You can watch the pre-election episode of The Explainer, November 4, 2008 over at YouTube.

Magnificent as Obama’s victory speech (which you can read or watch here and here) was, and much as there was general approbation over John McCain’s concession speech as a “class act,” (and many Filipinos, I noticed, wistfully commented they wish our own politicians could learn how to concede gracefully when they lose) there were other scenes that I touched me more. In particular, and perhaps this is more due to my own personal, deep affection for the place, the scenes of rejoicing in Washington, DC, moved me most.

Take this video, for example:

Or this one:

These scenes were repeated throughout the United States, see the videos from East to West, from New York to Brooklyn to Philadelphia to Wisconsin, San Francisco and Seattle, among many more online. And I don’t think anyone’s heard of, much less seen, such spontaneous and large manifestations of happiness over an election in modern times (you really have to watch the videos

And for one particular group, there was a sudden, tangible reconnection with the past. See In Our Lifetime by Henry Louis Gates, Jr.:

We have all heard stories about those few magical transformative moments in African-American history, extraordinary ritual occasions through which the geographically and socially diverse black community—a nation within a nation, really—molds itself into one united body, determined to achieve one great social purpose and to bear witness to the process by which this grand achievement occurs.

The first time was New Year’s Day in 1863, when tens of thousands of black people huddled together all over the North waiting to see if Abraham Lincoln would sign the Emancipation Proclamation. The second was the night of June 22, 1938, the storied rematch between Joe Louis and Max Schmeling, when black families and friends crowded around radios to listen and cheer as the Brown Bomber knocked out Schmeling in the first round. The third, of course, was Aug. 28, 1963, when the Rev. Dr. Martin Luther King Jr. proclaimed to the world that he had a dream, in the shadow of a brooding Lincoln, peering down on the assembled throng, while those of us who couldn’t be with him in Washington sat around our black-and-white television sets, bound together by King’s melodious voice through our tears and with quickened-flesh.

But we have never seen anything like this. Nothing could have prepared any of us for the eruption (and, yes, that is the word) of spontaneous celebration that manifested itself in black homes, gathering places and the streets of our communities when Sen. Barack Obama was declared President-elect Obama…

How many of our ancestors have given their lives—how many millions of slaves toiled in the fields in endlessly thankless and mindless labor—before this generation could live to see a black person become president? “How long, Lord?” the spiritual goes; “not long!” is the resounding response. What would Frederick Douglass and W.E.B. Du Bois say if they could know what our people had at long last achieved? What would Sojourner Truth and Harriet Tubman say? What would Dr. King himself say? Would they say that all those lost hours of brutalizing toil and labor leading to spent, half-fulfilled lives, all those humiliations that our ancestors had to suffer through each and every day, all those slights and rebuffs and recriminations, all those rapes and murders, lynchings and assassinations, all those Jim Crow laws and protest marches, those snarling dogs and bone-breaking water hoses, all of those beatings and all of those killings, all of those black collective dreams deferred—that the unbearable pain of all of those tragedies had, in the end, been assuaged at least somewhat through Barack Obama’s election? This certainly doesn’t wipe that bloody slate clean. His victory is not redemption for all of this suffering; rather, it is the symbolic culmination of the black freedom struggle, the grand achievement of a great, collective dream. Would they say that surviving these horrors, hope against hope, was the price we had to pay to become truly free, to live to see—exactly 389 years after the first African slaves landed on these shores—that “great gettin’ up morning” in 2008 when a black man—Barack Hussein Obama—was elected the first African-American president of the United States?

Anne Applebaum says the spontaneous celebrations were a kind of national self-affirmation for the entire citizenry:

Because all Americans, white and black, liberal and conservative, are brought up to believe that their country is different, special, the “greatest nation on earth,” a “city on a hill.” We are all taught that our system is just, our laws are fair, our Constitution is something to be proud of. Lately, though, this self-image has taken a battering. We are fighting two wars, neither with remarkable success. We have just experienced a cataclysmic financial crisis. We are about to enter a recession. We are unloved around the world, and we know it. Electing our first black president won’t by itself solve any of these problems, but—to use the pop-psychological language for which Americans are justly famous—it sure makes us feel good about ourselves. That hysteria you saw on television in Chicago was, yes, partly about the return of the Democrats and partly about the passing of George Bush. As the rain-on-the-parade dispensers of sour grapes are already writing, it was absolutely about ideology, too. But it was also about relief: We really are a land of opportunity!

Speaking of the dispensers of sour grapes. Of course the Republican and conservative sourpusses were already a-curdlin’ even before election day: and insisted that something was fishy in the votin’ (see hummers & cigarettes). Surely such bloggers were the grist for sites like Vote Fraud Squad (much as it declares itself “non-partisan”), and post-election, angry Republicans (back to verging on being a lunatic fringe party, if they aren’t careful, as they were poised to be in 1964) are off to a rip-roarin’ start: ‘Impeach Obama’ groups pop up on Facebook. Though it’s noteworthy that some took a cue from John McCain and have rolled up their partisan banners.

