The Economists' Disease

Before you read on, please watch this.

As you watched through the video, I would guess that you were thinking about the beauty of nature, diversity,  sustainability, environmental awareness and so on. If I am right in your case, then you are likely not an economist, but for sure you have a beautiful heart.

If you are one of us, a gang of people burdened by a "rational brain" to the point of it being in fact an affliction, you would have not seen the beauty you just saw; the birds and the rabbits and the regrowth of willows and the less-meandering river. You would have not seen the colors and the hues as your brain connected the dots from the reintroduction of the wolves to the changing of the river.

Instead, you would have seen a multiple regression model, with predictor variables and correlation coefficients. You would have thought, "hmmm, what tests are applicable: multicollinearity, heteroscedasticity  and/or autocorrelation? Will the values of x's be true blue unbiased estimates? Do I just look at the residual plots or perform the White Test or the Goldfeld-Quandt Test?" You would be yearning, longing, thirsting, aspiring for a data set, both time-series and cross-section. You would be fumbling for what dummy variables can be used. And after all the number-crunching you would have came up with a thought: "It makes me wonder, what it we introduce dingoes and not wolves?"

Yes, we kind of always spoil it, even in the case of love and beauty.

And that is why I call it an affliction.

 

The Yuan and the Bald President

 

On the heels of China's devaluation of the Yuan, economists all over the world knew that this one will be felt all over the world in staccato fashion. China has been for a time regarded as the last bastion of the once highly-regarded BRIC nations. Brazil and Russia had seen low growth for a while now, and India had been quietly limping along. And China has finally entered a massive deceleration from a previous regime of high growth that had been mainly fueled by government spending, mostly in vertical and horizontal construction. This is not really a big surprise. From 2-3 years ago, we already knew this will happen.  A nation, even one as big as China, cannot build roads, rails and Olympic stadiums forever.

Main exporters to China, the likes of Australia, Japan, Brazil, South Korea and Malaysia, will surely take a hard hit. The construction machine has gone past its overheating point and has to slow down. It will therefore buy less of the raw materials that it once gobbled up in big numbers. With the devaluation, it will also be more expensive for China, thus adding more pressure to import less.  

The Chinese government had been trying hard to fix their woes  by way of monetary and fiscal policy; the most recent is the decision to devalue the Yuan. And every economy strongly linked to China will take a hit.

And the Philippines? Well, no matter how much we throw mud at the balding President, we have to admit, this one knows his job. There might be some stroke of luck in there where our economy currently stands, but undeniably our strong economic fundamentals is also a result of good leadership. Our well-known fiscal and monetary prudence did not happen by accident.

Thanks as well to our solid BPO industry, and the forever heroes that are the OFWs. Also a much deserved thanks to Filipinos who invest in the Philippines. Our stocks and bonds are only 10% foreign-owned. When the going gets tough, foreign investors cash in and run. But even if they do as in the case now, 10% of them is not enough to make the edifice crumble. 

I hope I have whetted your appetite about this issue. I will not repeat what has already been written, and might as well let you read it straight from the Chicago Tribune (http://www.chicagotribune.com/news/sns-wp-blm-news-bc-philippines24-20150824-story.html?ref=yfp).

As a parting shot I wish to hammer this one home: We are in good footing today despite the financial chaos elsewhere because Filipinos (incl. the OFWs) invest in the Philippines, and the bald leader has the ability to see the big picture; the acumen to put society first before politics.

Finally, the Filipino as a citizen has evolved. We keep our money here because we believe in what we have become; a new version we could aptly call Filipino 3.0. This is the version that holds real our ability to rise and rise again, until lambs become lions.

Notes:
Pic from vox.com
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TradeLib in the ASEAN - By Nonoy Oplas Jr.

This one here is a well-written paper on the topic of Trade Liberalization in the ASEAN by a good friend of mine, Nonoy Oplas, Jr. A must-read, for those who wish to understand the relevant economic concepts and likewise see ASEAN trade in graphs and numbers. True to his advocacy of having less government intervention in areas where the free competition should thrive, Nonoy draws the conclusion that governments should promote and not interfere in business trade. Two thumbs up!