Quintos, who is considered a radical but logical economist (quite like Nobel Prize winner Paul Krugman), "quite perceptively wrote last year that the current global financial crisis " with the US economy at its epicenter " is merely the latest and so far most severe in a series of financial crises that have erupted since the 1970s. At the most basic one finds the capitalist system itself to be in fundamental contradiction between social production which enables great strides in productivity on one hand, and the private ownership of the means of production which ensures that only a few profit from production by exploiting the many. The contradiction inevitably leads to crises of overproduction relative to the capacity of people to buy the productive system's commodities and products. Before long, real production that cannot realize enough profits gives rise to shadow financial products that enables some to make tons of moneys until reality catches up with the shadows, derivatives and other profitable mental figments and thereby manifest real crisis.
According to Quintos [here cited by Avila], "In 1980, the value of the world's financial stock was roughly equal to world GDP, itself bloated. By 1993, it was double the size, and by the end of 2005, it had risen to 316% " more than three times world GDP. Government and private debt securities accounted for more than half of the overall growth in the global financial assets from 2000-2004 " which indicated the role of leverage or debt in driving this process. In 2004, daily derivatives trading amounted to $5.7 trillion while the daily turnover in the foreign exchange market was $1.9 trillion. Together they added up to $7.6 trillion in daily turnover of just two types of portfolio capital flows, exceeding the annual value of global merchandise exports by $300 billion.
Early on in the 2008 financial crisis, Quintos had already asserted: "While the value of financial assets is ultimately grounded in the value created by the working class in the process of production in the real economy and cannot [should not] diverge too far from it, asset bubbles can form for a period of time driven by ˜irrational exuberance' (in the words of Alan Greenspan). The positive expectations of financial speculators feed on each other, bidding up asset prices in a seemingly endless virtuous cycle. But like all ponzi schemes, reality eventually takes over and all it takes is one negative development, e.g. rising home foreclosures, to reverse expectations and send the entire house of cards crashing down.
http://pdsp.net/?p=445&comments=true
This is exactly what happened.
Meanwhile, Quintos has predicted that both the global economies short and long term responses in this crisis will continue to be to put pressure on workers to give up still more earnings and benefits. This continued pressure on employment has affected the Philippines adversely for many years as University of the Philippines, Professor B. Diokno, has noted "In 2007, 924,000 new jobs were created; in 2008, the number was down to 530,000. This level of job generation is unacceptable for an economy that is expected to generate between 1.0 to 1.5 million new jobs every year.
Furhtermore, "[a]ccording to Diokno, a responsive jobs creation program should address five sets of unemployed and underemployed workers: those who are currently unemployed (2.7 million), those who are underemployed (6.6 million), those entering the labor force (1 to 1.5 million), those who will lose their jobs at home, and finally, Filipino overseas workers who will lose their jobs abroad.
Avila, in early August 2009, noted that the Philippines government has discussed--but not yet implemented a large 330 billion peso spending program. This program is already called the PERP (Philippines Economic Resiliency Plan).
According to Avila, the plan includes:
PhP160 billion in incremental government allocations;
PhP100 billion for government corporations, financial institutions and the private sector;
PhP40 billion for corporate and individual income tax breaks; and
PhP30 billion for temporary additional benefits from the social security institutions " Government Service Insurance System and Social Security System " and Philhealth [national healthcare program]
However, this plan is very short on details and with a major national election brewing in the Philippines for Spring 2010, it is not likely that any well-integrated spending plan will be implemented untill then.
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