Current Senate’s design flaw

My column for today is Senate the victim of a design flaw. In it I refer to two articles, former Chief Justice Panganiban’s column on the Senate’s rules, and my 2007 election post mortem, An abnormal return to normality.

I couldn’t find it at the time, but the September 1, 1945 diary entry of Antonio de las Alas explains why the Senate ended up drawing lots to determine the terms of its members. And also, when the drawing of lots took place, which was in August, 1945. Conjecture: that the destruction of official election returns for the November, 1941 elections might have required that solution.

Meanwhile, today’s Inquirer editorial, Focus on consequences, urges the Senate not to ask members of the Supreme Court to inhibit themselves. Such an act would be, uh, counterproductive:

Nothing erodes the people’s confidence in the court of last resort like an unjust decision. And a decision becomes unjust not because of the intentions that move the justices to rule one way or another but because of the ruling’s very real consequences.

The majority in Neri vs. Senate Committee may have set out simply to strike a balance between an assertive Executive and a rambunctious Senate. But the consequences of the decision have been most severe: The ruling dangerously swung the pendulum in favor of an Executive that has made a virtue out of secrecy (and fools out of those who demand transparency and accountability).

Rep. Teodoro Locsin, Jr. on my show last Tuesday said something similar, he was particularly offended by the Palace’s assertion that the Supreme Court decision made the Senate hearings “null and void.” Was the Executive Secretary decreeing what would and would not be facts, and saying that what had taken place in full public view never happened, he snorted. He said on that basis alone the Senate had good reason to appeal to the Supreme Court and point out that what the Justices may have considered a nuanced decision (and one, he added, that by the manner of the voting avoided becoming a doctrinal decision) has to be reversed because of the way it’s being applied.

Rene Azurin, the other guest on the show, had this to say today in his column:


René B. Azurin

Legal but not right

History buff Manolo Quezon saw parallels between the recent Supreme Court decision on the Neri case and the same body’s decision on the Javellana case a quarter of a century ago. Invited to comment on this on his TV program the other night, I said that the most notable similarity was that, in both cases, the justices could (with even stronger legal grounds) have taken the side of the hapless Filipino citizen but chose instead to give in to the desires of a powerful President.

In both instances, the justices who opted to support the President found refuge in arguments that are, doubtless, technically legal but also morally unworthy. Without bothering to delve into personal motivations, one can of course conjure up a whole slew of reasons as to why taking the side of specific powerful (and wealthy) individuals is far easier than taking thide of the nameless and powerless public.

In both instances also, the Chief Justices — Roberto Concepcion in 1973 and Reynato Puno today — dissented passionately and eloquently.

For those too young to remember, the Javellana case revolved around the validity of the 1973 Constitution. Mr. Javellana (and several other petitioners) questioned this Marcos-written charter essentially on the basis of the fact that it had not been ratified as specified under the 1935 Constitution then in effect. In the set play that unfolded then, the fiction of “Peoples’ Assemblies” was created and people were gathered at such assemblies and asked to raise their hands if they were in favor of the proposed new constitution. On the basis of such show of hands, Mr. Marcos claimed the new constitution approved.

The Supreme Court then — in a 6 to 4 vote — agreed that the new constitution had not indeed been ratified because such show-of-hands procedure was not in consonance with the relevant provisions of the 1935 Constitution that required that changing to a new constitution needed “a majority of votes cast in a plebiscite called for the purpose”. Having conceded that point, however, the pro-Marcos justices then demonstrated legal inventiveness and contort-ability, producing the concept of “acquiescence” and saying that the “acceptance” of the people can take the place of ratification. Four justices agreed. Three justices contorted themselves in a somewhat different way, saying that they did not have sufficient knowledge to say for sure whether or not the people had “accepted” the new constitution and that they were therefore not competent to rule on that question. Only two justices disagreed. In the end, the 1973 Constitution was held to be in force because it was already in force and there were not enough votes to declare that it was not in force. Huh?

In the current Neri case, on the other hand, the Supreme Court — voting 9 to 6 — decided that the highest officials in the Executive branch of government could legitimately conceal information from the Senate and, by extension, the public, even if such information involved the commission of a crime. Inexplicably, moreover, the Supreme Court held that it was not even necessary for these officials to show why it was necessary to withhold the information elicited, the only potentially permissible bases being military or diplomatic secrets the disclosure of which might endanger national security. Here, the legal contort-ability of the justices supporting this decision can be seen in how they sidestepped the constitutional provisions that expressly mandate the public’s “right to information on matters of public concern” and require the State to adopt “a policy of full public disclosure of all its transactions involving public interest” and, instead, argued that the notion that presidential communications were “presumptively privileged” had greater legal weight. To a simple engineer like me, that’s illogical.

