Chimerica or Greater China?

Let China sleep, for when she awakes, she will shake the world. -Napoleon

The East is Red! -Mao Zedong (upon reaching the summit of Mount Taishan)

If capitalism is restored in a big socialist country, it will inevitably become a superpower. The Great Proletarian Cultural Revolution, which has been carried out in China in recent years, and the campaign of criticizing Lin Piao and Confucius now under way throughout China, are both aimed at preventing capitalist restoration and ensuring that socialist China will never change her colour and will always stand by the oppressed peoples and oppressed nations. If one day China should change her colour and turn into a superpower, if she too should play the tyrant in the world, and everywhere subject others to her bullying, aggression and exploitation, the people of the world should identify her as social-imperialism, expose it, oppose it and work together with the Chinese people to overthrow it. -Deng Xiaoping (circa 1974, quoted in Time‘s The China Blog)

Over the Christmas holidays, a friend recounted, with some concern, having dinner with a Filipina who has essentially abandoned her Filipina identity, adopting, instead, a Chinese cultural supremacist attitude that extends to weeding out what she considers her former, inferior, culture. My friend and I discussed the enthusiasm with which some Filipinos jettisoned their own identity in order to take on the characteristics of a culture they viewed as the “up-and-coming-one,” and hence, superior. No different from the worship of Spanish culture in the past, I suggested; and in the case of today’s Sinophiles, no different from the debates on Asiatic Monroeism in the 1930s in the wake of Japan’s expanding prestige and power in the region, and the Japanophiles during the War. In the case of China, as far back as the 1920s, the rise of Chiang Kai Shek’s Nationalist government led to proposals, in the Philippines, to orient the independence movement towards China, in an effort to counterbalance American influence.

Since the closing of the US bases and the banishing of the Philippines to the periphery of American strategic and other concerns, Filipino leaders have been at a loss to make up for their shortcomings at home no longer being lavishly subsidized by Washington. When the United States started showing concern over the resurgence of China, in the late 1990s, Filipino leaders sensed an opportunity (shared by many countries in the region, also nervous over the growth of China) to reburnish old alliances with Washington.


The problem was that Washington blew hot and cold, and after courting Asean governments (Singapore and Thailand, most notably), during the Bush, Sr. and Clinton years, the Bush, Jr. years saw a dwindling of American interest in the region, which it seemed content to delegate matters to Australia as far as the Western presence was concerned. The Americans oriented themselves, primarily, towards neutralizing Islamic Extremism (see this Japanese article, Hu Jintao’s Strategy for Handling Chinese Dissent and U.S. Pressure from 2007, on the lack of American interest in the Chinese ploy to assert Beijing and Washington as the ultimate arbiters of Taiwan’s fate).

The Philippines, having achieved favored nation status by climbing onto the Coalition of the Willing bandwagon, promptly hopped off for domestic reasons, and this led, in turn, to the government playing the “China Card” as a foil to Washington. A kind of modus vivendi ensued, in which Washington remained content with focusing on Mindanao, while making noises from time to time to remind Manila not to fall too firmly in Beijing’s pocket. But the pockets of Beijing are deep, and somehow, despite domestic crises, Manila and Beijing’s relationship seems to be fairly stable.

This has raised repeated questions about how the Philippines will be affected by the rise of China to, potentially, Great Power status.

This detail (below) of a wartime American speculative map (found at Strange Maps) shows how the Americans envisioned our region as victory seemed imminent in World War II. The Philippines was portrayed as an American protectorate, with added territory from the then-Dutch East Indies. Note how Indochina and Thailand are given over to the Chinese sphere of influence, while Burma belongs to an undivided India’s sphere of influence.


From the same site (see China as a World Power: How Big?), comes this map, showing China’s potential sphere of influence in the world:


In the case of a “Regionally Dominant Greater China,” the Philippines lies just outside the informal borders of China; in the case of a “Greater China as a Global Power,” the Philippines lies firmly within the Chinese sphere of influence. It’s interesting that in the New World Order Map, the “United Republics of China (URC)” was envisioned by the Americans, even then, as federation composed of China, Korea, Indochina, Thailand and today’s Malaysia.