Politics is as much about logistics as it is about inspiration, and Words: Who, What, When gives an interesting glimpse of how finely-tuned, not to mention well-oiled, the Obama machine was, locally . John Dickerson in Slate, summarizes the achievements of the campaign and its strategists:

It was not only Barack Obama who made history—so did his strategists. They designed a plan and executed it relentlessly through a brutal primary and general election. Twice they upended the idea that no plan survives engagement with the enemy. Obama won by driving up his vote in traditional Democratic areas, and he shrunk the margins in conservative areas. They also out-hustled the competition. According to exit polls, 27 percent of voters said they were contacted by the Obama camp. Only 19 percent say they were contacted by the McCain camp.

Exit polls also indicated that race was not a factor. Where voters said race was important, they voted for Obama. Those who said race wasn’t important also voted for him—in relatively the same percentages. In Ohio, Obama won among whites making less than $50,000, a group that was once supposed to be a big problem for him. In Pennsylvania cities like Scranton, Reading, and Allentown, where he was supposed to have the same problem, he won by healthy margins. “I always thought that there was a prejudice factor in the state,” said Sen. Bob Casey, a Pennsylvania Democrat. “I hope we’ve now washed that away.”

In the end, the voters favored change over experience 37 percent to 20 percent. People also seemed to vote against their economic self-interest, something liberal critics said only witless Republican voters did. Fully 70 percent said Obama would raise their taxes, while 60 percent said McCain would. They voted for Obama, anyway.

Seeing the writing on the wall, one Republican senator even tried to campaign as a Democrat (see Campaign Diaries).

The speculation (fueled by what must have been calculated leaks from the Obama camp) on the President-elect’s forthcoming cabinet started prior to election day on Politico.com. On the same site, Mike Allen and then Sam Stein over at The Huffington Post has the latest.

Some bloggers have offered up reflections on what the Democratic victory means, either for the world (see The Coffee) or for the Philippines, see The Marocharim Experiment and Patricio Mangubat.

My editors at the Philippine Daily Inquirer asked me to write a commentary addressing the same question. See New era of intervention, which came out in today’s paper. In the short term, the President’s window of political opportunity has narrowed to the changing of the guard in Washington January 20. Mid- to long-term, the Intengan-Gonzales liquidate the enemy plan is going to face even tougher going abroad.

As for the concerns over the incoming administration’s economic policies and how they might affect Filipinos, Jeffrey Sach’s What Obama Needs To Do: It’s time for a new macroeconomics will make for interesting and informative reading.

As for the President, well, things are off to an unpromising start: Obama too busy to take Arroyo’s call. She could’ve just said she’d sent a congratulatory telegram.

For a regional perspective, see Asian Views of America’s Role in Asia 2008 as well as The view from the Pacific (and its environs) and What lies behind Beijing’s reservations about an Obama Presidency.

My own reaction to the Obama victory is in my column for today, Out with the old, in with the new . You may have noticed the discussions that went on in Howie Severino’s entry Obama and Filipino racism earlier this year.

Aside from racism, something else intrigued me about the reasons given by some (not all, of course) Filipinos and Filipino-Americans for going conservative. Faith. And so I quoted from Archbishop Burke talks to Inside the Vatican Magazine on Eve of Election.

The Religious Right might have failed in mobilizing against Obama, but they scored some morale-boosting victories in California, Florida, and Arizona. Here’s an intriguing article: Props to Obama: Did he help push California’s gay-marriage ban over the top? Not least because of how time, it seems, is not on the Religious Right’s side:

But if the anti-gay-marriage side was boosted by a one-time event—the first major-party African-American presidential candidate on the ballot—might supporters of gay marriage win in the future? McCuan says that’s plausible. “In the abstract, there’s a high level of support for equal rights, particularly among the younger generation.” And support is growing fast. In 2000, 61 percent of voters approved of a ban on same-sex marriage; this year, it was down to a bare majority. The “Yes on 8″ campaign was particularly well-funded and savvy, blanketing the airwaves with ads suggesting that gay marriage would be taught in schools. If supporters of same-sex marriage wait a few years, and if they can muster as effective a campaign as the one mounted this year by the other side, they could well change the law.

You can take a look at the website of the proponents of the American ban on gay marriage at Protect Marriage.

This brings me back to my views on the Reproductive Health bill, and how the actual merits and demerits of the bill as a piece of legislation are now irrelevant, because it’s a showdown between conservative Christians and secularists. It is a fight the secularists will lose and will only serve not only to delay the inevitable, but to make it so much harder to achieve liberalizing things on many other fronts. In which case it has to be asked whether it was the right fight, in the right place, and at the right time.

My next entries will focus less on the scheduled resumption of the Bolante investigation in the Senate (see the Inquirer editorials Defending Bolante and Saved by technicalities ), and more on the truly big fight to come: on the same day the Senate reconvenes to tackle Bolante, the House of Representatives will kick off the do-or-die effort to finally amend the Constitution. That’s on November 10.