Actually, most lawyers I’ve heard propound on the merits of the decisions in these cases appear so fascinated by the nuanced — I call it hair-splitting — legal arguments that they seem unable to strip the cases down to their most basic elements. At their most basic, these cases are about calibrating the balance of power between the Presidency — which is entrusted with the collective resources of the entire society and the full coercive might of government — and the people, more specifically the institutions that are supposed to be the means of the people for monitoring the use of the entrusted power and for holding the Presidency accountable for its abuse. At their most basic, the decisions in these cases mean that the power of the Presidency has been enlarged and the power of the people (already minimal to begin with) has been reduced. That should distress every one of us citizens because, even under the best of circumstances, it is difficult for us to obtain transparency in the wielding of executive power and, except in extraordinary instances, virtually impossible to hold our highest officials to account.

Mr. Quezon quoted Santayana on learning from history. What these lawyers and the pro-Presidency justices seem to forget is that the historical role of the rule of law in any society is to ensure that the rights of the powerless are not violated or abridged by those with power. They seem to forget that the rule of law that we are heir to today grew out of the experience of common people with overbearing monarchs and is essentially the consequence of uprisings that allowed the people to establish some rules and structures supposed to constrain the power of those to be entrusted with the might of government and make them accountable for their actions.

What the Supreme Court in the Javellana case and in the Neri case did was essentially to affirm the legitimacy of Presidential actions that usurp power the people did not intend the Presidency to have.

Clearly, justices in both Courts exhibited remarkable feats of legal legerdemain, the kind that raises the hackles of those against whom it is practiced. These were the kind that make people wonder whether our honorable justices care only about being legal and not about being right.

An interesting Reuters story: Manila’s Arroyo treads risky path with rice campaign:

The government’s very public campaign to ensure supply has created a sort of artificial crisis with poorer people queuing for hours in the heat to stockpile state-subsidized rice.

Manila’s more frequent rice tenders have also boosted international prices, which in some cases have more than doubled this year…, hiking the government’s import bill and the cost of subsidizing the grain.

The Philippines has said it wants to import up to 2.2 million metric tons of rice for this year, which would be its biggest purchase of the grain in a decade. So far, it has bought 1.2 million metric tons and is holding a tender for 500,000 metric tons on April 17.

“They are kind of fanning the fire,” said one Manila-based trader of the government’s measures. “I would interpret the series of tender schedules as panicky.”…

…The rice crisis is also putting pressure on the country’s finances.

In a recent research note, investment bank Credit Suisse calculated that the government could lose up to $1.3 billion or 0.7 percent of Gross Domestic Product (GDP) this year by importing up 2.6 million metric tons of rice at climbing world prices and selling it at lower prices domestically.

Having whipped up consumer fears with her efforts to be visibly on top of the situation, the best way for Arroyo to calm them down is to ensure adequate supply and to tone down the government’s more extreme responses, analysts say.

Manuel L. Quezon III.

131 thoughts on “Current Senate’s design flaw

  1. Karl, thanks for your understanding. I feel it’s my duty to expose the folly of the elitist mindset. Besides, i’m outnumbered by the Ateneans so i have to work doubletime.

  2. im not sure what your beef on this rice crisis. granted they miscalculated, hey its not the end of the world…now their trying to rectify their mistake. – Magdiwang

    It’s bad enough for a legitimate President to ‘miscalculate’ on such a fundamental matter. An illegitimate President, who has no business being in Malacanang in the first place, takes this miscalculation to a whole different level.

  3. KG:

    OK, thanks. I think most Filipinos take this realist approach: it’s not all GMA’s fault, but she could have done better. Seven years was a lot of time.

  4. Madonna,

    I think it is two-ways. Intrinsically, on an individual basis people can be altruistic and share their resources to the poor. Instrumentally, the poor are entitled to social goods like education and health, which the government must provide (which our government does not fully deliver), and this is the systemic part. Good governance is instrumental to development. But still, if somebody does not reflect on his life in a critical way, he or she can remain poor. The Philippines is in a difficult situation. We both have an F on the two, except for some people, that should include a few government officials of course, who work real hard.

  5. “I tell you its a bad sinking feeling. Could you imagine those without any help or choice?”

