So you're thinking of bashing your head on the wall or the street following the financial meltdown. After all, you've just learned of stock picking and mutual funds last year and the concept of "not putting all your eggs in one basket" with regards to your investments doesn't seem to carry weight anymore. The whole stock market plummeted, resisting all the financial wisdom you've heard. Even gold prices, which have an inverse correlation to the money markets, went down one day, and acted according to the expectations the next. Your future in the call centre suddenly became less certain, as the service industry becomes affected, and many professionals could suffer redundancy. Your plan to acquire a condo is about to be scrapped, after all the biggest clients of the industry, the Fil-Ams, are under stress, who will you sell or rent to? It's a storm in accord with chaos theory, a tsunami on your income, savings and investment.
There is a spectre haunting America, and it is its money. The world watches this movie, and it gets scared.
Bear Stearns, Freddie Mac, Fannie Mae, Lehman Brothers, AIG, Washington Mutual, Morgan Stanley, it's all a blur. You've just suffered schema discrepancy, you question your worldview, you've lost your bearings and you lose faith in capitalism, asking whether it's sustainable.
Each person has a schema, a theory about the nature of reality and immediate situations. When this is disrupted, when the inputs from the surrounding environment which the person constantly checks - though largely unconsciously - is in divergence, a person gets disoriented and becomes very vulnerable, willing to look up to others, to "strong leaders" to steer the way.
Well, instead of banging your head on the wall or the street, it would be better to throw rocks on Wall Street. It's time to steel yourself, but more importantly join other people, historically the way progress and changes were achieved before.
Just in case you haven't understood most of it yet, it's more productive not to suffer a meltdown of your own, but to crystallise and reorient yourself on what happened and what can be done about it.
The $700 Bn bailout plan by the US government may have provided you with some relief (though it still has to be approved in the US Senate as of this writing). Combine that with the $25 Bn spent on Bear Stearns, $100 Bn each for Fannie Mae and Freddie Mac and $85 Bn for AIG, you're thinking the US government really doesn't plan on letting the ship sink. But the more than $1 Trillion spent may just be one giant band-aid to a gaping wound
However, the same policies should make you outraged, for reasons that will be discussed later. But there is also the possibility of hundreds, if not thousands more, banks and financial investment houses that will go under.
The whole house of cards was built on financial leveraging, by greed and exploitation of hopes. But the more poignant moment is to point out to the deregulation policies, from Reaganomics and Thatcherism, to the deregulation continued during the Clinton years (despite Clinton's insistence on some regulation now, he shredded the rest of those regulatory policies), which blurred the line between bank holdings, financial investment houses and insurance companies.
When the tech bubble burst, the Federal bank ('The Fed') implemented low interest rates, making money 'cheap.' But the money was in real estate, so mortgage brokers, whose commissions depended on advising more investments in the property market, kept on feeding that frenzy. Then banks invented new financial instruments and schemes, packaging these loans into new investments and selling them to other banks. These derivatives, whose backing were these mortgages, led to a situation where money was 30 times what it's really worth, leading to an inverted pyramid of financial speculation. The inverted pyramid of greed got bigger and bigger and bigger.
Another part of the story is what is called the subprime market. Predatory lenders lent to people who had simple dreams of owning their own house and leveraging other people's money to build those dreams. The thing was, they had doubtful capacity to pay and had a bad credit history, making them risky. Some deals went something like this: lenders would give them a slack in their payments for the first three years. But after three years, the payments would now soar, to rates that were above market levels (Hey, the lender justifies, the risks I took should be rewarded with higher interest rates - and therefore higher returns for my investment.). When the rates became higher, lots of mortgagees couldn't pay - the subprime crisis - and properties had to be foreclosed. It is estimated that if the crisis continues, 2 million Americans could lose their homes every year. Multiply that with, say, average house prices of $225K, and the US property market could be haemorrhaging $450Bn to $600 Bn a year.
As noted, the bubble has burst and the inverted financial pyramid has collapsed. 11 US banks have gone under this year (compare that to 3 banks in the last 3 years), and you know the deregulation scheme and free-as-a-bird market financial capitalism is dead in the water (to use cliches to soften the impact) - or at least it should. Bank of America, Citigroup, Wachova are some of the names that are likely to be next in line.
Oil may also be in shorter supply than we are led to believe. The governments and intelligence agencies may just be hiding it, or they really don't know it, but Saudi Arabia hasn't discovered oil fields in years, yet claims the same (or more!) productive capacity year after year. This may be due to a complicated scheme where OPEC countries are allowed to produce a certain fraction of their known reserves. For certain, more oil crises are coming, and if present trends from the US military machine continues, more war.
At the moment, economic growth is stalled, jobs are cut, oil and consumer goods prices are rising, the dollar is falling and there's a slump in housing - which is the tail-end of years of 'globalization' policies. Yet despite the robbery and the misery that the captains of the finance industry have wrought on others, they are being offered a lifebuoy by the US government.
Where is the rage?
For years, the financial oligarchs have been enriching themselves in the financial bubble, additionally being rewarded with tax cuts, yet when they caused such a massive failure, it is they who are offered the bailout, not America's financial victims. As of this writing, a $700Bn bailout is being considered in the House for the mortgage-based financial system.