I’ve been watching The American Future: A History, the latest documentary series by one of my favorite historians, Simon Schama. A book version, it seems, has also been released (see Niall Ferguson’s review). Schama, a long-time resident in an America that, in in its post 911 incarnation, became so frighteningly different from the America that was so attractive to liberal intellectuals like him, and which Republican Neo-Conservatives mightily strove to dominate for the foreseeable future, seems relieved to witness a revolt from the American people themselves: what many foresee as Obama’s impending victory seems to be a return to a more familiar, more attractive, United States.

I must confess that is how I feel: and it betrays a familiarity with, and affection for, a particular conception of
America that conservatives labored mightily to prove the false face of America. And to be sure, for a huge number of Americans, Obama is not the face -literally and figuratively- of their America; just as for a particular kind of Filipino-American, it is McCain, his party, and the values of that party that are their values, their preferred face: what other Filipinos and Filipino-Americans would react to with horror as too much paleface.

But I am not an American. But I am a particular kind of Filipino, not particularly representative of the Filipino (or Filipino-American) experience or possibly even conception, of the United States. We lived there for a time; I studied there, for a time; I saw many things I liked, experienced much I did not; but like so many Filipinos, found something exceedingly familiar and attractive in a culture and from a people one didn’t really have to exert much effort to get to know and appreciate.

Let me state first of all that my bias is a clear and in many ways, an unshakeable one, beginning with being bombarded by my father’s very strong opinion that the American Democratic Party was the only proper party to appreciate in the United States, because it was the party of Philippine independence, a cause that generally prospered during Democratic administrations and that fared less well under Republican ones. For this reason I continue to be astounded by Filipino-Americans who are Republicans but eventually, I suppose it makes sense for those who’ve made the decision to leave home and become citizens of the USA: emigration is at the very least an implicit repudiation of the homeland; more often than not, an explicit one, too; and if one party and its policies can be credited with the independence one feels ambivalent about, then one can understandably embrace the very party that, to too many Filipino minds, was poised to bring the permanent blessings of American civilization to their benighted little brown brothers.

That being said, I suppose I am like most Filipinos in viewing the relationship of the Philippines with the United States as more of a positive than negative one, or at the very least, who sees it from the perspective of a relationship that is very personal and not just abstract: the relatives and friends over there, the American friends over there and here, and so on. And for every George W. Bush who praised Marcos’ devotion to democracy, there’s a Ted Kennedy who was a friend to Filipinos fighting Marcos.

Which brings me to this touching scene:

Seeing Ted Kennedy addressing the Democratic Party Convention earlier this year, my thoughts came back to viewing a Democratic Party Convention back in 1984. I had no choice in the matter; every night, my father would sit me down in front of the TV and sternly exhort me to “watch real democracy at work,” trying to exorcise whatever authoritarian instincts, I suppose, might have been nurtured by a childhood spent under the New Society.

During those convention nights, I watched, and learned to enjoy, speeches; Ted Kennedy gave a masterful performance during one of those nights, but there were two speeches, in particular, that thrilled me because they evoked an understanding, or so I thought, of the reason my elders seemed so ill-tempered all the time whenever the government at home was discussed; instead of fear and suspicion it was refreshing and inspiring to hear people talk, not only of what was, but of what could, and should, be.

There was the Rev. Jesse Jackson:

What thrilled me about Jackson wasn’t just his rhetoric, but what he represented: equality of the races, for all races. Something I was quite conscious about because that was the year I’d experienced feeling the urge to speak up for my country when I discovered the Filipino-American War was referred to as the “Philippine Insurrection” in our American history textbook, which made me bristle; fortunately, the teacher was an entirely liberal man he himself made this Mark Twain short story required reading for the class:

And so, for me, 1984 was, indeed, a very interesting year: it was, to begin with, the year in the title of George Orwell’s novel, the sort of book that would make a precise connection with someone in America to experience a culture different from the police state that was the Philippines; it was the year I was introduced to Mark Twain, and his writing against the annexation of the Philippines; and it was an election year, for someone whose only living memory of elections had been the charade that was Marcos’ validation as President of the New Republic he inaugurated with such pomp in 1981. It was, also, the year after Ninoy Aquino had been shot, when the world had focused on the Philippines and Filipinos had begun to consider that their choice wasn’t limited to the bloody revolution of the Communists or the bloody repression of Marcos’ Constitutional Authoritarianism.

There had to be a middle path and what more centrist model could there be, than comfortable America’s? And the other speech that made me sit up and listen was Mario Cuomo’s:

These golden-tongued orators, for someone discovering the joy of words, and who had begun to feel the stirring of political thoughts -of the interplay between leaders and followers, nations and people, ideas and idealists, and how it had all be chronicled and how those chronicles, in turn, explained what was happening, now- well, to a young impressionable mind such as mine, they were the stuff of which indelible memories are made.

In those still-Imeldific days, with its talk of Metro Manila as “The City of Man,” and where the fences had been raised to shield the eyes of visiting Republicans from our shantytowns, to hear someone say, “this nation is more a tale of two cities than it is the tale of a city on a hill” referring to his country, of course, but said in a way that might very well have been addressed to Marcos, why that was enough to instill in someone as firm an understanding of Social Justice as any exploration of the Great Thinkers in College (indeed, when that time came, I mostly fell asleep in SocSci I and II).