    You’re right. A corrupt regime essentially takes away from people a life that they have reason to value.

    For instance, of the 7 councilors I had in the SK not so long ago, all but one finished college, and all but one have jobs now. It goes without saying that if the government commits itself to the well-being of the poor through education, choices will always be available sooner or later.

    It is not about income, but the ability to achieve something, income included, by means of one’s capabilities. But as of today, as far as this regime is concerned, the ratio to be able to attain that is 5:100. For every 5 Filipinos living a decent life, 95 or so are in a bind. Basis? It’s an intuition.


    Riots over rising grain prices are ripping through the developing world and the United Nations warns there’s worse to come.

    Apr 12, 2008 04:30 AM Lynda Hurst
    Feature Writer

    The warning bells are ringing, furiously.
    This week, food riots paralyzed Haiti, with angry marchers outside the president’s palace shouting “We are hungry!” Five people were killed in the chaos.

    In Egypt, a 15-year-old boy was shot and killed this week in two days of violence over food shortages. Last month, a two-week protest at government-subsidized bakeries ended with the deaths of 10 Egyptians in clashes with police.

    Rice is the staple food of 4 billion people. But the prices for it, along with corn, wheat and other basics, has surged by 40 per cent to 80 per cent in the last three years and caused panicked uprisings in some of the poorest countries on Earth, from Cameroon to Bolivia.

    The situation has deteriorated so swiftly that some experts predict the effects of a global food crisis are going to bite more quickly than climate change.
    According to the World Bank, 33 countries are now vulnerable to social unrest and political instability because of food insecurity – and that has implications for all the rest. Major rice producers like China, Cambodia and Vietnam are already battening down, curbing exports to ensure supplies for their own populations.

    The Philippines, whose population has grown from 60 million to almost 90 million in 17 years, is warning rice hoarders they’ll be charged with economic sabotage.

    Why is it happening? Was Malthus right when he said the world would eventually be too populated to feed itself?

    Very interesting articles for more check it out:

  7. to PhilippineDemocracy Online: Your number is too low and has too much pessimism embedded in it.

    For every 5 Filipinos living a decent life, 95 or so are in a bind.

    The top 10%, and I’ll even say the top 20% (ranking based on household income) should be doing well. Now, “doing well” does not mean indolent, not-working but money keeps coming in.

    To me, “doing well” is earning enough to feed family, save-for-retirement//rainy-day//kid’s education along with a good vacation once a year. So somebody miserable in his/her job can still be doing well by my book.

  8. “Your number is too low and has too much pessimism embedded in it.”

    Yes, maybe you’re right, 5 is too low. But my intuition does not count those at the top. I am thinking of the poor. Rich, including the middle class people, are never on my mind. My basis is for every 100 poor kid in the public education system, only 5% might have a chance to do well in life. With all these troubles, ZTE, rice crisis and all that, I don’t know how our children will fare in the future. I neither pessimistic nor optimistic. It’s just that I don’t see any glass of water.

  9. It’s bad enough for a legitimate President to ‘miscalculate’ on such a fundamental matter. An illegitimate President, who has no business being in Malacanang in the first place, takes this miscalculation to a whole different level.

    just like you and me we err on some of our decisions. the government have been making the right call for decades on the importation of rice. if you crunch the numbers, they have stringed a long excellent batting average. you cant expect them to make right choice all the time. its not even possible as sooner or later the law of averages will prevail.

    what will be deplorable is if they make the same mistake all over again and dont address swiftly the repercussions brought about by a bad decision. What is equally damming is pounce on somebody who made the wrong commitment the first time around after many years of calling the right shots. just like you and me we learn from our mistakes and hope we do better next time.

    on gma. we can scream all we want and takes the daylight out on all of us but at the end of the day she is still the president of the republic. she might be illegitimate on the eyes of many people but the fact is she is also recognize by others and the international community which makes her relevant. currently, she is the most important part of the equation for a better philippines whether we like it or not as she holds the keys of power.

  10. What is equally damming is pounce on somebody who made the wrong commitment the first time around after many years of calling the right shots. – magdiwang

    ‘calling the right shots’ = getting lucky

    We know that it is foolish to keep depending on luck and disingenuous to evade blame when such luck runs out. That speaks a lot about her quality of leadership. GMA should have read Nassim Nicolas Taleb’s ‘The Black Swan’ which was recently featured by Manolo in his Book of the Week.

  11. To Philippine Democracy Online: My basis is for every 100 poor kid in the public education system, only 5% might have a chance to do well in life.

