My Blog

Erle Frayne Argonza

Magandang hapon! Good afternoon!

2009 will be another bleak year economically, more so for the North (USA, EU, Japan are topmost). The recession that began with the subprime mortgage bubble burst in America in 07, will ensue with even mightier turbulence, as there are no coherent policy solutions of a strategic nature that can salve the economic ailment on a global scale.

As already articulated by this economist/analyst in various articles, the policy environment must be changed and regulatory mechanisms strengthened to immediately gain business confidence and reverse the tide of catastrophe.

On the domestic front, the solution begins by following a New Deal type of policy set, which will bring back the fervor of production-driven growth and full employment. On the international/global front, a new financial architecture must be agreed upon via a global summit called for the purpose, akin to a New Bretton Woods.

The only intervention mechanisms we observe today are bailouts of failing financial and business institutions, which are toxically immoral as those criminal oligarchs are even rewarded for their sordid looting and corrupt practices. Only Russia and China have openly resorted to a New Deal type solution, in consonance with the practices of the late regime of Franklin Delano Roosevelt of the USA. As far as the international-global front is concerned, the concurrence of a new treaty that will resonate a new financial architecture is nowhere in sight.

In the absence of genuine solutions that can stabilize ailing economies on both the domestic and international fronts, the downward spirals will continue, until the economies of the North will hit rock bottom depression that will be worse than the one that crashed the USA, UK and Germany almost a century ago (USA, UK, Germany were then the world’s top industrial & military powers). In the absence of capital control policies up North, capital flight will ensue at dizzying speed, draining their respective countries of trillions of dollars and/or euros at levels far higher than the 2008 drain. The smart money that will sneak out will find better shelters in the South (emerging markets notably East Asia + India).

The possibility of North-based companies transferring their headquarters to the South is not entirely ruled out. The other option is for the corporate owners to transfer domicile from the North to the South, leaving their ailing mother companies in the hands of trusted stewards. The era of distance remote control-type management by corporate owners could very well begin this year, which will modify corporate governance by no small means.

The positive light for the global economy is that finally the corporate and state leaders will see light at the end of the tunnel and call for a global conference to carve out a new financial architecture. Laissez faire, a cadaver doctrine before the 2^nd world war that was revived by the monetarists and greedy financiers, will finally lay to rest as it gives way to dirigist or interventionist economics. Stronger regulatory mechanisms may be charted this year too, at least on paper.

New Deal, Keynesian, and welfare state doctrines will be blended together to produce an eclectic admixture. Since New Deal has an international facet into it thus rendering it more comprehensive, as the late FDR cogitated the need for international cooperation and development for all countries to end all wars and foment lasting peace, this doctrine will more or less be followed. We will not be surprised if, after the Davos conference, the shape of the future will already be definitively of the New Deal type.

Conclusively, even if the Northern economies will flatten down to zero and/or negative growths, the downward spiral may stop by the last quarter of the year. The full effects of the intervention solutions won’t be felt this year though, as it will take some more years to get them to galvanize. So let us brace for more turbulent winds, while hoping that the storm would finally stop so we can enjoy a delightful holiday season comes December.

[26 January 2009, Quezon City, MetroManila]

Bro. Erle Frayne Argonza

From my highland nest in Manila goes Big Kudos to Barack Obama & US Democrats!

My first elation has to do with the fact that Obama represents my generation of ‘post-industrial babies’, comprising of those aged 55 and younger. Obama represents a broader worldwide trend of leaders who are veering away from intolerant/polarized values towards one of ‘tolerance for difference’. My  generation is the first among the emerging ‘global citizens’, and I could hardly wait to see various sectors worldwide taken over by the most competent and enlightened ones among us, as exemplified by Obama’s take  of the US presidency.

Another source of elation is the fact that Obama is a Black man, the first one ever elected as president in America. His victory sends a clear signal to many countries across the globe—dominated by Whites as majority populace—that the time for change has come. Just across the border, in Mexico, the citizens are still accustomed to choosing a White Man as president: White, and Male. Quite a bit further, down south in Argentina, it’s still White country there, and I wish the minority Colored people or Colorados will get to be Chief Executive, whether they are male or female.