Of course, listening to Cuomo lash out at Reagan for subsidizing foreign steel, and hearing the concerns of some contemporary Filipinos over Obama’s vow to start bringing home US jobs, serves as a reminder that the Democratic Party as the party of Philippine independence was in large part, whether at the time of William Jennings Bryan, or in the 1930s, when independence was finally settled as a matter of when and not if, with the entirely selfish assistance of US sugar interests:

And so it remained, with the Recession Act after the war, stripping Filipino veterans of their benefits; or even in the 1980s, where American enthusiasm for democracy and human rights regularly got trumped by the need to retain their bases; or, in the era that’s evolved after the last umbilical cord, the US bases, has long been cut, in Democrats not being very different from Republicans in attending to their own national interest regardless of appeals for solicitude for Filipino ones. This is simply a reminder of a basic lesson no amount of American tutelage or Filipino navel-gazing can ever really teach: the meaning of sinking or swimming entirely on one’s own efforts. Contrary to what many might say, we have not been a total failure in this regard, as a people; we are, by every measure, middling at the job of independence; yet we have set such a high benchmark for ourselves -and rightly so- that our frustration, individually and collectively, is high, and despair a real problem -the world, as it’s evolved, making it so much easier and lucrative to simply pack up and leave, to work or live, or both, abroad.

To see the maps -and how I wish we could come up with similar things, for our own politics, to graphically explore our political realities- is to see how divided, literally, America is:

But it is also to see a shift; and for those, like me, with a particular kind of affection for a particular kind of America, to derive a certain satisfaction and comfort -the comfort of a return to something familiar, and which seemingly seemed poised to be gone for good- from what is going on.

It’s a return to a more inclusive, a more idealistic, less fear-driven and optimistic, view of the world, for Americans the world they affect so much; and for those who find affinity in those ideals, and in the expression of those ideals, a return to the motive power of words, and of their promise of a society where Social Justice is a living ideal, a commonly-held aspiration, and where might is not what defines right.

The following was forwarded to me, and I assume that it is genuine. It may be useful to readers in terms of planning their family and personal finances for the coming year. Montinola expects two major difficulties: first, as Chinese exports to America are affected, Philippine exports, mainly oriented towards China, will be affected; second, layoffs of Filipinos overseas will start having an impact on remittances and investments.

Fellow Unibankers,

Attached please find a piece that I was supposed to write for an outside publication - unfortunately, I cannot submit it as the ending is perpetually changing.

What I thought to be a gathering storm to hit in the first quarter of 2009 has hit our beaches yesterday - the Philippine Stock Exchange had its highest (12. 27 %) drop in history a single day, and the Peso Dollar exchange rate is creeping back from around P 41: $ 1 to almost P 50 : $1. Like other markets in the region, the PSEI has dropped 50% ytd, and people are getting nervous.

It has now become a Fundamentals versus Emotion issue - Philippine economic fundamentals relative to the world and even Asia are good, and the banking system is stable, but Bloomberg 24×7 Television, local media reports, and cocktail party talk make people fear the worst, and then expect the worst.

We know however from experience that Filipinos are resilient and have survived the economic crises of the foreign debt moratorium in the 1980s and the Asian Crisis in the 1990s.

BPI remains well capitalized, strong, and prudent - and both our customers and the market analysts appreciate this. 2008 will show lower earnings than our banner year in 2007, and we must now worry about what 2009 will bring.

As in the past, this negative cycle will eventually pass, but in the meantime, we will have to prepare for the typhoon.

Let us all work together to take care of our customers, and in the process, keep BPI strong and our employees safe and secure in their jobs.

All the best,

Gigi Montinola

FINANCIAL TSUNAMI 2008

On Sept 15 2008, the unthinkable happened. Lehman Brothers, a Triple A credit rated, 4th largest, and 158 year old US investment bank, filed for bankruptcy. Merrill Lynch was rescued and sold to Bank of America, and one day later, AIG, the world’s largest insurer, announced its effective nationalization. This set off a chain of notorious “firsts” - a $ 700 billion bailout of the US banking system that almost did not pass, a country (Iceland) almost going bankrupt, and the largest UK banks in trouble.

By the IMF meeting on Oct 13, two additional unthinkables were unfolding. Global stock markets had fallen 20% in a week, the entire global banking system had almost collapsed, and it took the collective resolve of 27 European governments and the US to institute forceful emergency circuitbreaker measures to temporarily calm the world and prevent a catastrophic breakdown of financial markets worldwide. However, in the most free market oriented countries of the developed world, the US and the UK had effectively partially nationalized the largest banks without a public outcry.

How did this happen, and what is the effect on the Philippines, and the Pinoy citizen?

Act 1 - 2007 Housing Collapse

Home ownership ($ 20 trillion) and equities ownership ($ 20 trillion) are central to the American middle class dream of becoming wealthy. Borrowing money is equally ingrained - the US household debt today is larger than what the US can produce through its GDP (Gross Domestic Product). America became the world’s largest consumer of cheap imported goods, and China became the world’s largest producer.