It would seem unacceptable. But the thing is Wall St. and the government are wed to each other. Both parties would convince the public that it is in their interests to bail out the banks. Well, why don't they bail out the taxpayers and the mortgagees first?
And why not? Let's take a very simplified example. If there are 300M workers, and let's say they contribute a very underestimated $2k a month (as measured by wages), that's $7.2 trillion a year for the economy. That's the minimum measure of their productivity. Why, in the face of this crisis, aren't they considered first instead of the richest 1%? Why shouldn't stressed mortgagees be relieved by a moratorium on the overblown rates they're required to pay? Why is policy for the richest one percent instead of for the majority of the population?
Well, it turns out that the majority of the population is less priority than the interests of the richest Americans. The American taxpayer is now being asked to accept the socialisation of financial losses. S/he is being asked to bear the further risks of collaterised mortgage obligations.
While this may have resonance with the Republican right-wing, who in principle suffer from thoughts of big government (even though their pockets and their richest constituents benefit from big government subsidies), they have other intentions. Newt Gingrich, for example, has 18 policy prescriptions that intend to further deregulate the industry, and would lead to further privatisation, offshore drilling, and tax cuts.
But these people are the same. They change shape, one day calling themselves liberal or neoliberal, then conservative, pro-deregulation, then regulation to save the financial system. Whether they want to let the financial train to go full steam ahead or rail them in for other industries, it is the rest of the people who are the crash victims.
The structural weaknesses revealed by this latest crisis should awaken people and lead them to stand up. For years, they've been led to embrace the boom times, to participate in the stock and property investing markets to pacify them and lock their interests with capital's, but they have to be clear-eyed right now. They have to show the rage against the robbery and the looting.
The story now has to be less of the pirates of Wall St. and more of the people taking control. As a first step, financial regulations should be enforced.
And what about people in Asia, in particular, the Philippines? Well, for years, GMA has been the most ardent advocate of these same policies. She's proud of saying that a few times under her regime, the economy has gone up. But what she never mentions, is that economic statistics don't even see the millions who have complained of suffering from hunger, unemployment and underemployment.
Indicators, after all, are incomplete, and rarely take into account social indices. Let's take per capita income, and take a very extreme example of getting two Filipinos, Pinoy Businessman and Juan De la Cruz. Pinoy Businessman earns roughly P1M a year, while Juan De La Cruz is mostly unemployed throughout the year and earns only P50 thousand in 12 months. The per capita income for them is just a bit over half a million pesos, even though one of them can barely provide for his family's needs. Well, guess what, the stats can be stretched to millions of people and would hide the same inequalities.
The US financial crisis would have an impact on the Philippines in terms of trade, jobs, especially the service industry, as well as the stock markets and the peso. However, it may not all be a downside, as Asia will look more attractive for investments. Commodity prices are also going up. This may provide some opportunities for agriculture and the minerals industry, but the government really has to regulate them and make policies more favourable to Filipinos. However, with the subservience of the present regime, this has very limited scope.
With speculative investment coming in, another bubble is getting bigger in the commodities market. This may provide opportunities in the beginning, if you can stomach some of it and set aside ethical investing principles. Some of these investments are in mining (which produces hazards for the environment and to communities), 'clean coal', uranium, Asian energy and communications, and the like. Although some opportunities come in the form of 'green' technology start-ups, but the government should offer more incentives for communities and businesses to go green, and to make carbon emissions more expensive (though assessed for the impact on local economies).
The global financial, food, oil, environmental crises have made it urgent for people to look for alternatives. We can imagine the day, for example, when workers own and self-manage their workplaces, and plan production with consumer groups and community needs with the nation and the environment in mind. Not to mention the dawn when work becomes not just as a means towards self-sufficiency, but an end, a venue to proactively plan, produce and create (ergo, to express creativity), and because people will be in business and working to serve society's needs, it will be the responsibility of the state to compensate them for their work.
What are some of the steps you can take to cushion the financial fall?
If you're a middle-income earner and have started savings and investment plans for your family, better unburden some of your shareholdings and convert them to more secure cash (under PDIC-insured amounts), and other investments that are backed by real value, including gold. The shares you can hold should be analysed for their fundamentals and technical performance, and it is safe to maintain investments in those that have real value, in industries and productive companies, for example, instead of mere financial instruments that may be floating on nothing.
If you're active politically, a politician, or policy-maker, push for more stringent financial regulation (though the Philippines learned to a certain extent from the Asian financial crisis), and push for higher wages that have already been left behind by inflation for years. Support unionisation of workplaces to ensure workers' wages, rights and conditions are being respected.
Join other people to better understand and act on the latest issues. It is hard to do it alone criticising the continuing attacks on your rights and economic interests. Organising and joining other people have been the historically successful ways for people to testify, to share, to educate themselves and others to act to push for progressive change and to rein in some of the worst excesses of the reigning system. With all the information and communication networks we have, in the modern world, the way to move forward is to move towards your fellow person.
Support the movement for national industrialisation, agricultural revolution and an independent policy in the Philippines.
Oust Gloria and similar supporters of the 'globalisation' project, now shown to be a dismal failure. Make sure GMA is incarcerated not only for the economic ravaging, but also for her administration's political crimes.
