The riveting drama gripping Filipino urban-based businessmen and yuppies now is not the forthcoming Ateneo-La Salle legendary basketball championship games. It is the game of markets, specifically the US stock market and companies who got burned (and are still burning) in the US subprime bond market.
Bear Stearns, Freddie Mac and Fannie Mae, Lehman Brothers, Merrill Lynch, AIG–a who’s who of giants in the bond market (and also in the stock market) toppled or are toppling like dominoes. Others are teetering on the edge. Some may be bailed out by huge Federal funds, some may merge into the banks, but some will fold up.
Hard times are ahead for the Americans and their economy. The US economy is almost sure now to go into recession. Some analysts are even saying a depression is already a possibility, in the horror tradition of the 1929 Great Depression. The world stock market has taken note, and global stock markets started their sympathy dives.
How fare the Philippine economy and businesses? The US remains the country’s biggest trading partner, largest source of overseas Filipino remittance, and largest concentration of overseas Filipinos. Most of our foreign currency is in US dollars. Though Philippine economic relations have diversified in a globalized economy, the biggest share is still with the US economy. When the latter sneezes, we will still get the colds. Due to globalization, other economies (or Philippine trading partners or job markets) will feel the US recession. We will doubly feel their pain and still get the colds.
Assurances from the President, the Central Bank, the banks, and the affected businesses here are not much different from Bunraku, the ancient Japanese shadow theater–the puppeteer is in full view of the public but the puppets are what the audience see, thanks to the skills of the former.
Credibility however is paramount. GMA’s assurances are worrying because the more she insists on the economy’s strength or capability to withstand the US recessionary pressures, the more people will believe the opposite. More often than not, the people are correct.
The only prudent thing for our people to do is to hope for the best but prepare, prepare, and prepare for the worst. Prepare to deal with local stock market losses, bank fold-ups, disappearing insurance plans, dissipating foreign and local investments, company bankruptcies, job insecurity, decreased remittances, decreased jobs, and labor repatriation. Prepare to deal with poverty on top of poverty.
The nearest thing to recall is the 1997 Asian crisis. That was a hiccup. The situation now is threatening to be a flu, even possibly a pneumonia.