    I understand the sadness about the situation that you feel.

  12. Philippine Democracy Online : “With all these troubles, ZTE, rice crisis and all that, I don’t know how our children will fare in the future.”

    IMHO, it will get worse. I taught in a university attended by students of middle class status. Its quite saddening. Their (well, my class for that matter) skills in written and oral communication are weak.

    China and India are taking crash courses in improving their English proficiency. Sayang talaga if we lose our comparative advantages in the English language.

  13. magdiwang, i agree. btw, the ones who call her illegitimate are, for the most part, don’t count. their interminable ranting and ravings have not, would not, and never would change anything re gma’s presidency, in my estimation.

    cvj, who is saying it was a matter of luck? as they say, lightning doesn’t strike on the same spot twice, does it? luck, or the lack of it, is the refuge of losers.

    One of the Most Popular myths in doesn’t strikes the same place twice:

    In fact lightning favors certain spots, particularly high locations. The Empire State Building is struck about 25 times every year. Ben Franklin grasped the concept long ago and mounted a metal rod atop the roof of his home, then ran a wire to the ground, thereby inventing the lightning rod.

  15. Sa galing ng mga anti GMA, naghihintay ako kung sino sa kanila ang tatakbo bilang presidente…tutal may noble intentions naman sila…

  16. CVJ,
    OK lang yan, pero I am sure na ang ibig sabihin mo ng you are outnumbered by Ateneans has nothing to do na Lasallista ka.(o tayo)If you think and feel that it is your duty then good luck with your advocacy.

  17. “never did I say GMA is a running a hedge fund, i was giving an analogy on how rational people succeed, they move on, cut their losses, take the bull by the horns, learn from their mistake and not dwell too much on the past. you subscribed to the fact that our government will have the money to finance such a massive undertaking and yet you bemoan the fact that it is neck deep in debt. which is which? regarding jpmorgan one billion sovereign fund from the philippines. hehehehe, philippines always a follower and aspring to be temasek or abu dhabi. on BSP defending the peso, im sure you know the compeling reason behind it and just cant resist to digg on it. why would tantengco want lose that much? because the alternative im sure will be much worse.”

    Nice attempt at swinging on a pitch but you are not even in the ball park. You are swinging in your own backyard with other ten year olds. Ignorance is not a cardinal sin but studpidity is.

    One of humanities greatest inventions and innovations that has transformed the planet in the last 200+ years plus is the creation of soverign debt by a state. Private Banks are given that power by the state. they are in effect subsidiaries of the state in the debt creation mechanism.

    Successfull economies used the judicious use of this innovation to spread the wealth in a deepenning and widening of the division of labor within an economy.

    However the wanton abuse of the power to create debt has been the cause of the downfall of unsuccessfull economies.

    Just check out the debt picture of all economies and she the size of sovereign debt + corporate debt + personal debt and with the U.S. the ratio is four (debt) to one to size of GDP. The notional vlaue of financial instruments – $500 trillion and the physcial world economy at $ 50 trillion. All built on debt leverage.
    The British Empire was built on debt as is the American Empire.

    Let us go to what our ‘uber’ economist took in her schooling years. Guess what it was —- Fiscal and monetary policies also known as macroeconomics. You know this thing called debt.

    Lwet us go to her rise to power. Even before she could warm the actual chair in the palaca, Her erstwhile Justice Secretary signed the government guarantee for IMPSA. Without it they could not get better credit ratings since no clear statment of a sovereign guarantee.

    Then in preparation for her running for Presidency before 2004, she took a most pernicious, mercenary and opportunistic move in preventing NAPOCOR from raising their rates. Please note that she even agreed to borrow on bahalf of NAPOCOR to save them on interest payments. Did she have choices then to bite the bullet? She sure did. She could have put NAPOCOR into receivership and restructure their loans and that famous take or pay in dollar stipulation. The financial markets would have accepted it if it was a sovereign decision. Argentina proved it in actual fact that it could be done. Even then the IMF was toying with it after Russia and Argentina simply reneged and restructured their debts unilaterally. The timing then was perfect.

    However right after her re-election the bright boys from U.P. tapped her on the shoulder and told her she had borrwoed too much and the credit ratings would blow up and interest rates would go up. No seizure but the possibility of higher interest rates to come.

    The fact that NAPOCOR was being charged higher interest the markets legally could only look at it as a corporation owned by a state and not the very state itself.