Back in 2008, I’d pointed to Waving Goodbye to Hegemony, and it’s well worth reviewing what Parag Khanna said was taking place:

Aided by a 35 million-strong ethnic Chinese diaspora well placed around East Asia’s rising economies, a Greater Chinese Co-Prosperity Sphere has emerged. Like Europeans, Asians are insulating themselves from America’s economic uncertainties. Under Japanese sponsorship, they plan to launch their own regional monetary fund, while China has slashed tariffs and increased loans to its Southeast Asian neighbors. Trade within the India-Japan-Australia triangle – of which China sits at the center – has surpassed trade across the Pacific.

At the same time, a set of Asian security and diplomatic institutions is being built from the inside out, resulting in America’s grip on the Pacific Rim being loosened one finger at a time. From Thailand to Indonesia to Korea, no country – friend of America’s or not – wants political tension to upset economic growth. To the Western eye, it is a bizarre phenomenon: small Asian nation-states should be balancing against the rising China, but increasingly they rally toward it out of Asian cultural pride and an understanding of the historical-cultural reality of Chinese dominance. And in the former Soviet Central Asian countries – the so-called Stans – China is the new heavyweight player, its manifest destiny pushing its Han pioneers westward while pulling defunct microstates like Kyrgyzstan and Tajikistan, as well as oil-rich Kazakhstan, into its orbit.

And the process is continuing.

All right, so apparently Deng Xiaoping did not say “to get rich is glorious,” but the China’s that emerged since Deng was at the helm has come closer to the kind of Great Power he warned about, when still toeing the Cultural Revolution line in the 1970s. The rise of China, too, has been put forward in the context of the decline of the United States. But what if they’re joined at the hip?

Niall Ferguson’s been plugging the concept of “Chimerica” in his book, “The Ascent of Money: A Financial History of the World” (Niall Ferguson).

Here’s more on the themes of his book and “Chimerica”:

Aside from “Chimerica,” there’s even, as Brad Setzer proposed on December 21, 2008, Chieuropa.

Europe is part of the equation: Chimerica only works, in some sense, if China lends the (large) surplus it earns with the non-Chimerican world (and Europe in particular) to the US, allowing the US to run a deficit with the non-Chimerican world.

On one hand, cash-rich, China has continued going shopping, essentially buying futures in minerals and oil for when times get better; there’s also the effort to start building up the Yuan as a Reserve Currency, see China to Boost Yuan Swaps, Payments on Dollar Concern.

In “Inside the Red Mansion: On the Trail of China’s Most Wanted Man” (Oliver August), there’s a scene where the author talks to a Chinese citizen who remarks that China’s mistake was that it confused paper with power; that is, it bought American debt but in the end, even though it ended up holding vast amounts of that debt, the Americans, indebted as they are, still held on to the tangible manifestations of power: China might have paper, America continued to possess nuclear aircraft carriers for projecting influence -even to China’s shores.

So, the game plan seems to be:

1. Strong currency, strong country. Build up the Yuan.

2. Rich country, strong country. Use the vast amount of cash reserves to get plugged into the economies of many nations.

3. Armed country, strong country. (see Tony Abaya, on the Chinese buying the HMAS Canberra for scrap, but making blueprints for future reference.)

Ferguson in his documentary mentioned how “crisis-free” China’s growth has been. That was before recent news that 20 million migrants have lost jobs, China says. There therefore remains the serious problem of maintaining internal peace.

Back in 2007, Cheng Li (see China’s Inner-Party Democracy: Toward a System of “One Party, Two Factions”? ) pointed out the era of party purges seems over and instead,

For the first time in the history of the PRC, the ruling Party is no longer principally led by a strongman, such as Mao or Deng, but instead consists of two competing factions or coalitions. These two factions cannot be divided along typical ideological lines, such as liberals versus conservatives, or reformers versus hardliners. Rather, a more accurate set of labels would identify the two factions as the “elitist coalition” and “populist coalition,” with the former led by ex-President Jiang Zemin and current Vice President Zeng Qinghong and the latter by President Hu Jintao and Premier Wen Jiabao. These new factional dynamics have three main features: (1) the two coalitions represent two different socio-political and geographical constituencies; (2) the coalitions have contrasting policy initiatives and priorities; and (3) they compete with each other on certain issues but are willing to cooperate on others.