Through a confluence of events, a deadly cocktail was being concocted.

First was increased home ownership demand in a boom time. Next was easy credit (1% US Fed Funds rate), and commercial banks relaxing credit standards (zero down payment) to lend to subprime borrowers (with minimal income) due to the belief that home prices would forever rise and therefore this would protect the loan from default. Third were investment banks securitizing or packaging a pool of these loans (”mortgage backed securities” ) backed up by credit agencies rating the top slices as Triple A credits. Finally, there were commercial banks and hedge funds with sophisticated risk models who greedily bought into these instruments as a means of increasing the yields on their books.

Initially, home prices soared 20% as the bubble grew with triple leverage (housing loan, investment bank securitization, and hedge funds buying). What was not apparent was that due to lax US regulations, investment banks had leverage (debt to equity ) ratios of 35 to 1, and unregulated Hedge funds had a 30:1 debt to equity ratio. Going up (2002 to 2007), everyone made money.

Suddenly, in 2007, some subprime borrowers defaulted, homes were foreclosed, and home prices fell. Countryside Financial, a US institution, almost failed, while Northern Rock, a UK institution, failed due to bad loans and falling house prices. The housing bubble had burst, and attention shifted to major commercial and investment banks with exposure to the housing sector.

Act 2 - 2008 Financial Markets Meltdown

First to go were the investment banks and AIG.

By regulatory fiat after the Great Depression, investment banks were separated from commercial banks. By anti regulatory bias in the past decade, Alan Greenspan, the US free market “maestro” of financial policy, and the Federal Reserve Bank took away a 12:1 debt to equity regulatory ceiling, and allowed investment banks to use “sophisticated” risk models to justify 35:1 debt to equity levels and help sell billions of dollars of CDOs (”collateralized debt obligations” ) that eventually peaked at $ 55 trillion, which is the size of the world’s GDP! Worse, AIG sold $ 400 billion CDSs (”Credit Default Swaps”) insuring against the default of housing related securities.

The result should have been obvious. Normal leverage is 2:1 for a manufacturing company, 3:1 for a trading company, and 12:1 for a commercial bank. At 35:1, an investment bank happily made a 35% return on its capital if its position income only rose 1%; however, if the position dropped 10%, it would lose 350% of its position, and severely erode its capital.

Banks operate on liquidity (free flow of funds), solvency (amount of capital to pay for obligations) , and Trust (market confidence in normally operating institutions) .

Once the market saw the falling home prices deteriorating into potentially illiquid asset prices, counterparties started holding back and stopped dealing with suspect investment banks. Bear Stearns was rescued by JP Morgan at fire sale prices. Lehman had $ 19 billion in cash the day it went bankrupt; not enough counterparties could be found to deal with them. Merill Lynch was rescued by Bank of America, and Morgan Stanley by Mitsubishi UFJ. Even the proud and mighty Goldman Sachs announced it would become a commercial bank with lower leverage.

Next to go were the global stock markets, which acted more in unison even if the events were initially US based., In the Great Depression, 90% of the stock market value was lost from 1929 - 1932. Today, $ 9 trillion and 40% has been lost since the 2007 peak, and RBS, the largest UK bank, lost 40% in a day! Bloomberg became the most watched 24×7 television show in the world, and fear and panic begun to spread. Most felt “poorer”.

Third to go were the commercial banks.

Regulators, analysts, and banks themselves started becoming suspicious that other commercial banks held more “toxic” (illiquid or low priced) assets that they admitted, and that potential solvency issues lurked if asset positions in a suspect bank wiped out capital. Recent “Fair Value ” accounting practices amplified reporting earnings volatility, as once any item (housing prices) dropped, the industry was compelled to “Mark to Market” these items to the new low level. If Lehman could go, so could a commercial bank.

Since 2007, banks have reported $ 633 billion in losses, but have raised only $ 418 billion in new capital. If things got worse, who would they raise additional capital from?

In simple terms, Trust, as expressed in interbank (banks lending to each other) lending availability and price, is the Oxygen of the financial system. When it slows to a crawl, the whole system is prone to massive cardiac arrest. Most businesses and consumers operate on a certain assumed debt level, and once this breaks down, prices rise astronomically if funding disappears.

Suddenly, from easily accessible global financial markets fuelled by cheap and available money worldwide, an “Ice Age” of banking started. Banks with high loan to deposit ratios requiring them to borrow from the previously free capital markets were hit badly. Neither a US $ 700 billion troubled asset purchase program (”TARP”), or piecemeal European home country deposit guarantees initially helped.

Washington Mutual was bought by JP Morgan, and Wachovia by Wells Fargo in the US. The European solution was government based, as the UK, Dutch, and French governments offered massive government capital to save and strengthen household names like RBS and ING.

Effectively, 27 European governments voted together for 3 measures - partially nationalizing large “significant” banks, partially guaranteeing retail deposits, and guaranteeing interbank lending. The US followed by offering funding and partial nationalization to 9 banks, and direct lending to US corporations through the commercial paper market. The IMF put a brave front announcing the measures, but many wondered why the IMF was not more active in the process.