Finally, a source of euphoria over Obama’s victory is his being funded largely by the people’s purses. True, there were fund donations from the wealthy families, but to say that their pockets constituted the cutting edge funding would be to disregard those aggregates of monies that in-flowed to Obama’s campaign coffers from out of ‘couples of dollar bills’ donations from the workers & middle classes. I would dare say that the people’s purses comprised the cutting edge in funding, for the 1^st TIME, which has many governance implications for Obama’s Team.

There are certain sociopathic elements in America, represented by the perennial Democrat candidate Lyndon LaRouche, who have been peddling the allegation that George Soros, through his subaltern Felix Rohatyn, were behind the bulk of funds for Obama. In some other articles published early this year, LaRouche kept on peddling the noxious allegation that Mafia groups were behind Obama’s making as a politician, and that, ipso facto, his funding would come largely from the same criminal rings.

Were it not for LaRouche’s sociopathic and fascistic tendencies, I should really find many of the facts and thoughts that he generated as worth our reflections. Let us challenge the likes of LaRouche to come out with evidences, and file criminal charges in proper channels such as the US Senate, and they better desist from further slanderous and libelous accusations against a political team that is outside of their poll choices.

The people’s purse option, let me repeat, has deep governance implications. It is indicative, first of all, of the immense constituency participation during the polls, which clearly created for them (people) a status as co-partner of the Obama Team. Second, the people’s purse option gave the clear mandate to the Obama Team, comprising largely of noblesse technocrats, that it can exercise a ‘relative autonomy’ from diverse interest groups particularly the financier-technocratic-military elites.

I would prefer to see the Obama victory as a ‘14^th Brumaire of the US Technocracy’, which is a very laudable feat, precisely as a result of that people purse option. 14^th Brumaire refers to that moment in history when Louis Bonaparte declared a coup d’etat in France, a grand act of defiance against the oligarchy that enabled him to exercise ‘relative autonomy’ from the latter. The governance implication of such an act is that the Strong Man was able craft and enforced policy initiatives, unhampered by the pestering demands of ensconced elites.

Obama won his coup equivalent by way of the electoral path, with aid from a vibrant electoral constituency and allied politicians who also buttressed his victory with additional seats in both houses of the US Congress. With solid grounds of support from both the people and the legislative allies, Obama has been practically offered the policy initiative on a golden platter by the electoral heaven of social contract. And the good image exuded by this Team was that of a change-directing Technocracy rather than that of a rambunctious Pedagogue of dangerously perverse hoi polloi.     

With such a grand opportunity of mandate, the Obama Team is enabled to re-engineer the policy environment of America on its initiatives. Lobby groups and ‘whispering mafias’ representing the elites do not have a business making demands on this Team, and must be kept at bay, in practice more than in words as promised by Obama.

The Obama Team should also use this ‘14^th Brumaire’ mandate to begin a long process of healing. The healing work is quite complex, as it entails tasks both on the domestic and international fronts. This healing can begin by the shift in tact from that of the previous hawkishness of the neo-conservatives to the dovish aura of Wilson-Roosevelt-Kennedy greats.

For my own country, Obama should not forget the 1 Million+ Filipinos who died during America’s invasion of the nascent republic, many of whom died as ‘collateral damage’ of a genocidal campaign. White House and Congress should better release their respective statements of apology to my nation, dubbed as populated by “brown monkeys with no tails” by the White combatants (T. Agoncillo, History of the Filipino People). Coupled with this is the return of the Balangiga Bells that were  looted by the US Army after leveling the town of Balangiga in Samar province, with all town folks butchered and all visible structures burned to the ground (ibid).

Obama must also remember the 1 Million+ Filipinos who died during World War II, or who died defending the interest of America in the Far East. Many of the living veterans of that war are waiting for their additional just subsidies, their bones now almost disabled from mobility. World War II was never our war, but was one among the world powers’, and look at what the cruelties and genocidal butchers our people got from defending America here.

Authentic healing will take several decades to undertake. But there is no harm involved by beginning the process now. The Native Americans and Colorados of the USA are expectant, and so are those peoples who suffered from America’s imperialistic adventurisms overseas. Begin the healing now, and put a final end to the USA as Empire.