Now in this more recent article, China’s Team of Rivals: Cheng Li says,

Of the six members of the fifth generation serving on the Politburo today, three are tuanpai and three are princelings. The policy differences between these factions are as significant as the contrasts in their backgrounds. To a great extent, their differences reflect the country’s competing socioeconomic forces: Princelings aim to advance the interests of entrepreneurs and the emerging middle class, while the tuanpai often call for building a harmonious society, with more attention to vulnerable social groups such as farmers, migrant workers, and the urban poor….

Despite their many differences, the fifth generation of tuanpai and princelings share a common trauma: They are part of China’s “lost generation.” Born after the founding of the People’s Republic, they were teenagers when the Cultural Revolution broke out in 1966….

If there is another event that approaches the importance of the Cultural Revolution in the lives of these men, it is undoubtedly the Tiananmen Square incident in 1989….

These events taught the fifth generation two lessons: First, they must maintain political stability at all costs, and second, they should not reveal their fissures to the public. Although these leaders wear their differences on their sleeves, there is solidarity at the highest level, inspired by past unrest, to avoid any sign of a split in the leadership, which would be dangerous for the party and for the country….

…Barring something entirely unexpected, though, the populist policy platform will prevail over the next three to four years, and the ongoing global financial crisis will likely push Chinese leaders to increase government intervention in the economy. Yet there may be a swing in the opposite direction in 2012 as princeling Xi Jinping succeeds Hu Jintao, similar to the transition from Jiang to Hu.

RGE Monitor on February 4 noted,

IMF: Asia’s growth forecast for 2009 reduced to 2.7% with further downside risks. Developing Asia will grow 5.5%, the slowest pace since 1998. China will grow 6.7% though an additional stimulus package could help China reach the 8% target. India will grow 5.1% while South Korea’s growth will contract by 4%. The region may expand 6.9% in 2010. Given high trade and financial linkages, Asia will recover (rapidly) only when global recovery begins. But improved fundamentals and considerable room for counter-cyclical policies are pluses.

What the hell does that mean? Two blogs I find essential reading are China Financial Markets ,which covers the present-day economic development of China (two recent entries, as a sampler: Did China experiencing January hot money outflows? and Trade, CPI and other numbers came in this week, about whether the global crisis is seeping into China’s “real economy”), and Frog in a Well, where all sorts of historical topics concerning China are explored.

For us, there remains the question of how, exactly, do we define our national interest? Does a consensus exist? Could one be put together?

Manuel L. Quezon III.

78 thoughts on “Chimerica or Greater China?

  1. “So, the game plan seems to be:

    1. Strong currency, strong country. Build up the Yuan.”

    For years China has been doing all it can to have a weak currency.
    For the meantime they can not stick to that idea since they cannot export to the US.
    I wonder if they have learned from the roller coaster ride of the yen vis a vis the usd.

    “3. Armed country, strong country. (see Tony Abaya, on the Chinese buying the HMAS Canberra for scrap, but making blueprints for future reference.)”

    Unknown to some. For years China has been meeting with its neighbors discussing cooperation(military). They have set programs for maritime cooperation among neighbors. The Philippines has always been sending its representative.
    So China does not plan on doing it alone,China wants to win over its neighbors.

    CVJ and myself discussed a what if(in this blog.
    What if China did not concentrate internally and sets its sights outwards. I think that can still happen.
    Before(centuries hence) they had a fleet stronger than any European fleet,but they never go t to use it other than defending their land from invaders.

  2. “Carl on Tue, 7th Apr 2009 7:33 am

    Muslim countries in Asia, the Middle East and Africa, on the other hand, have surging population growth. There will be more Muslims in the world in the coming decades. We will all need to figure out a way of dealing with the Islamic world.”