Act 3 - 2008 Countries in Crisis

Even countries started running into trouble - as of press date, Korea, Pakistan, and Argentina were in various forms of funding problems, and the latter two were rumored to have to go to the IMF. Iceland became the first Western country in 40 years to seek IMF help.

Act 4 - 2009 Real Economy Recession

Clearly, the next wave would be a real economy US and European recession, which would then overflow to the emerging market countries.

In the US, massive deleveraging has started, and unemployment has risen. The consumer spends 75% of a $ 14 trillion economy, and financial sector debt is 115 % of the GDP. Working capital bank lines are cut, while people strive to pay back credit card debt. Businesses are closing, and consumer related industries will suffer the most.

In Europe, the housing collapse in Spain and Ireland has spread to the financial services layoffs in the UK to overall demand cut everywhere.

A year ago, Asia hoped to “decouple” from the US; today , this is fantasy. Once the world’s largest buyer (the US) stopped buying, the world’s largest producer (China) would have growth cutbacks, with corresponding effects on the rest of Asia. GDP in the US and Europe could fall to zero or negative, but in Asia it would be lower growth, but still positive.

The Philippines - A Gathering Storm

Fortunately, the Philippines is small, far away, and of less marketing interest to sophisticated financiers. Also, its banking and insurance industries are more heavily regulated. In addition, the painful 1997 Asian crisis has left Filipino businessmen and bankers more cautious and more resilient than their Western (former) idols.

Given this, the Philippines dodged the Housing Subprime bullet, and was only minimally affected by the US investment bank and UK commercial bank crisis.

Philippine local currency banking operates normally, as Sept yoy lending growth remains close to 20%, while the deposit market remains fairly liquid.

We will go through dollar funding strain just like all other emerging market countries, but hopefully this storm will pass.

Banking is all about Growth and Earnings in good years, and about Liquidity, Solvency, and Trust in bad years. While growth and earnings will be significantly lower in 2008 and 2009, hopefully they will still be positive. Liquidity and Solvency should be manageable for as long as Filipinos continue to Trust the banking system to function normally.

However, we will be hit hard in 2009 - the first wave will probably be trade related, as the US cuts back on imports from the Philippines and China (which imports from the Philippines) .

The second wave could be more fearful - a significant drop in OFW remittances as some lose their jobs or need more for their overseas needs. Today, we contend that we are more insulated due to global OFW diversification and higher level jobs, but in a global recession, we will not be spared.

What to Do

Just as we prepare for a typhoon, we have to prepare for potentially rainy days in 2009.

For businesses, your balance sheet will become critical. You must reduce your debt to acceptable levels, and you must think through your business model in a low growth economy. Fro example, can a 20% drop in revenue cover your overhead? If not, some serious cost cutting is needed.

For consumers, it will be time to reduce unnecessary expenses (electricity consumption, gasoline, impulse purchases) and to start saving even a small portion of your monthly income. Capital preservation is critical, so think through your KYC (”Know Your Counterparty” ), and your asset allocation. If you can, keep 25% in cash or bank placements, and 75% in fixed income instruments until you are brave enough to reenter the stock market.

If you want to spend anything, either ask yourself twice or postpone the decision for a day - you will be surprised how many items will feel less necessary or desirable the day after.

However, we Filipinos are resilient, and we will survive this crisis as we survived the bank moratorium in the 80s and the Asian Crisis in the 90s.

Good luck to us all!

AURELIO R. MONTINOLA, III

President

Bankers Association of the Philippines

President

Bank of the Philippine Islands

October 27, 2008

(Above: video of “Anti DEATHS” rally mounted by Catholic Church in Cebu City last July: DEATHS is the acronym thought up by the wife of Kit Tatad and represents the Church’s advocacy against Divorce, Euthanasia, Abortion, Total Family Planning, Homosexual Unions and Sex Education)

Felipe Medalla some months back recounted to me that whenever President Marcos thought the Catholic hierarchy was becoming too antagonistic, he would make a big to-do about dusting off a draft Presidential Decree instituting divorce in the Philippines.

So long as Marcos was at the height of his powers, and there was a Julio Cardinal Rosales to counterbalance Jaime Cardinal Sin, the ploy worked. But as time wore on, and Marcos’ legalism gave way to cruder methods to stay in power, the manner in which he concentrated all power in his hands meant that as his own physical and mental condition decayed, no one beneath him could really do anything except scheme against fellow subordinates. The result was a power vacuum that only the Communists or the Catholic Church could fill -with the hierarchy worried that its clergy were drifting in to the clutches of the Communists.

As I wrote twelve years ago, the Catholic hierarchy exorcised the demons of the Philippine Revolution of 1896 by taking a lead in the People Power Revolution of 1986. Just how thoroughly Church has ended up appropriating the functions of the State is best seen in the opposition, with its reliance on mass mobilizations for masses, and how opposition and administration alike fuss over the hierarchy and whether they will order the Catholic studentry into the streets.

