the rest of the lot most especially those deeply involved in the process in the conflict areas have already internationalized the conflict as a part of the war on terror.
It was the Pinoy who taught the Americans modern anti-insurgency techniques. The HUK’s during the Japanese occupation wrote the template for modern day insurgency against a highly equipped and modern occupier.
Col. Napoleon Valeriano organized our version of the Totenkopf division. The Philippine army organized the Philippine scouts as the main anti-insurgent unit. The Nenita Unit came to be known as the local counterpart death squads. Together with the CIA they wrote the book on anti-insurgency methods. This was later exported to Vietnam and to all Latin America. Col. Valeriano was also used the the CIA to train the anti-Cuba group that participated in the bay pf Pigs invasion.
If the Philippine government would want to destroy the Muslim insurgency or the banditry they could do so. The military has all the knowhow but they need the logistics. You do not need the U.S. forces as in this type of battle it was the Pinoy who taught the white man.
The Indian insurgencies in the Western U.S. was solved by destroying the food supply of the enemy, the buffalo. Genocide was politically correct then.
In Mindanao due to the pressures of the need for more land for both fuel and food at this time in history getting rid of the Muslims or at a minimum a pacification campaign (destroying their will to fight by force of arms) is the only way to go.
The Philippine state is too weak to do anything else. Part of GMA’s program is the resolution of the Muslim insurgencies. The Malaysians and the Chinese desperately need more land for their food and bio-fuel plantations.
Whoever is now and in the near future the owner of those lands will make a fortune in flipping those lands to foreign investors.
Manolo, you’ve got to go easy somehow. You are young and vibrant and thanks for being there but I really do wonder how you do all the things you do.
abe, i’ve been thinking i’m burning the candle at both ends too much, too. but you know the saying-
i owe, i owe,
so off to work i go…
do you think there is any link between the recent calls (Gullas/Celeste/Gonzales) to make ROTC mandatory and the current situation in Mindanao?
I found it disturbing that this time it will was referred to the committee on National Defense instead of the committee for higher education. Thank God Lim is no longer in the Senate
MLQ3,
You are always welcome!
HVRDS,
I was expecting to “hear” from you, thanks again for the valuable inputs.
Sir, you are all around,even the scout ranger guerila warfare vs. the Huks you gave inputs to them,as well.
Karl
Leah,
Even before;
Although, while the traing the ROTC cadets was under the various universities,it was still the department of defence who handled them.The R in ROTC has always been as reserved forces.
Many pundits thought that it will be peacetime for good,and we should leave the war of teror with the allied forces,and we don’t need an “armed forces” at all but guess again. Right prof. Carlos?
I was expecting more from a former head of a defence college.
Sorry Leah,
me nagpropose din kasi na idesolve Military and strenghten the PNP instead.
What do you do with the logistics(the whole nine yards),destroy all of them and sell them for scrap?
Going back to ROTC….
baguhin naman nila ang style nila,mas madami pang nagpepeke ng med certs para mapunta sa shaded area, and fake asthma and skin allergies.
This was called light duties btw.(and it was rampant,then,making corruption rampant as well.)
Kahit ano namang proposal basta maayos implementation is worth looking at.
Speaking of proposals..
even co-bloggers/commenters have one…..(boy,a lot; one is an understatement)
posted on sadbagging the opposition:
https://www.quezon.ph/?p=1468
Devilsadvc8 :
“Proposals and lobbying have been going around,maybe its time for a paradigm shift and let us have a say,as to how….again I could not say and I would not know.â€Â
Karl, this is nice. i’ve suggested this here before, and i understand Benigno has a working site of his that utilizes the same idea.
headline reads: Online Legislation, Anyone?
http://newsinfo.inquirer.net/inquirerheadlines/regions/view_article.php?article_id=82835
Vic, yeah. imagine if all elective positions drew a “vote of No confidence” on all sides. how would that look like for the nincompoops who ran? maybe time for rethinking of their attitudes and actions eh?
But i guess that system is open to massive cheating that will be very hard to detect.
hvrds, as always we learn a lot from your posts.
Manolo, your getting sick was one way for your body to tell you that indeed you’re “burning the candle at both ends too much.” And the only way your body could get you to rest was to switch the sick button on. One way to handle too much work is to set aside a day for vacation. Throw away the cellphones, lock-up the laptop and emails, don’t watch TV, and spend some time enjoying nature and solitude.
When there is bloodon the streets buy,buy,buy(HVRDS)
I thought it was annihilate then build.
So its annihilate then buy..building comes later.
“The Philippine state is too weak to do anything else. Part of GMA’s program is the resolution of the Muslim insurgencies. The Malaysians and the Chinese desperately need more land for their food and bio-fuel plantations.”
Speaking of Chinese and malay post maindanao problems
how I wish, the malays bring with them their palm seedlings so we can have a share of their palm oil thing.
As to the chinese,panahon pa ni mahoma nandito na yan, pati malay btw.
But no one controlled Mindanao,not the spanish,not the americans,maybe there is quite more to it than what i understand by HVRDS post.
Speaking of HVRDS’ post;since you mentioned conspirational theorists let me be one,even for this post.
Are you saying that the program(revolution vs. Muslim insergencies) is to accomodate the land needs of our neighbors?
I know HVRDS seldom answers unless he wants to.
Good night, Dr. Rolando Hiro Vaswani
Oh, I forgot that you manitor the markets 24/7
A University-of-Philippines professor told me a few years ago that a better solution to Mindanao is to accelerate the integration of the territory into the rest of the nation. He said that a good way to do this is to improve law-and-order in the area AND to increase the migration from Luzon/Visayas into Mindanao.
what’s this business of ancestral domains for muslims? Akala ko ba meron tayong separation of church and state ?
ancestral domain:
http://www.usip.org/events/2005/1001_philippine.html
more fully, here:
http://www.usip.org/pubs/specialreports/sr151.html
and from here:
http://www.manilatimes.net/national/2006/sept/04/yehey/top_stories/20060904top4.html
to here:
http://www.news.ops.gov.ph/archives2006/feb10.htm#Joint%20statement
a micro view of the problem:
http://mindanews.com/index.php?option=com_content&task=view&id=733&Itemid=51
and
http://mindanews.com/index.php?option=com_content&task=view&id=742&Itemid=51
HVRDS,
Can you please post some links on the colorful life of Colonel Napoleon Valeriano? His system was one of the most successful Philippine exports, serving as the foundation of psywar in all places that America wanted to shake like Latin America, parts of Africa and Vietnam. Old timers also swear that the exploits of his Nenita Unit form the biggest part of the core training of the US ARMY Special Forces (the Green Berets). Official websites do not make mention of this. And if it were true, formal governments will, of course, skirt any association with him because of his negative reputation.
Mlq, thanks for the links to the U.S. Institute of peace. Our treaties with our indigenous Inuit in the Territory of Nunavut (formerly Yukon, now divided into two, the Yukon and Nunavut, and the third Territory, the North West) was finalized during the tenure of then PM Jean Chretien. Just like in the Philippines where the National Government has to negotiate a treaty for every group of insurgents and indigenous natives, we do the same for every tribe of “First Nations†(native Indians) as to their own reservations, their kind of self governance within the Federal system. And the Constitution Act of l982 (to take effect in l983 for provisions on treaties with aboriginals) enforces the Government to Honour all the negotiated treaties in the Past and in the Future.
The Moros, the Aetas, the Ifugaos and all other aboriginals, should in my humble opinion restored to their ancestral rights through negotiation in a fair and just process within the law of the national government. Left marginalized there would be no end to the conflict and the achievement of a Just Society…