    And on ther matter of hedging – which idiot would hedge the entire Philippine economy to the policies of the Washington Consensus. The guys who did not are the ones who have the surplus food from whom we are buying from including the U.S. that does not practice what they preach.

    Tignan mo naman. Tapos sasabihin niya na ang BSP ay nagiinvest kagaya ng Temasek ng Sinagapore. Mali nanaman.

    My favorite magician Tetangco on our behalf kasi utang ng Pinas yan appointed J.P. Morgan as fund manager of a large portion of the dollar reserves of the country. (Galing iyan sa utang ng bayan) TEMASEK naman is the Singaporean fund manager owned and operated by the Singaporean government to manage the provident fund of Singapore. They are the part equity owners of Sinagporean corporations and have invested heavily in Asia thorugh these corporations like Singtel and DBS.

    GIC invests dollar reserves and it was they who bought into Citigroup. The Philippines used to have Citi manage also some of our “reserves” Now Sinagpore is part owner of the bank that acts as our de facto Central Bank when it comes to dollar transactions in the Phils.

    Iba yan sa dollar reserves ng gobeirno ng Singapore na di galing sa utang kundi sa surplus nila. These dollar reserves are also mamaged by the Sinagporean government through the Government of Singapore Investment Corporation. (GIC) You can google them. They invest these funds.

    Meanwhile since we are a net capital importing economy part of the conditionalities is our reserves are committed as part of our reserves in a de facto common currency arrangement with the U.S. (No choice dollarization)Kaya our BSP has to keep a large portion of reserves in dollars as the base of our entire monetary system.

    Now as far as Tetangco, and the rest of the BSP governors before him they have so far distinguished themselves in the service of the foreign bankers above and beyond the call of duty. The facts behind this can be discussed in a other story.

    Just remember that when PNB and PAL were on the verge of going over the cliff, instead of an orderly bankruptcy process to restructure, Juan de la Cruz bailed Lucio Tans ass in a similar manner that the Fed bailed out the investment banks of the U.S. recently. Socialism for the rich. All our major businessman were in deep shit after the Asian Crisis in 1997. Juan de la Cruz bailed them all out.

    So after taxpayer funding of the campaign of our erstwhile de facto President – and all her judicious use of state assets (Debt)to transform the country, kulang pa tayo sa bigas.

    Please note legally some people consider her to be a de jure President- some consider her a puta-tive President.

    Since neither side could prove their points for me she remains to be our de facto President.

    Oh I forgot to mention that if one wants to see the most extreme abuse of debt creation of the State look to Zimbabwe. Here the abuse of that p[ower is all around us during the term of this ‘uber economist’ Starting with IMPSA start counting the many ways.

  18. bencard, luck is not a loser’s mantra, it’s the ultimate mantra of the power game, the great imponderable: review your machiavelli.

  19. Karl, you’re right on that. It’s beyond petty school rivalries. Besides, a number of our fellow schoolmates are also elitists.

  20. GMA administration’s wondering why China refuses to sell anymore wheat to the Philippines and it has nothing to do with the ZTE revelation but this: Water…
    (experts say that it takes 1000 tonnes of water needed to produce a tonne of food..go figure..

    Beijing Games water policy troubling

    China’s quest to make the parched capital green and gleaming by August is taking a devastating toll on the countryside
    Apr 12, 2008 04:30 AM Bill Schiller
    Asia Bureau Chief

    LIJIAZHUANG VILLAGE, China–On a sunny afternoon on the parched plains of drought-stricken Hebei province, Fan Xiangnu, a solid, straight-talking grandmother of 63, grits her teeth, and sums up the local environmental situation as well as any high-priced consultant.

    “There’s just no water,” she says bluntly, squinting into the sunshine. “So there’s no wheat.”

    As she speaks, just 300 metres away a legion of labourers is hard at work building a broad canal to transport desperately needed water supplies.

    But the canal won’t supply her family – or those of the other parched peasants in this community.

    Instead, the canal will take 300 million cubic metres of Hebei’s remaining waters and rush them some 300 kilometres north to Beijing.

    It’s all part of the national effort to prepare for the Olympic Games.
    The central government wants Beijing green and gleaming come August.
    Green and gleaming it will be – even if it means others may have to go without.

    A government slogan painted on a nearby wall trumpets the goal, urging everyone to support the project to “guarantee a secure water supply for the Olympics.”

    Booming Beijing’s historic thirst – the parched capital has long depended on Hebei for its water – continues to reach ever deeper into the Chinese countryside.

