new year wish 2011

clinton’s campaign strategist carville was right, “it’s the economy, stupid” that won clinton the presidency in 1992, trumping bush senior’s foreign policy high from the “successful” gulf war.

here at home it would seem that the president and his men know it too, that it’s the economy that truly and urgently needs working on.

“We are conscious of the fact that we are in a debt hole. We can only begin to climb out if we strictly implement austerity measures and cut down on unnecessary spending,” said Malacañang aide Paquito Ochoa.

but is there a plan? asks business world‘s amelia h.c. ylagan:

The national budget in 1986 was P250 billion and 70% of that went to servicing the US$26-billion debt that Cory’s predecessor, Ferdinand Marcos, grew from the $465-million 1965 level, in his 20-year reign. The 50 million Filipinos (in Cory’s time) had to live on the remaining 30% of budget. And then there were the many military coups d’état from the misguided military who wanted to take advantage of the weakness of the country at that time. Cory could not have worked a miracle in six years, many now allow in judgment of her. Some may also say that in comparison, her successor, President Fidel Ramos, probably benefitted from the six-year cycle of painful adjustment and realignment before him, and he successfully augmented what would have been economic deficits with significant one-time proceeds of the privatization of some big government-owned and -controlled corporations.

Survival and growth might be more difficult in Noynoy’s presidency. There are 92.2 million Filipinos (84% more than 1986 population), owing about P47,000 per head for about P4.3-trillion debt (US$ 95 billion approx.) The Asian Development Bank (ADB) warns of extreme debt stress as the country holds the highest debt-to-GDP ratio at 56.5%, the highest among Asian countries. This key measure shows how a country can manage its obligations from its annual economic output, with a declining ratio viewed favorable as this means the country would allot a smaller amount to pay off its debt. But based on the ADB’s projections, the Philippines’ debt-to-gross domestic product (GDP) ratio may rise by 15% by 2015 in a scenario of higher primary deficit to GDP; by 5.1% amid lower nominal GDP growth rate; by 3% on higher nominal interest rates on public debt; and by 12.7% on a combination of the three negative scenarios.

So, is there a plan to address these scenarios of where we, as a country might be going, how we are going to get there, and when we will get there.

grabe, we are deeply in debt to the tune of Php 4.3 trillion, that’s $ 95 billion.   ylagan rightly asks if there’s a plan, what’s the plan, considering that the president vetoed the debt cap provision inserted by senator joker arroyo in the P1.645-trillion 2011 national budget, which would have limited government’s borrowing to 55 % of gross domestic product.

Malacanang has defended President Benigno “Noynoy” Aquino III’s decision to veto the debt cap in the 2011 General Appropriations Act.

Presidential spokesperson Edwin Lacierda said this is a good time to borrow given the favorable market conditions like the strong peso and the appetite for peso bonds.

so that’s the plan?   since creditors are willing to lend, we will just borrow and borrow, ganoon, bahala na si batman.   but, as senator joker points out:

The US is, in many ways, our model. There is a debt ceiling in the US President’s power to borrow money, but the US Congress would invariably increase the ceiling whenever it is justified by necessity,” he said.

For the cause of fiscal prudence and transparency, why can’t we adopt the same?” he asked.x

why not indeed?   i wonder if it has anything to do with what former senator orly mercado said, when he was the new president erap’s secretary of national defense, that when you’re in the driver’s seat na pala, the view, the perspective, changes and campaign promises prove unrealistic.   or something to that effect.

could it be the same for president aquino?   but who exactly is holding him hostage to the old rotten system, making real CHANGE impossible?   what exactly are these forces beyond his control?   i wish he’d tell us so we can all grow up and face the unpleasant consequences of our past actions and/or inactions.

and then, again, the president could just be in over his head?   sana hindi.   and that’s my happy new year wish for us all ;))


  1. Presidential spokesperson Edwin Lacierda said this is a good time to borrow given the favorable market conditions like the strong peso and the appetite for peso bonds.

    Ngek! If it is a good time to borrow, then private entrepreneurs should be doing the borrowing, not the government. The private sector actually produces things whereas the government does not produce anything. In fact the only way the government can generate income is to confiscate its citizens’ earnings or by inflating (issuing money out of nothing, e.g.) If government borrows, and knowing that it doesnt produce anything, where do you think it’ll get the money to pay back what it was borrowed?

    And with government competing with the private sector for available funds for lending misallocates resources. There will be less loanable funds available for the private sector which actually produces things. If government corners the bulk of the loanable funds, the private sector must compete for the remaining resources driving up the price of money (interest rates).

  2. so why dyou think they’re doing it?

    They can’t help it. The only way they generate income is through inflation and taxation (what they borrow will be paid for by taking it from our incomes) because they really dont produce anything but they feel we need them in every aspect of our lives. That’s my most charitable assessment.

    They rightly said that they should cut down on government spending and yet they removed the cap on borrowing. If they want to cut spending, why remove the cap on borrowing? One reason is because they probably want to relend the borrowed money to businesses. And knowing how government operates, these funds will probably be available to their cronies. Sorry na lang yung hindi nila crony.

  3. Seriously, the government produces public goods like national defense and peace and order, or the services of the courts; and merit goods like public education. To pay for public goods, government is an agent who can borrow on behalf of the rest of us on the “collateral” of its power to print money, tax us, or sell state assets such as natural mineral resources (oil and gas in Malampaya for example).

    So long as investors are reasonably confident that government can service its debt, it is not a problem. It becomes problematic only if the proceeds of borrowing are misused, but for now, government borrows mainly to repay maturing debt.

    Are we in the same league as Greece and Ireland who got themselves into a debt crisis? The plain-vanilla comparisons suggest that for now the answer is No. What matters then is to prevent misuse under Pres. Aquino of the government’s borrowing power. Here, the trick is to ensure transparency. Foreign investors in PH sovereign bonds will demand it, and so should we as ordinary citizens.

    Happy 2011! If you believe in Pollyana economics, the peso will appreciate, the stock market will boom, and everything will be roses.

  4. “”government borrows mainly to repay maturing debt”

    if it is just for paying maturing debt, there is no need to increase the debt cap. It is just minus one plus one equals zero not unless, for every 1 dollar debt to be paid, they borrow 2 dollars- one is for payment of the debt and the other is for spending.

    the boom of the stock market does not necessarily mean economy is improving. it is hot money, anytime it can be withdrawn by the speculators. it does not create jobs.

    money launderered from illegal activities thru shell companies can be invested in the stocks. it can cause excess liquidity which could lead to inflation and or unnecessary appreciation of the currency.

    there is only one reason why the government turns to borrowing–it can not meet the goal of revenue generation so it resorts to deficit spending where the only option is to borrow.

  5. @ the Ca t: There is of course yet another way out. Government can also print money, and this is a good thing if price inflation stays low.

    Why does a credit card holder borrow on the card? Because he can’t “wait,” and believes he can repay. Nothing wrong with that, and it can apply to governments too.

    What is wrong is when the one doing the borrowing eventually “sticks it” to an unwilling another to do the repaying. That’s why the important safequard on public debt is transparency.