Thursday, October 16, 2008

Dark Clouds Looming Yonder

I couldn’t help thinking about the effects of the recent financial crises that hits the US and Europe. If giants like AIG and Fortis are reeling and needs its governments’ shoulder to steady its wobbling posture. How will banks in the Philippines take such economic punch if its own government can’t even make ends meet in balancing its own budget?

Like most OFWs, I send my earnings back home, in a bank inside a “time capsule”. I couldn’t touch nor withdraw it until a certain period expires. My anxiety only increases because our PDIC guarantees only a fix amount for each depositor, unlike in Europe, where governments agreed to guarantee entire savings to boost confidence and prevent withdrawals by depositors. So if you have several accounts in your name, you might as well seek intervention from all the saints you know that this catastrophe won’t hit your bank directly.

I’m neither an economist nor a financial analyst. All I can do is put together an intelligent assumption based on “street level” observation. US economy thrives on credit. Americans buy almost everything on credit, from the roof over their heads, to their cars, utilities, entertainment and even their daily sustenance. If you pay cash, either you’re rich or you got something to hide from the Feds. Outstanding accounts are settled every month and salaries shrunk from soaking in bills. For an average Joe, his lucky if he could save 10% of his monthly wage after these deductions.

I first took notice and sense something’s wrong when they started foreclosing houses in the US. Most homeowners blamed financial institutions for their predicament. I don’t know why when all this creditors did was lent money to buy houses, cars and other necessities needed to live a decent life. Of course there’s the issue of exaggerated interest, but “lendees” are supposed to know the rules. It may take ten or twenty years to totally pay Joe’s loans, but as long as his up-to-date on his payment, some extra cash saved on the side, everything’s fine.

Perhaps problem began when Joe started living the “American dream”. He bought a 4 bedroom house with a nice lawn, complete with swimming pool, instead of a respectable 3 bedroom for his wife and two kids. He bought an SUV for himself after he mailed the final payment for the family’s station wagon. Inadvertently, Joe stretched his credit to its limit. When cost of commodities took off worldwide and economic slowdown hit the US, Joe’s income diminished, resulting to foreclosure of his possessions.

Supposing1% of the population has Joe’s dilemma, I think that’s more than enough to bring down even the most secured bank in the US. What will banks do with all these properties? They’re banks; it needs money, not houses and cars, to continue their business. Like dominoes, every institution one way or another connected to Joe, tumbled down. And like the “butterfly effect”, the fluttering of Joe’s artificial delusion was felt halfway across the globe. A dream prodded by celebrity endorsed advertisement sponsored by corporate America.

I’m afraid this is just the beginning. I see a storm coming from the horizon. Pray it doesn’t make landfall.

14 comments:

  1. So far, it seems it doesn't affect us that much here in the country. Anyway, we are already living in dire straits naman so nothing different there.

    Well as the saying goes, "When America sneezes, the world catches a cold," surely the recent collapse of wall street will have an effect globally. Sana nga, we will be spared.

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  2. During the financial crisis in 1998 (if im not mistaken)we survive the Asian meltdown,countries where the IMF ranked top of the list for best performing economies or most competitive suffers the worst and in this coming crisis it seems like the same countries will suffer the same fate.The IMF should review their criteria or dissolve the institution all at once and come up with fund manager that can manage the next generations world economy.They failed and thats the truth.

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  3. It's a rollercoaster ride for everyone. We have to be reasonably practical and keep the faith. =)

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  4. you're right. many Americans lived beyond their means. they bought lavish residences, which due to high demand, were outrageously overpriced. when their incomes dipped, their houses were foreclosed. the banks were left holding the empty bags,unable to resell.

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  5. Ka Rolly, sana nga. Ang nakababahala e, our government is already priming up the citizenry to expect the worst.

    ed v., Philippines was spared because we aren't heavy in exporting at that time, unlike Korea and Japan. Besides it was the OFWs remittance that saved our economy. Ang nakakatakot, this time the crisis is worldwide and our remitances will also be affected.

    Ms.Jo, hang in there and hope it will be over soon.

    R-yo, come to think of it. Is this the beginning of the end of the America Empire?

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  6. naalala ko nung time na patapos na kontrata ko dito sa kuwait...isa sa mga dahilan din ng pagbabalik ko dito ay yung ekonomiya,di lang satin kundi pati narin sa ibang bansa...baka kasi mahirapan ako at ang pamilya ko kung hindi ulit ako mag-abroad...sana makatulong tayo kung ano man ang magiging sitwasyon.aminin man natin at hindi,naka-base ang ekonomiya natin globally.

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  7. ever, ako naman, dahil sa age bracket ko, mahirap makakuha ng trabaho sa atin na makapagbigay kahit kalahati ng kinikita ko ngayon. Kaya siguro, kung hindi ako matatangal dahil sa krisis na ito, baka hanggang pag-retire an dito ako.

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  8. Actually the IMF whose job is supposed to look into the economic health of nations around the world in partners with other big companies who ranks the competitiveness (moody's, JP morgan etc.)of each nation competitiveness,did not act early and ring the bell when richer nations like America( with whom they rank strangely as most competitive) seems to be overborrowing in proportion to their GDP and mismanaging their economy due to greed and dream of world dominance.As a result when their economy crashes they pulled down the economy of smaller nations who are too dependent in their economy for survival. Luckily we have as you say the OFWs that saved us and will save us if ever another meltdown occurs, But at anyrate this crisis will be a big setback to our quest for economic prosperity and still many of our people will suffer.

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  9. ed v., I'm always in an opinion that these international organizations (UN, IMF, WB , WTO etc) wasn't put up to serve member nations as a whole but as a usefull tool to be manipulated by rich nation to their advantage, specifically the G7.

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  11. I think the only things left for us to do are to work hard to stay in our jobs and to continue saving as much money as we could. Choices are quite limited during these difficult times, sad to say.

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  12. editor, that's a nice invitation. Will think about it.

    panaderos, hope your not affected directly by this crisis, pards.

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  13. Very good opinion! I couldn't add some more.

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  14. RJ, thank you and thanks for dropping by.

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