    The Philippines has always been criticized for having the last communist insurgency in Asia. But this resulted in Macapagal, Marcos, and Cory appeasing the leftist insurgency through the gentrification of Mindanao with Christian Maoist farmers. And so in this sense, its just a stroke of luck that we had a Maoist rebellion in our history. For if it were not for relocated leftists, Muslims will be the dominant majority in Mindanao.

  3. “The Philippines has always been criticized for having the last communist insurgency in Asia”

    Maybe the honors should go to Nepal.

  4. When will the discussions on the global crisis move to the root causes????

    The drastic imbalances in a structural lack of aggregate demand in the emerging economies and developing economies caused by free market fundamentalism of the last 30 years?

    On one hand you have tremendous slack or an output gap in the more industrial and industrializing economies of the world. (Tremendous Overcapacity)

    China, Germany and Japan the hardest hit countries.

    The Philippines more a debt based consumption economy is only worried on whether its debt and remittance lifelines underpinning its narrow based consumption based economy will be affected….

    Now even its status as a tax haven and tax refuge for criminals, tax evaders and corrupt governments has become exposed for the world to see and attempt to regulate.

  5. From Public TV in the U.S. dissecting their debt.

    This is not for lunatics or practitioners of corrupt governments.

    James Galbraith University of Texas at Austin

    Can you imagine a scenario in which the United States government actually goes bankrupt?

    No. The United States government cannot go bankrupt because it can always pay debts issued in United States dollars. There is no operational risk of bankruptcy in any meaningful sense of that term. To use the term in the context of the United States government is, in my view, profoundly misleading. It’s a scare tactic. It is not a metaphor which fits the government which can issue its own currency and which can pay its own debts in that currency. That’s the government we have. …

    … The National Debt Clock is running really fast. Have you noticed?

    I heard that it actually ran out of digits. … And my suggestion was that they should try just turning it off.


    Because it’s not the problem that we should be focusing on right now. Why don’t we have a clock there that tells you how many jobs are being created and how many jobs are being destroyed? Why don’t we have a clock that tells you how many states and cities are cutting their budgets and how many are able to go forward with the services that they have presently been running? Those are the priorities that we have to face. …

    The national debt clock doesn’t tell us anything?

    No, it doesn’t, and in particular this $11 trillion number, when many trillions of that actually are held by the government itself, which is basically just an accounting offset.

    The total share of debt, [as a share of] U.S. GDP, our national output, held by the public before this crisis was on the order of 40 percent. It is not a big number either by the historical standards of the United States, nor compared to our major industrial democratic partners in Europe and elsewhere, where debt-to-GDP is 60 percent to 100 percent and higher. And those countries are as solid as we are. So we are not in a situation where this number tells you anything meaningful about the economy.

  6. But J_AG, already there is talk of the US having a treasuries bubble. The world and China has learned its lesson and won’t buy anymore what essentially are junk bills, and in order for the Fed to stimulate their economy, it has resorted to buying the U.S.’s treasuries, ie, monetizing the debt, printing more money. The reason being there isn’t much more they can do interest rate wise to stimulate the economy as the rate is near zero.

    The “great recession” has also depressed assets prices in other categories, ie stocks and real estate, and pension and sovereign and Jo Blo funds will be investing them in those than T-bills. Or they may just elect to keep them as cash if they are not as optimistic and daring as Warren Buffett.

    So they are in a situation where there will be lots of printed money to circulate in the coming years and that only means more inflation. Americans, and yes Pinoy Americans, will find that their American dream will require two more extra jobs (on top of the 3 jobs that they’re already juggling) to pay off.

    The good news for the Philippines is that our debt servicing could go down now that the US dollar is cheaper. But then again, there’s the problem of our weak currency bogged down by the poor handling of our economy by inept politicians…

  7. “Karl Garcia on Tue, 7th Apr 2009 9:53 am

    Maybe the honors should go to Nepal.”

    Touche. But ask me again in 10 years, I might be correct after all.

  8. J_AG, a good summation of the root causes\ of the global financial crisis is, I believe, provided by Simon Johnson, former IMF chief economist and currently professor at MIT’s Sloane School of Business.

    “In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

    But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.”