    The coming of the Olympics will spike that thirst with added demand – about 30 per cent during the Games.

  21. The elitists can be so hard to spot, because many people believe that they are NOT when they actually are.

    Case in point — Barack Obama — who looks at small-town Americans frustrated with economic conditions:

    “It’s not surprising, then, they get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.”

  22. Obama does not seem to understand that many people cling to religion not because they are bitter but because they believe it. Faith in God to many people is source of purpose and comfort.

  23. BrianB,

    Yes, Ely Buendia is not really an outstanding vocalist. None of the E-heads were, nor were they great instrumentalists, except probably for Raymund Marasigan (now with band Sandwich). But they were really good at songwriting together and Ely Buendia was the principal composer. When he called it quits in 2002, that was the end for the Pinoy Beatles.

  24. whoah hvrds, your prolific posts just muddles the issues and could not hide your weak arguments. what happened to argentina and russia remains a precedent. there was a total financial meltdown with runaway inflation and totally empty treasury. nothing even close on what we have in the philippines at that time, we were not saddled with unsustainable debts.

    did i hear you say restructure sovereign debts. easier said than done with all the consequences that will follow. you know how much that will affect our image and prevent us from accesing international credit markets for many years. restructuring sovereign debts is too complicated and you have to contend with multiple private creditors involving many types of debt intruments and derivatives. countries avoid this like a plague until the very end due to the difficulties and fallout they face after emerging from restructuring. this goes on to show your theoretical approach to the problem is not feasible in the real world of finance. imagine if the government restructured their debts years ago, we probably wont have the >24 quarters of positive growth in the last five years or still under the tutelage of the imf.

    on bailouts, every country bails out their floundering industries. are you not happy that both pnb and pal emerged from the help as much stronger companies? do you want the government to just stay in the sidelines and do nothing? when you have britain nationalizing northern rock and the us rescuing bear sterns from bankruptcy, i begin to wonder where are you coming from? perhaps you have a stake on all of this, probably long on commodities and shorting the dollar, eh.

  25. “whoah hvrds, your prolific posts just muddles the issues and could not hide your weak arguments. what happened to argentina and russia remains a precedent. there was a total financial meltdown with runaway inflation and totally empty treasury. nothing even close on what we have in the philippines at that time, we were not saddled with unsustainable debts.” Ignorant not stupid.

    “on bailouts, every country bails out their floundering industries. are you not happy that both pnb and pal emerged from the help as much stronger companies? do you want the government to just stay in the sidelines and do nothing? when you have britain nationalizing northern rock and the us rescuing bear sterns from bankruptcy,” Ignorant not Stupid

    “imagine if the government restructured their debts years ago, we probably wont have the >24 quarters of positive growth in the last five years or still under the tutelage of the imf.” Really ignorant and not stupid

    There is saying that ignorance is bliss. However trying to make a point based on ignorance is dangerous. It is obvious the writer does not know what he is saying.

    States cannot go bankrupt but governments and corporations can.. There is enough precedent in law already established.

    Anyway these are the facts circa the year 2000 or one year before the Argentinian debt blow up.

    Argentina has defaulted and restructured her foreign debt almost half a dozen times over the last 100 years. International bankruptcy proceedings are not yet embebeded in international agreements. The IMF proposed the Sovereign Debt Restructuring Mechanism known as SDRM but the U.S. shot it down. Argentina had a probelm of forex blowout. She imposed forex controls and restructured. She also restructured all contracts denominated in forex in her domestic economy. Russia meanwhile defaulted on their domestic debt.

    From Forbes January 21, 2002 Comment by Steve Forbes based on the data from the Economic Intelligence Unit of London on debt as a % of GDP.

    “What’s the problem? Contrary to the uninformed blatter of most journalists and economic experts, Argentina’s government finances are harldy in bad shape. Idiotic IMF austerity policies are the principal cause of the country’s difficulties”

    As of the year 2000

    Public Debt as % of GDP
    Italy – 110%
    Japan – 109%
    Canada – 106%
    France – 63%
    U.S. 57%
    Britain – 47%
    Argentina – 44%

    By the way Argentina did repudiate a large part of their foreign debt (in bonds) as they do not issue complex derivatives and restructured it and are now able to access the financial markets of the world. They might have a better credit rating than us.

    Also please check on this on the present problems facing the municipality of Jackson in Alabama. They might be filing for Chapter 9, just like Orange Country did some years ago. You also have Chapter 7 or 11 proceedings under the law.