The Obama electoral coup is total, his technocratic Team’s autonomy ensured. He cannot fail to deliver results as expected, and he must translate that ‘relative autonomy’ into more solid healing and prosperity feats. His massive constituencies must help the Team in this colossal task, to ensure galvanization par excellence, rather than just wait passively for results.

Cheers! Kudos to the Obama Team! Mabuhay!

[Writ 06 November 2008, Quezon City, MetroManila]

Erle Frayne Argonza

Good morning from Manila!

The candidacy of Barak Obama had generated a lot of surprises and raised hopes about reversing the trends of economic decay and neo-conservative (fascist) aggression by the USA, henceforth catapulting the USA back to its role as a world leader and friend of the world’s nations. Not only in the USA but also overseas, did Obama capture wide audiences and sympathies, and his image is still moving up the ladder of meteoric ascent as of the moment.

Indubitably, the standard banner candidate of the Democrat Party for the 2008 Presidential Election, Barak Obama, is the Man of the Hour. Intelligent, charismatic, competent, and young, he exudes the aura of a Man of Destiny, and is the man to watch across the globe this decade till next.

Already, a personality cult has been spontaneously rising and interwoven with his personal character, all over the world. Putting this cult aside, I am declaring my sympathy for this candidate, and honestly say that he is an ally to many causes that I advocate. To repeat: Obama is an ally, and a leading ally, not an object of my cult worship. Let those superstitious cult worshippers hold Obama in the highest esteem as their messiah, I have no qualms about their superstition provided that they do not hurt other people whose reverence for Obama isn’t identical to theirs’.

I shall no more dwell on the means for catapulting him to meteoric ascent, as this is better done in some mass communications and political science classes or opinion pages. I would prefer to dwell on Obama’s savvy for public policy, he being a legislator for some considerable numbers of terms now. This to me is the most important feature of his competencies, as public policy will be the cutting edge of his presidency if ever. That includes both domestic policies (economics, welfare & social sectors, growth for the states) and foreign policy.

To sum up my preliminary observations about the man, Obama has what it takes to re-chart the USA towards a new life, as far as public policy is concerned. He knows what policies destroyed America’s economic base, what policy architectures and politico-military actions destroyed America overseas, and he knows what policy options to install in order to reverse the trends. And he has the constituencies to embark on bold policy initiatives, rest assured, even if those policies are unpopular to the elites of his country.

Based on his grasp of public policy, Obama can in fact boldly undertake a revolution in America and across the globe. Obamanomics can be crafted to replace the Reaganomics of the last quarter of a century that resulted to catastrophes in both the USA and across the continents. The thematic directions could very well integrate the state interventionist frames crafted by George Washington, Alexander Hamilton, Abraham Lincoln, Friedrich von List, and Franklin Delano Roosevelt, all aimed at promoting the general welfare, effecting prosperity and equity, and galvanizing national unity under the aegis of the US Constitution.  

‘Obama Doctrine’ can be introduced in foreign policy, that can reverse the equally catastrophic neo-conservative (fascistic) unilateralism, global police aggressor deodorant, and anti-terror campaigns that destroyed nations and yet paradoxically led to the broadening and strengthening of terrorist forces worldwide. ‘Obama Doctrine’ may need to recast both the (a) Wilsonian civil rights advocacy and (b) Roosevelt’s New Deal advocacy of engaging America in the development of backward nations, (c) integrate both doctrines, and then use the new doctrine to foster lasting peace, international cooperation and prosperity in the entire planet.

The man has the sophistication to craft the core principles and concepts of his Revolution, I have no doubt about this. No matter how brilliant his core staff may be, he’s got the competence that enables him to exercise ‘relative autonomy’ from his technical team who can, in the end, add the flesh and tissues into the Obama core concepts. At the same time, Obama has the savvy to listen to his brilliant team people and the mass leaders that supported his candidacy, as listening is among his strengths that must have been tempered by his youth upbringing and grassroots work early in his life.

The last ingredient to his success, which should never be underestimated, is his coffers tactics. His candidacy having been funded largely by people’s donations rather than the elite’s purses, Obama is enabled to exercise a ‘relative autonomy’ from the patrimonial interests of America. This fact allows for a ‘14^th Brumaire’ of American leadership, a direly needed element to strengthen the institution of both the presidency and the US Constitution. The ‘relative autonomy’, reinforced by a massive constituency, enables the presidency to use sticks against erring elites and emancipate state institutions from the enslaving claws of the Military Industrial Elites.  

