There’s A financial tsunami that’s threatening the Philippine economy and we better be aware of it. The financial tsunami is the sea of money created by the QE (Quantitative Easing) policies of the central banks of the developed countries. Since Japanese Prime Minister Abe took over, the Japanese Central Bank has moved very aggressively to print money in order to arrest Japan’s deflation and economic funk. The US Federal Reserve has its own QE program since Fed Chairman Ben Bernanke’s time. Recently, the European Central Bank also announced its own QE program in order to revive the slowing European economies. Already, this financial tsunami has hit the Swiss economy. Last Jan. 15, the Swiss National Bank (SNB) reneged on its long-standing 53 commitment to peg the Swiss franc to the euro. In other words, the SNB abandoned its promise to keep creating francs in order to buy euros to prevent the Swiss franc from rising relative to the euro. It was becoming too costly, both financially and politically, in the light of the European Central Bank’s quantitative easing program for SNB to maintain the peg. Why? With the flood of new euros, which weakened the euro currency, it was becoming very costly to keep on buying euros with francs in order to maintain the peg. Immediately, the Swiss franc saw a sharp rise of 30%. The result is devastation for the Swiss manufacturing sector -- pharmaceuticals, chocolates, watches, etc. because the sharp appreciation of the currency will make its products uncompetitive in the world market. Swiss tourism will also take a hit. Why is this financial tsunami -- this tidal wave of money created by aggressive monetary expansion by the developed countries -- a threat to the Philippine economy? Continue reading... Kind of goes directly against the last article I posted but I'm no economist.
A very 'sensationalist' article. Interesting how in one breath the article states that PHP appreciation will hurt exports (true) but that there is also an issue with "Port Congestion"? Hmm - if .PH products become uncompetitive - WHAT CONGESTION?!! They won't be shipping much will they! In any event - the major players in the currency markets (mutual funds & active ETF's etc.) will always be looking for yield so sure, .PH currency may be a good short term punt - but these managers aren't daft. There will always be a concern over capital risk - which for .PH investors is very high. At least the article recognises this and I do agree that a major boost would be spending money on infrastructure projects, but in the REAL WORLD we all know where that money would end up! OFW's ship money into .PH - everyone else worthy of note takes it out! I wonder why?
Economists making predictions on the economy. If this guy could make accurate predictions on currency movements, he would be sufficiently rich that he wouldn't have to work as "board director of the Institute for Development and Econometric Analysis" and he would be able to afford to pay the hosting bill on that site which is linked to the article. Did he put his money where his mouth is? How much money does he have riding on this prediction? Opinions are cheap.