Both Marcos and Estrada, traditionally contemptuous of and hostile to the hierarchy, paid the political price, not realize how thoroughly eroded the traditional secular reverence for their office had become. Ramos was more clever; Arroyo, cleverer still, in appreciating that the hierarchy can be upwardly mobile, too, in their aspirations, and if flattered and courted and plied with cash, can become pliable, too, and a source of strength and not subversion to the incumbent.

And yet, the cozy relationship’s being challenged, and the challenge is in the form of a bill.

It is 2008, and in comparison to say, 1938, it seems unclear whether secularism is once more resurgent, or whether the Church Militant is poised to be triumphant and retain the privileged position it secured in our national life in 1986.

I like viewing things in cycles so let me explain my approach to the problem.

In 1938, Filipino leaders, most of them with memories of the Spanish era still fresh in their minds and themselves heirs to the anticlericalism of both the Propaganda Movement and the Revolution (a shrewd exploration of this can be found in Frederick Marquardt’s 1954 article, Quezon and the Church), debated and ended up defeating the proposal to teach Catholic catechism in the public schools. See The Church, July 2, 1938. Efforts by Catholics to have catechism taught during class hours in public schools, passed by an obliging National Assembly, ended up vetoed; a line was drawn demarcating the separation of Church and State (a line first established by statute in 1898, thoug even the Malolos Republic seemed more inclined to pursue establishing a national church more along the lines of the England of Henry VIII).

This line would hold so long as there were Filipinos alive who remembered the Spanish era and bore the anticlerical attitudes of Filipinos of that time. The apogee of that generation and its attitude towards Catholicism was the passage of the Rizal Law: see The Church Under Attack, May 5, 1956. Yet victory in Congress -the law was passed, against the impassioned opposition of the Catholic hierarchy and a new generation of bold Catholic apologists in politics- turned out a pyrrhic victory.

You could say the height of the anticlerical era was from 1896 to 1956; and in turn, the Catholic era began in 1956, and peaked in 1986 -with the Edsa Revolution taking on the characteristics of a Marian Deliverance- and, just as the anticlerical era began to wane in 1938 when the National Assembly, indicating how local-minded politicians were willing to take their cues from local prelates, approved religious instruction in the public schools and so showed the sign of political submission to the Catholic hierarchy to come, so did the influence of Catholicism -its naked triumphalism in the wake of Edsa, and its lingering assertion of religious supremacy over the secular, as demonstrated every day by the insistence of Catholic schools in having invocations and prayers come ahead of the national anthem, an act that would have caused a riot fseventy, sixty, even forty or thirty years ago- begin to wane at its point of maximum influence, when patently Catholic principles concerning the family and sexuality were enshrined in the 1987 Constitution.

The debate over the Reproductive Health Bill, then, has characteristics both modern and ancient: and aspects that echo the 1890s, the 1930s, the 1950s, 1970s and 1980s, too. But what too many overlook, I think, is how the Catholic Church is now fighting from a position of strength: not just in terms of organization and the enfeebled notions of citizenship and political identity of the electorate, but also, from a position of statutory advantage.

From the preamble of the Constitution, which dispensed with invocation of a Deist “Sovereign Legislator of the Universe” of 1899, or of the studiously non-denomenational “Divine Providence” in 1935 and 1973, our present Charter invoked “Almighty God,” and despite retaining the official separation of Church and State in Art. II, Sec. 6 (while providing, in the Bill of Rights, Article III, Sec. 5, from any specific Church being favored over the others, while forbidding any limits on the exercise of religion, as much a limit on the State as it is an encouragement to members of any particular faith), the Constitution moves on to providing for Catholic Doctrine as the core principles of the State:

Article II, Section 12. The State recognizes the sanctity of family life and shall protect and strengthen the family as a basic autonomous social institution. It shall equally protect the life of the mother and the life of the unborn from conception. The natural and primary right and duty of parents in the rearing of the youth for civic efficiency and the development of moral character shall receive the support of the Government.

And while Sections 13, 14, and 15 may nominally ordain concern for the youth, gender equality, modern health policies, etc., there follows a provision that subordinates all these, quite clearly, to Section 12:

Section 16. The State shall protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature.

Here lies what is arguable a Constitutional exhortation to limit anything related to health, including reproduction, to the Church-sanctioned Rhythm Method, or “natural” family planning.

For this reason, I believe that the debates raging in and out of the blogosphere, in the public sphere and wherever people take either their citizenship or religion seriously, when the debate focuses on the duties versus the rights of individual Catholics as pertains to their conscience, is a waste of time. I say this as a non-practicing Catholic who is entirely uninterested in whether or how people reconcile the tenets of their faith with their political and social conscience. It is a question only of interest to practicing Catholics but no one else (and even for the practicing Catholic, I think it’s futile: either have faith, which is beyond science and reason, or exalt science and reason and become an apostate; there can be no compromise between the two if one actually takes seriously the fate of one’s immortal soul).