Obama brings hope not only to his fellow Americans but also to peoples across the globe who are so sick and tired of imperialistic wars, deaths, and the catastrophic effects of Reaganomics liberalization-privatization-deregulation oligarchic policies. Being an Asian observer, I’d urge my fellow Asians to give the trust to this great leader in the making, give him at least four (4) years to exhibit his performance level, and pray that peace and prosperity can be had globally under Obama’s reign over his federation.

Let’s give peace and prosperity a chance, and here is a man who can demonstrate that building our cherished dreams of peace and end to poverty are viable ones.

[Writ 22 October 2008, Quezon City, MetroManila]

Erle Frayne Argonza

Good afternoon, Fellows of Planet Earth!

The planet’s bourses are still plunging as of yesterday (Friday), a day that was dabbed as ‘black Friday’ in Japan which saw the Nikkei plunge by 10%. ‘Bloody Friday’ may be a better term, as the word ‘black’ in ‘black Friday’ could be construed as a racial slur.

This gentleman is among the economists/social scientists in Manila who forecast, way back in the late 1980s yet, that the Western economies led by the USA will experience another horrific depression this decade. We were then following the trends of a yawning gap between the ‘financial economy’ or ‘virtual economy’ and the ‘real economy’ based on the GDP statistics. The American economist Lyndon LaRouche devised a very potent graph of the event which he termed as ‘collapse function’.

As of late 2007, debts in the USA already exceeded the GDP by four (4) times. That means that, in the event of a bubble burst (which came from the realty markets), the economy will come crashing down. It is simply impossible for a $13 Trillion GDP to pay up for debts approximating $50 Trillion last year. In the secondary debt markets, financial derivatives exposures breached the $120 Billion mark in the USA last year, and that all the more exacerbates the weakness and fragility of a $13Trillion economy that simply doesn’t have the money to pay up for ballooning private and public debts.

My own forecast is that the stock market plunge across the globe, which is now in the vogue of a ‘freefall’, will continue till next year yet. At its best, the Dow Jones index reached past 13,000 points about less than a couple of years ago. The same index had already shrunk below 10,000 points at its worst. By next year, the Dow will further shrink by as low as 8,000-8,500 points, the range that actually represents the real value of the entire US economy.

1 Point in the US bourse is equivalent to $1.5 Billion more or less, at its best. A shrunken size would deflate the value to around $1 Billion. At 13,300 points, the Dow index represents a value worth $20 Trillion, which seemingly exceeds the GDP of the entire federation. But that amount is largely speculation, the speculative value exceeding beyond 50% of the real value of the commodity lines traded.

8,500 points in the Dow index would yield, at deflated value, around $8.5 Trilion dollars. That same estimate is the real value of the US economy in GDP terms, per year, as of today. The value of $13 Trillion includes the value of speculation and fiction, on account of the predominance of the ‘virtual economy’.

As I’ve already explained in a previous article, the Bush-Paulson bailout, allocated an amount of $700 Trillion, is a faulty measure to salve the financial ailments of the USA. It follows from the flawed Japanese ‘crisis management’ bailout of huge banks that went in the red last decade, a tragic measure that flattened Japan’s growth to almost zero for around ten years at least. It is a band aid solution to a gargantuan problem that is equivalent to cancer, and everybody knows that band aid doesn’t cure cancer.

That explains the jittery situation of the post-bailout law scenario. Financial traders and investors who still recall well the Japanese fiasco just couldn’t be appeased by a repeat of the same band aid solution, this time to an economy almost three times bigger than Japan’s (in real value). For as long as no strategic solution to the global financial crash is in site, the stock markets will be jittery till next year, and before long we would see both the USA and Europe plunge back to the depression years of the mid-1920s to early 1930s.

Let’s see what will happen to the election fever in the USA. Some liquidity will be produced by the election spending there, and the optimistic pitch created by the electoral situation may somehow drive back the bourses up a bit. That is just a temporary respite from the blazing flames of the crash, rest assured.