    Under the U.S. Constituion bankruptcy is an option for debtors whether they be persons or legal entities including governments.

    So that option is available in Common Law and all we have to do is enshrine it or do it to make it law.

    Now as to public money being used to rescue PNB and PAL? Why bail out Lucio Tan he can afford. We should have nationalized PNB again and the same with PAL. Why reqard his mistake with a bailout.

    Look what Manny Villar and Bayantel and Metro Pacific had to do. They restructured their debts through the court system and forced their debtors to take equity positions with them at the helm. Meanwhile Pangilinan thanks to smart restructuring his way with public funding and eventually sold off his interests in the Fort.

    Why are some luckier than others?

    Northern Rock was nationalized instead of having someone from the outside come in and support them with public funds just like what the Fed did with J.P. Morgan wherein public funds where used to backstop the takeover. Bear Stearns is no more. The fed took over the toxic wastes from Bear Stearns worth $30 billion and gave the line of credit to J.P. Morgan. J.P. then proceeded to offer $10 a share to all stockholders of Bear. Then the Fed opened their discount window to all investment banks. Please note that investment banks do not have reserves on hand with the Fed. Only commercial banks do. The Fed could have saved Bear Stearns by opening up the discount window to them earlier. But it wanted a scapegoat since B. Stearns was mostly involved in the subprime dealings.

    However in effect the Fed had gone where no man had gone before. They had effectively informed all and sundry that the Federal Government had the wherewithall to nationalize all financial institutions to prevent a systemic meltdown. Now the Federal Government not the FED is moving to put a bottom on hosuing forelcosures with FED guarantees whose instiutions are already in place since the Great Depression.

    Now to this issue of a long continuos period of positive GDP growth rates as a result of our not restructing our debts.

    That one really takes the cake bordering on lunacy. The high levels of debt that the Philippine state is facing is a result of bad governance leading to forex blowouts that has compounded over the years. Today we still spend 60-70 percent of our budget on debt payments (principal and interest)We are caught in a debt trap.

    We are in a debt spiral. Instead of being able to borrow more for the creation of public capital goods we borrow to pay our debts

    Now as to the party line message of uninterrupted GDP growth rate please be kind to the ignorant. The principal bane of an import dependent economy is a forex blowout. That means the lack of foreign exchange. (You see this thing about the dollar being the international currency instead of gold.)

    By pure design we have mitigated that problem though the exports of human resource and sometimes human organs to the detriment of sustainable sound economic policies.

    So much so that according to Sergio Luis Ortiz our formal employment numbers number only about 5M + out of a possible formal labor force of about 45M +. Please note that unemployment and underemployment rates are calculated from the labor participation rate and not the total labor force. We are most definitely more an informal economy than a formal economy if you take the human rosources involved in the formal and informal economy..

    So now you want to crow about the continous growth rates when the principal cause is the export of labor.

    Now the neglect of the domestic productive sector is coming back to haunt our favorite ‘uber economist’ who claimed success with her unintended policy of labor exports. Wala pala siyang programa. Lahat pala slogans at bullet points na walang laman. BEAT THE ODDS, FIELDS at ano ano pa. Yung FIELDS pinagmamalaki pa niya yung taas precio sa pagbili ng palay sa Php 17. Isa or dalawang porciento lang ang kaya bilhin ni Madam. Pero kayang kaya niya bumili ng bigas sa labas na mas marami.

    I have been on record here that it is time to short the peso. It is the easiest bet in the Philippines. The entire world have been taking long positions on commodities since the oil crossed $50-$60. In a time of uncertainty shorting anything is the norm. The trick is to know what to short. For those that can afford and involved in the financial markets only.

    And please someone wrote earlier that it was time to go long for the short period. Ay naku????

  26. Would speculating on the peso falling versus the dollar count as economic sabotage? How come the markets are reacting to the rice shortgae in the Philippines by shorting the peso in spite of the longest continous period of growth rates? Naku the price of imported rice will go up when converted to pesos.

    Can we send our Justice Secretary abroad so he can file cases of economic sabotage on those who are speculating on the peso falling in value to make easy money.
    Rupiah Weakens With Peso as Rice Feeds Asia Inflation (Update1)

    By Patricia Lui and Wes Goodman April 14 Bloomberg

    “In the Philippines, a widening trade deficit will cause the peso to fall beyond 42 per dollar within a month, said Wee Ming Ting, the head of Asian fixed income in Singapore for Pictet Asset Management, part of the largest privately held bank for the wealthy in Switzerland. The trade deficit was $756 million in January, compared with a surplus a year earlier.”