    – The Quiet Coup – published in the Atlantic Monthly, by Simon Johnson, former chief economist at the IMF and presently professor at MIT

    Johnson blames “a river of deregulatory policies” because the U.S. government was corrupted by the elite business interests.

    These are among the “astonishing” deregulatory policies Johnson blames for the excesses that led to the financial collapse:

    • insistence on free movement of capital across borders;

    • the repeal of Depression-era regulations separating commercial and investment banking;

    • a congressional ban on the regulation of credit-default swaps;

    • major increases in the amount of leverage allowed to investment banks;

    • a light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement;

    • an international agreement to allow banks to measure their own riskiness;

    • and an intentional failure to update regulations so as to keep up with the tremendous pace of financial innovation.

    Adds Johnson: “The mood that accompanied these measures in Washington seemed to swing between nonchalance and outright celebration: finance unleashed, it was thought, would continue to propel the economy to greater heights.”

    Now, as for the much ballyhoed international currency to replace the dollar, that is just a pipe-dream, says Robert Samuelson:

    “The attraction of an international currency depends on its presumed stability, what it will buy and how easy it is to invest. The euro (27 percent of government reserves) and the yen (3 percent) don’t yet rival the dollar. As for China, it hasn’t made its own currency (the renminbi, or RMB) automatically convertible for Chinese investments.

    We’re stuck with the dollar standard for a while. To work, it requires that countries with huge trade surpluses reduce the export-led growth that fed the system’s instabilities. The Chinese increasingly recognize this. “They’re very aware of the need to promote consumer spending,” says economist Pieter Bottelier of Johns Hopkins University. In November, China announced a 4 trillion RMB ($586 billion) “stimulus.” In addition, says Bottelier, the government is improving health and pension benefits to dampen households’ need for high savings.”

  9. “J_AG on Tue, 7th Apr 2009 12:24 pm

    When will the discussions on the global crisis move to the root causes???? ”

    I prefer the simple Jewish/Rothschild/Federal Reserve conspiracy: loosening the money supply to increase per capita debt then tightening it all of a sudden to make the masses go bankrupt and have the banks seize all their property.

    We’re in the loosen phase at the moment. Expect Bernake to tighten it when inflation hits 20% 5 years from now, then, the Rothschild family awash with wealth, goes on to finance Russia, China, Japan, Nato, Iran rearmament, then it’s World War III time baby!

  10. With all due respect to economic purists here, a strong currency is not all about favorable balance of trade, low inflation, etc. A strong currency must be backed by a strong army, air force, and navy.

    Talk about Japan and Switzerland with strong currencies but nary anything to growl about it. Japan is now even being bullied by North Korea.

    Since the dawn of history, men were political animals. They let the wives run home economics.

  11. This global financial crisis has exposed the weaknesses of what was thought to be an ideal economic model for emerging markets: export-led growth.

    Most especially since after WWII, export-led economies were seen as the way to go for undeveloped and developing countries. The stellar examples of Japan and Germany, then later Taiwan, South Korea, Hong Kong and Singapore were proof that exports were the surest and quickest way to industrialization, structural change, productivity, prosperity and well-being.

    Japan and the “tiger economies” were so celebrated as success stories that export-led growth was often called the “Asian model”. Malaysia, Thailand, India and, eventually, China followed this pattern.

    For decades, it had been difficult to argue against this development strategy. The success of export-led economies spoke for itself. Per capita incomes of the “tiger economies” soon rivaled or surpassed countries in Europe. Asian countries that fumbled, due to political constraints or sheer incompetence, countries such as North Korea, Myanmar, Indonesia and the Philippines, continued to remain poor.

    China, by stimulating its economy, is indicating that it wants to develop domestic consumption. It seems to be signaling that it will not be relying on exports, but will rely more on domestic demand-led growth in the future.

    At the same time, China is signifying its intentions of increasing trade with emerging economies by extending loans and other facilities. Now that profligate consumers in mature economies like the U.S. and Europe are holding back, China wants to develop alternative markets in Russia, Africa, Latin America and Asia.