[Writ 11 October, 2008, Quezon City, MetroManila]

Erle Frayne Argonza

Magandang hapon! Good afternoon!

It’s been some couples of weeks now since the financial downspin in the USA took a further plunge as mega-banks sought help from federal government for rescue. The closure of the Lehman Brothers and the S.O.S. by other big banks that are now in the red rocked the global stock markets to a new round of instabilities and volatilities, even as the US economy is in danger of another Great Depression.

As I’ve already expressed in many articles of mine, the US financial collapse, an event that economists in many parts of the world forecast as early as the 1990s yet, is bound to happen, on account of many factors. The key factor, as this analyst and fellow ‘nationalist economists’ have been saying since 1998 yet (when I was actively involved with a group of economists in Manila called the Independent Review circle), is the widening gap between the (a) ‘virtual economy’ based on predatory finance that produces mere fictitious values and the (b) ‘real economy’ or ‘physical economy’ that produces real values.

The serial liberal economic reforms that began in 1971 yet, which saw the collapse of the gold standard and the dropping of fixed exchange rate (FER) in favor of ‘floating rate’, and onwards through the liberalization-privatization-deregulation-decentralization (structural adjustment policies or SAPs) of the 1980s, and onwards to the GATT-Uruguay Rounds that created the WTO in 1994, took its catastrophic toll on the economies of the planet, but most specially the USA’s.

The Nixon-era financial-monetary reforms and the Reaganomics (SAPs) were the policy culprits of America. They dealt the final death blows on the dirigist policies of New Deal, initiated by Franklin Roosevelt but which was inspired by dirigist policies of earlier luminaries (i.e. Alexander Hamilton, Abraham Lincoln, Friedrich von List), provided the impetus that created the strong, gigantic ‘physical economy’  of the country, and transformed it into a world power economically, politically and culturally. Without dirigist economics (interventionist) and the New Deal, Middle Class America wouldn’t have been possible. The neo-liberal reforms simply wiped out whatever was left of the New Deal by the 1980s, and with the liberalization of the financial –capital-monetary markets, the predatory financiers had their field day of looting the middle class purses under the rubric of portfolio capital and derivatives operations.

Had the US policy makers just labored a bit and assigned their staff to scour the world for some related experience of bank-financial collapse, their researchers could have easily ‘discovered’ the experiences of Japan in the 1990s. By the early 1980s, when Japan clearly demonstrated its sterling industrial and technological capabilities as the base for its wealth production, the Zaibatsus and the policy makers decided to go the liberalization way, confident as they were that the fruits of decades-old ‘physical economy’ build up can’t just be easily wiped out by predatory financier operators.

Japanese technocrats (both in Japan and overseas) also theorized that the key to producing a sound, healthy, mighty Japanese economy was in the realm of micro-economics more than public policy. Never mind if the policy environment will shift from the protectionist-dirigist policies of the post-war decades to liberal policies, provided that at the level of production and organization, capacity and internal potency can be demonstrated. The likes of William Ouichi’s ‘theory z’ comes to mind, or ideas that spawned strategies and tools dovetailing on quality control, team building, and decentralized operations. The world was so awe-inspired by the ‘Japan Incorporated’ model that was based precisely on the micro-economic route, and was extolling the Japanese corporate firm to the hilt as the new champion of the globalizing economy.

The USA that had demonstrated its strength on macro-economics—In the terrain of public policy—as the route to economic might, must have been seduced by the Japanese ideological onslaught at one point, that it so sonorously echoed the Japanese technocratic jargon of ‘globalization’. But when Japan’s financial system began to buckle down in 1994, which then impacted on the rest of the economic sectors, the US politicians and technocrats simply didn’t pay attention, fixated as they were to the seductive results of the ‘virtual economy’ (bubble operations) on the GDP of America.

To recall, Japan suffered miserably for the bailout mistake it pursued. Dabbed as ‘crisis management’, the state went on a binge of saving ailing banks and financial houses, the very same measures that the Bush-Paulson team is now embarking on. Alarmed at those events than in Japan, which led to a 10-year recession & almost zero growth, I began to raise howl about the ballooning portfolio investments in the Philippines by 94-95, and was among those experts who forewarned the state officials that Japan’s ‘crisis management’ was seriously flawed, was tantamount to giving incentives to looters instead of criminalizing, them, and should never be enforced in the Philippines or ASEAN in case that the portfolio bubble will burst in Manila and the region (the bubble burst in 1997).