    “We are thinking of shorting the peso,” said Ting, who helps oversee the equivalent of $136.1 billion. He also trimmed holdings of rupiah debt three weeks ago because of increased government borrowing and rising inflation.”

    “A slowing global economy may also curb the amount of money sent home by Filipinos working overseas, said Daniel Moreno, one of the investors for Global Evolution, a hedge fund with $400 million in assets based in Kolding, Denmark.”

    “We have been reducing over the last three weeks,” Moreno said. “Currently we have close to zero. Now that prospects for growth worldwide are falling, it’s difficult to anticipate that those flows will increase,” said Moreno. The peso may fall 3.1 percent to 43 in six months, he said.”


    During the time of President Marcos, it can be easily perceived that some Supreme Court decisions sought refuge behind the political question doctrine and in case the doctrine cannot be invoked, decisions will be made in favor the Chief Executive for the simple reason that the magistrates are afraid to displease the powerful. Thus, in the landmark case of Javellana vs. Executive Secretary, (G. R. No. L-36142 March 31, 1973), the legitimacy of the ratification of the 1973 Constitution via raising of hands in the barangay level instead of via ballot boxes — was upheld as constitutional by a majority of six (6) justices over the four (4) dissenting votes of Chief Justice Conception and Justices Zaldivar, Fernando and Teehankee.

    In our present time, much opinion have been expressed that the majority of the justices of our present Supreme Court appointed by President Arroyo will be impartial after 2010. This only means, that the case of Neri vs. Senate can be easily overturn by the same (or nine justices who concurred) members of the Supreme Court when executive privilege is claimed by the President after Arroyo. Their impartiality after 2010 will, in no way redeemed their alleged inclination for Arroyo. Simply put it this way, supposed the nine justices who upheld the executive privilege claimed by Neri will remain after 2010, will their decision be the same if lets say if Lacson is the president?
    I am still convincing myself that the independence of the Supreme Court still holds true today. Few weeks ago, a clash between the Senators and Executive Secretary Ermita took place when the latter comments that Cabinet secretaries cannot be compelled by the Senate to attend investigations in aid of legislations unless the Senate rules are published. Ermita was ridiculed by Sen. Pimentel for his comment and said he (Ermita) doesn’t know what he is talking about.
    In my opinion, Pimentel and Ermita are both correct. Their word war is caused by the inconsistency of Supreme Court decisions. Ermita based his conclusions on the ruling of the Supreme Court that the Senate action was constitutionally infirm because the latter failed to publish their ruling in relation to Article 6 Section 21 of the Constitution which states “The Senate or the House of Representatives or any of its respective committees may conduct inquiries in aid of legislation in accordance with its duly published rules of procedure. The rights of persons appearing in, or affected by, such inquiries shall be respected”. (Emphasis supplied).
    In Senate vs Ermita and Savio vs Gordon, the Supreme Court decisions were commended. In these decisions, the Supreme Court did not look into whether or not the Senate rules had been published. They set aside the rules of technicality in these cases. However, the same is not true in case of Neri, the Supreme Court exert effort to find fault committed by the Senate, and even though the Senate rules were published in the internet, ruled against the letter.
    Chief Justice Puno commented that only time could tell whether the Supreme Court decision in the case of Neri vs Senate is correct. I believed the time had spoken.

  28. Would speculating on the peso falling versus the dollar count as economic sabotage? How come the markets are reacting to the rice shortgae in the Philippines by shorting the peso in spite of the longest continous period of growth rates? Naku the price of imported rice will go up when converted to pesos.

    i dont think so, since fundamentally when you short a currency, its the same thing as going long on its currency pair. how can you make it illegal when people who short are just trying to protect their long positions as a hedge. just like what they say in wall street, bears and bulls make money and pigs gets slaughtered if you dont protect your positions.

    option traders have been shorting the peso since january when the dow started imploding at the background of a looming US recession. emerging markets like the philippines with huge current account deficits are prone to currency devaluation in a US economic slowdown as they depend on the US to drive growth. risk aversion is good for the us dollar on emerging markets on times of market turmoil. on the flipside the dollar depreciates on countries with current account surpluses.

    the rapid appreciation of the peso the last two years and growth rates was due largely in part from the US bull market which ended in oct 07. it will be naive to think that gma was largely instrumental to that and equally be irresponsible to say the current rice crises and peso depreciation was her fault. hehehehe very hesitant to post on this as we are way OT.

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