    In the meantime, Japan, South Korea and other economies which flourished during the export-led boom, have to seriously rethink their economic models. They have to develop other sources of growth in order to maintain their living standards. After so many years prospering under what they thought was an established template, they seemingly need to reinvent the wheel.

  12. The Americans for a long time refuse to believe that they do indeed have a class system.

    Johnson flaw is they just now discovered that indeed they do have a financial capitalist class.

    Most Asians including Pinoys are still steeped in 19th century ideas about industrial capitalism.

    The history of the crisis of capitalism started in earnest in 1870’s then it transformed itself into financial led industrial capitalism with J.P. Morgan giving governments then the perfect model for government intervention with private capital in the economy. Federal Reserve backed up by the power of the state to monetize credit. The fiat currency system.

    The whole of the 20th century was an age of the shift from industrial capitalism to financial capitalism.

    From Adam Smith to the Keynesian world or its antithesis monetarism.

    The Chinese now are trapped and have started into bilateral counter-trade deals masked by the so called currency swaps. These swaps are only ledger entries in both Central Banks and will be used exclusively to facilitate trade and goods. They cannot be used as reserve currency or traded for other currencies.

    The Chinese are actually practicing pro-active protectionist policies versus the other emerging countries who do not have similar excess capacities and state support.

    The units of account for world trade is still denominated in dollars.

    The 19th century and the early part of the 20th century till the end of the second world war was about industrializing economies literally fighting for resources and markets and using finance to gain an advantage. FDR unilaterally defaulted on the U.S. gold debt by raising the price of gold and refusing to allow private ownership of gold. Really clever…

    Today governments tax the almost whole by inflating their way as a means of discounting their debts. Only the very few who own the means of production gain. Real incomes remain stagnant and drop while the government collects more on taxes directly and indirectly. It distorts the natural pricing mechanism based on labor theory of value.

    In the long run it destroys societies with societies not even knowing the reason of its own demise. The Philippines is a prime example.

    China’s Dollar Deception

    By Robert J. Samuelson
    Monday, April 6, 2009; Page A15

    “We are in a race between economic recovery and economic nationalism. At last week’s Group of 20 summit, leading nations agreed to roughly $1 trillion of additional lending, mostly through the International Monetary Fund, to help end the worldwide slump. But beneath the veil of consensus, countries are maneuvering to protect their economies and blame someone else for the crisis. Will the world economic order overcome these stresses or give way to a global free-for-all, characterized by rampant protectionism and nationalistic subsidies and preferences?”

  13. Except for Japan, India and China all the other export powerhouses in Asia made their economies export dependent. Japan and China net exports are less than 20% of their total GDP. They are both domestic based economies. India and China have huge populations and huge potential underdeveloped markets while Japan is already a mature industrial market living off its surplus savings.

    The two countries that were not entirely coupled with the global economy, China and India will still have growth above 5%… Both economies will be the growth driver in Asia and the world for the next two to three years. But the contraction of the world economy (industrial economies)will take time to reverse and move up since there has been a huge paradigm shift that has been caused by the meltdown of global financial capitalism and corporate led globalization.

    The huge imbalances and de-leveraging process will initiate a process of painful adjustment.

    History is on the march. Countries like the Philippines will find it almost impossible to grab the reins of change without a violent upheaval or process of change.

    The likelihood of that happening is almost nill since we are still so much “balkanized”

    I suggest we sell the country to the Japanese for what we owe in foreign currencies and turn ourselves into becoming a Jap colony. We could eventually take them over when our women who will then impregnate themselves with Japs will have millions of Jap pinoys. We could then take over from the Chinese in S.E. Asia. We are more highly evolved than the Instsik as we have learned from the gulangan nature of the Chinese merchant class.

    The Pinoys could then dominate S.E. Asia. Not to worry about India as their caste system will continue to impede their economic progress.

  14. The credit bubble has as its prime cause the highly indebted household sector of the U.S.

    Banks assets are tied to loans to households and businesses.

    Bottom line is that households will have to work themselves out or lower their debt positions. That would mean businesses would have to adjust to the new reality. That would mean that there is no going back to normal.