To repeat: Japan suffered miserably from that fiasco. Recession howled like unstoppable forest fires for ten (10) years, and were it not for the high growth of East Asian markets, Japan couldn’t have risen back to appreciable growth by 2005. Interest rate was compelled to be brought down to zero percent, a precedent that many countries affected by financial meltdowns were aloof to emulating. Bankruptcies,  corporate closures and downsizing led to dislocations and unemployment. For the first time in many decades, former decent Japanese executives and employees who lose their jobs and had their remaining mortgaged properties confiscated, were rendered homeless and starving, and forced to reside in the streets as paupers and vagabonds..   

Sitting with my fellows in the Independent Review circle from 1997-onwards, we took turns in exposing the maladies of the neo-liberal reforms, spoke in diverse media (TV, radio) to forewarn the public of the imminent financial collapse in East Asia (the meltdown took place beginning in June of ’97), and by 98 were of the consensus that the USA was next in line for a meltdown of even catastrophic proportions than either Japan’s or South East Asia’s (97 meltdown). The very destructive effects of predatory finance saw the decline of industry (de-industrialization), agriculture (land use conversions, decay), infrastructures (some huge infra were even privatized), S & T (low priority in budgets & education), and transport & communications in the USA. If the neglect of the ‘physical economy’ will continue for another ten (10) years, it will be too late for salving the US economy as a whole. Any catastrophic bubble burst and financial-monetary meltdown could bring the economic house down, collapse consumption, and render the US economy much like unto a Latin American economy past 2010.

 As I recall then, we experts from the Independent Review circle strongly opined that the ‘crisis management’ tactic was immoral and extremely perverted. How in the world could the state ever reward criminals at all? The bankers and financiers looted the Japanese purse by probably worth trillions of dollars, they should have been criminalized for their sordid crimes, and yet they were even rewarded! Unbelievable! This is one excellent narrative for the Ripley’s Believe It Or Not!

Fortunately for the Philippines, there was no large-scale bailout of any bank as a result of the 1997 Asian meltdown. Those realty and construction companies affected by the crisis, affected precisely because they over-exposed themselves to ‘hot money’ foreign portfolios that simply dried up as the same portfolios were pulled during the first month of the meltdown, were immediately able to cope up by retooling and re-engineering their strategies and tools. Interest rates were lowered, excess liquidities were flashed out in well managed manner that deserve our central bank accolades from the Bank of International Settlements. In less than a year after the meltdown began, we were back to consumption patterns like there was no recession at all. We didn’t take the Japan route, luckily. By 2001 and onwards our growth patterns were back to appreciable growth, and the local bourse moved up as well.

Today, all over the ASEAN + China-India-Korea (minus Japan), the Asian meltdown seems like an ancient event down memory lane as things have been moving fast. We just can’t believe that our mighty economic partner, the USA, didn’t learn its lessons from the 2001 recession there and from the flaws of the Japanese bailout. ‘Bailing out the rich’ isn’t the issue here, but rather ‘bailing out the criminals’ which is a gross disincentive for the legitimate SMEs and other market players that didn’t receive the same favor.

If we were to seriously search for appropriate short-term tactic for salving ailing financial institutions, the answer lies in a proven approach to corporate ailments: bankruptcy reorganization. The economists Robert Reich (former US secretary of Labor) and Lyndon LaRouche (Executive Intelligence Review) have been airing this solution very strongly, and I am myself bent on accepting this micro-economic short-term solution as an exemplar for the rest of the world. I would not be surprised if the eminent economists Joseph Stiglitz and Paul Krugman would air a similar advisory, and they should better air their counsel strongly.

The entire planet today is watching the horrific bailout in the USA, almost forgetting that this copycat bailout already flattened Japan for a decade at least before. Each one of us should look at our own backyards and make sure that our respective states won’t emulate the rather devious and insane bailout of Japan Incorporated and the Bush-Paulson team.

[Writ 04 October 2008, Quezon City, MetroManila.]