We all know about the crisis in oil prices. OPEC took the dare of British Chancellor of the Exchequer Gordon Brown about increasing production, knowing fully well that the problem for now, lies in the downstream end of the oil industry... refining and distribution. OPEC would now sell to whoever has the money, disregarding previous production quotas. But prices remain above $60 a barrel because of an already inadequate refining capacity made worse by Katrina and Rita.
Now, economic forecasters and Wall Street analysts are starting to hedge their bets about the US economic outlook. They’re no longer discounting the possibility of a recession. Among the reasons for pessimism are, you guessed it, soaring gasoline prices, high home-heating costs this winter, plunging consumer confidence, rising interest rates and falling new-home sales. And then too, there’s the one-two punch of Katrina and Rita to add to the gloom.
Economic forecasters often cite the US economy’s remarkable resilience, but they now have to face up to the reality of consumers starting to postpone discretionary spending, saving cash to pay their higher heating bills (specially if this winter turns out to be very cold) on top of paying more to fill up their gasoline tanks.
What could happen next is the weird condition experienced in the 70s called stagflation. This economic curse is characterized by rising prices but stagnant wages and frozen hiring, thus squeezing the ordinary wage earners, the bulk of consumers. The expensive wars in Iraq and Afghanistan, the rebuilding of the Gulf Coast and soaring federal fiscal deficits mean heavier borrowings and possible higher inflation also.
As always, consumer behavior – which drives about two-thirds of US economic activity – is the key. Last week, consumer confidence posted its biggest plunge in 15 years, according to a survey by the Conference Board, a New York-based business-research center. Wal-Mart, the country’s biggest retailer, has also been warning of weaker sales ahead as high gasoline and home-heating prices eat their customers’ cash.
Stephen Roach, the chief economist for Morgan Stanley, the giant investment bank in New York, warns that America is a "shoestring economy," kept afloat only by reckless borrowing by consumers and the government alike. He thinks a slowdown in home sales will expose how much economic growth has been fueled by risky borrowing against home equity.
For background, many American homeowners have been refinancing their home loans, betting that the value of their homes will go up enough to offset their growing personal debt. Should the economy slow down and home sales drop sharply, these homeowners and their mortgage lenders face financial ruin.
Unfortunately for us, any financial earthquake in the US creates tidal waves of tsunami proportions for the rest of the world. America is the great economic engine for Asia, Europe and the rest of the world. If American consumers cut back on their purchases, China and India would be in very serious trouble. So would we, given that America is still the primary market for our exports. We should be working out mitigating plans for this eventuality.
Our tragedy is, our national leaders are unable to focus on how to deal with the ill effects of a world economy going wrong. They are for so long, fixated on a power struggle. "Governance has been halted," Tom Green, executive director of Pacific Strategies and Assessments, a consultant to foreign investors in the Philippines told The Washington Post last week. "There are a lot of things that need to be done, but she’s not up to it. Those kind of tough decisions are on hold and probably on hold forever."
Green said Ate Glue has now become so fearful of alienating allies that she is unable to push reforms required to spur investment. And so the storm clouds gather in the horizon. They could dissipate before they reach our shores or gain strength as a super typhoon. Those who can afford to take care of themselves should go ahead and do so. Don‘t wait for Ate Glue to send the evacuation buses. The government is in no position to do anything for anyone, not even for itself.
Under Santiago’s bill, banks that impose or collect "inactivity" or below-minimum balance service fees would be slapped a punitive fine of at least P100,000 for each violation. The members of the bank’s board of directors and officers responsible for the issuance of the order to exact the illegal fees would suffer a five-year prison term.
To support his bill, Santiago cited the Supreme Court decision in the case of Gullas vs. Philippine National Bank (62 Phil. 519), wherein the tribunal, invoking Article 1890 of the Civil Code, declared that "bank deposits, whether fixed, savings or current, are treated as loans because they earn interest."
"As a result of onerous and totally unwarranted miscellaneous charges, we now, therefore, have a preposterous situation wherein the creditor (the depositor) is being penalized repeatedly by the debtor (bank)," Santiago said.
The congressman wants banks to first notify and get the consent of depositors before collecting any new charges or increases.
Yes sir... those service charges are everybody’s pet peeves. Banks claim that they spend money maintaining those dormant accounts. Well, banks should at least notify depositors before imposing those service charges. But the law being proposed by Santiago is even better... no fees at all.
In my opinion there are many factors why Philippine coconut-based products are not as marketable vis-a-vis other countries such as Thailand, Malaysia and Indonesia. Production costs, labor costs are part of the reason, and just as important is the lack of long term sustained marketing efforts by SMEs to market brands.
To a large extent the Philippines has lost the global coconut milk retail market to Thailand, we have lost if not losing the Nata de Coco market to Indonesia and we have lost all the high value consumer coconut products to Malaysia and even Vietnam. For the sake of the coconut industry and all its associated by product industries I can only hope that Virgin Coconut Oil does not go the same path as the Nata de Coco fiasco where we literally ruined our own foreign markets.
What else is new? We got burned with Hot Pan de Sal, we grilled to death the Lechon Manok businesses and all other worthwhile industries which were ruined by sheer greed and our quick buck syndrome.
My friend’s brother just told him that there’s a sperm bank in his neighborhood that pays $40 for a donation.
"Yeah, so?" my friend asked.
"Don’t you realize?" his brother replied. "I’ve let a fortune slip through my fingers!"
Boo Chanco’s e-mail address is bchanco@gmail.com