So if the question of whether one can salve one’s conscience and not imperil one’s soul is immaterial and irrelevant for non-Catholics and non-practicing Catholics, how then, should the question of the Reproductive Health Bill be approached?

First, the actual provisions of the bill are no longer relevant or material. I say this, because the bill itself has been turned into a litmus test.

On the part of the Catholic hierarchy, the only choice is whether the bill can be defeated outright in Congress, or so thoroughly amended as to turn it into a law more fully supportive of Church aims.

On the part of supporters of the bill, the provisions are less interesting for what they contain -it is, after all, only a law, liable to be enforced more with talk and less with any real action- than for what they represent: an assertion of a non-Catholic, ideally non-sectarian, morality for the state.

The battle lines having been drawn, the battle has been joined and it would be dangerous to prematurely gloat that indications of broad public support for the bill is some sort of death knell for the influence of the Catholic hierarchy in the political sphere.

For an entire generation, Filipinos have been allowed to subordinate the state to God, daily seeing sectarian prayers given priority over the national anthem; this underscores, day in, and day out, the subordination of the state to the Church.

While this period -the generation since Edsa- only represents a third of the lifetime of our modern-day political institutions, it encompasses the living memory of fully two-thirds of the population.

In other words, in the generation since Edsa, where God has day in and day out been demonstrated as superior to flag, anthem, and republic, at least half of present-day Filipinos were born and their attitudes towards Church and State, molded; Filipinos reared in the strict subordination of religion to the State, a subordination demanded by historical experience, are the minority.

During this period, when our sense of the proper distinction between God and Country has been literally turned on its head, our civic sense, our political consciousness as a people, has been enfeebled. The weakening of our political institutions and the political culture upon which the proper functioning of those institutions is premised, also means that in the absence of a vibrant civil society, the best-organized, best-motivated, and best-funded sectors can hold state policy, including the formulation of laws, hostage.

Those wasting their time sneering at Catholic dogma, who want to debate the superiority of Reason over Faith, and so forth, are wasting their time either preaching to the converted, or egging on the religious to new heights of missionary zeal and fantasies of martyrdom.

Public opinion, in this era of apathy and how legalism and naked force trumps all public sentiment, is worthless. As both leaders and the led become increasingly local in their mentality and dismissive of anything that smacks of the romanticism and impracticality of the national, then the political strength of the Catholic hierarchy exponentially increases.

The clergy have never elected a president, a senator, even a congresssmen; this is a truism of our politics. But the other truism is what matters: a politician, whether local or national, is asking for trouble if he incurs the displeasure of the bishop. The hierarchy may not be able to get people elected; but they can seriously harm the prospects of a candidate for election.

And the hierarchy has brought two presidents to their knees; and they helped make the difference between being down and out, or living to fight another day, for the present chief executive.

So let me disagree with Blackshama and others in terms of how they’re framing the debate on this bill. There is no reason to frame the issue in terms of what’s going on in the United States; the proper frame is our anticlerical heritage from the Propagandists and Revolutionaries of the 19th Century and the Catholic Countereformation since the 1950s which achieved its aims in 1987. That heritage has been swept aside by demographics and the rot in the educational system and the sapping of the strength of the body politic.

When Stalin sneeringly asked, “how many divisions has the Pope got?” it was a classic case of the pragmatist being unable to recognize the motivational power of faith; he could sneer at Pius XII, yet it was that same Pope who ordered even cloistered nuns to go out and vote and keep Italy from having a Communist government; and it would be one of Pius XII’s successors who was given great credit (exaggeratedly or not) for bringing the Soviet era to a close in Eastern Europe.

In a society that has taken to accepting, at face value, the administration argument that all politics is a “numbers game,” then the Catholic Church has the numbers; the supporters of the bill, on the other hand, may have public opinion on their side but it is an opinion that cannot find a practical expression -or one practical enough to negate the negative influence prelates can have on the countless political contests officialdom’s already gearing up for in 2010.

As Blackshama tellingly points out -Galileo may have provided inspiration for generations of scientists and freethinkers, but his daughters became saintly nuns. The students who will be mobilized to show their numbers should the debate over the bill reach the point of requiring mobilization, may be attending their chemistry classes today, but they and their parents are already being primed with the incontestible battle cry, “what does it profit a man to gain the world, but lose his immortal soul?”

I have been advocating an effort to reeducate people when it comes to their rights and obligations as citizens. Secularism is far from dead, but at no time since the Revolution has it been so feebly understood and unappreciated by the public as now. We are not alone in this, and not just in terms of Catholicism. See an appeal for the secular ideal, in terms of Muslims, for example, on British subjects -not God’s by Ed Husein.

If I were a betting man, I’d say the odds are in favor of the bill being defeated, and that the odds are getting better for the Church every day. At the very least, they can water down the law so it becomes meaningless.

But even if they fail to derail the bill, let’s not forget what the Catholic Church has done, and continues to do, ever since it lost the showdown over the Rizal Law: it interpreted it as it pleased, and flouted it more than it obeyed it. And the secular schools have not been able to compensate and have even added to the general uselessness and essentially counterproductive results of the passage of that law.