    That is the major difference between the internet bubble and the housing and credit bubble. Consumers in the U.S. and in parts of Europe overextended themselves.

    The party and if you want to call it the orgy of consumption based on credit is over. That would mean that the production capacities that were ramped up which were also based on credit will have to be worked out.

    Hence when credit froze and with financial institutions using light speed computers the economy responded by falling off a cliff.

    Realized loses on banks skyrocketed in light speed.

    Even the government did not know the extent of the accruing loses as exemplified by AIG.

    Someone described government actions as similar to the reverse thrust of a jet when it uses its engines to brake to a stop.

    Economists, governments were all caught with their pants down.

    Greenspan had to confess that he was not a God.

  15. From Bubble to a Depression

    The theory still is that capitalism will create its own gravediggers.

    So what is new in the idea that the government is the executive department of the finance capitalists??

    It has always been that way. Crony capitalism is the handmaiden of capitalism.

    Why is that idea so alien to so many when it is the reality and has always been the reality. Look at the list of Presidentiables in the Philippines.

    All different forms of GMA but similar in substance.

  16. mlq3,

    Did your grandfather envision a Philippine territory bigger than what it is now?

  17. “Life is a game, boy. Life is a game that one plays according to the rules.” – From J.D. Salinger’s “The Catcher In The Rye”

    The problem is that the rules are either changed or manipulated.

    As J_AG says, “history is on the march”. Game-changing and life-changing events are unfolding before our very eyes. The financial system that we knew the past couple of decades or so has broken down and is undergoing a painful evolution that may involve fragmenting it down to more manageable units. The concept of “bigger is better” has been discredited and “too big to fail” has now evokes images of a threatening behemoth instead of a rock of stability.

    Export-led growth, for the past 5 decades accepted as gospel due to the shining examples of tiger economies, has proven to be a frail domino when consumption dries up.

    How will these changes affect the Philippines? Will the thrust of our richer Asian neighbors to develop other markets be beneficial to us? Will this thrust to develop closer commercial relations with countries other than developed economies enable us to spur our own economy?

    There are opportunities, as well as perils, out there. Can we make these evolving changes work to our favor? Or will we bumble and bungle our way through, as we have done many times in the past?

  18. Since we lost our export market wal sigurong choice ang mga exporter natin kundi ibenta sa domestic market ang mga nakatambak na inventory nila.

    Ang mga garmnts ibenta nila sa mga tailors,o designers na kumuha pa ng kung saan para sa mga materyales nila.

    ang mgasemicon microchip
    sa mga computer shop,cell phone shop,o iba pang shop.

    ang mga furnitures pagkatapos ibenta dito sa atin,itigil muna nila yan makaktulong pa sa ating kalikasan.

    nag eexport din daw tayo ng mga yate at maliit na barko.Kailangan din natin yan.

    sa mga tao, ibang storya na yan

  19. Ang sinabi kong proposal na solusyon ay useless kung walang pambili ang mga consumer.

    Kaya nga sa China at India na bilyones ang populasyon.
    Kung wala ring atik ang kalahati dito, di madami pa ding imbentaryo matitira, unless bibilihin lahat ng imbentaryo ng me mga pera.

  20. Palagay ko, halos isang taon pa bago maramdaman ang epekto ng mga stimulus program ng Tsina at Hapon. Kung aangat ang domestic demand ng mga bansa na ito, makakabuti kaya sa atin? O wala pa ring epek?

    Karl, tungkol sa furniture industry, halos lahat ng raw materials ay imported na. Yung kahoy at rattan ay galing sa Indonesia at Malaysia. Ang inputs natin ay ang labor at ang mga disenyo.

  21. Chimerica? No way, if American rednecks can help it! The American Bible Belt may be the home of a large number of fanatical Christians, but how many really practice the Christian virtues of love, generosity and tolerance?

    In keeping with the spirit of Lent, here’s an article about how Middle America views Asians:

    By the way, would Filipino names be classified under Asian or Latino?

  22. supremo, yes, he proposed the union of the philippines and present-day indonesia. a spanish historian told me the commonwealth also made a claim on guam but i have not been able to find any record of that.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.