Friday, October 31, 2008


Erick San Juan
The Philippines and nations more impoverish than her (especially those similarly indebted to the World Bank – International Monetary Fund) should now start preparing for a lot more depressing times. This grim scenario is anticipated as the end result of having already infusing into its banking system the controversial $3-trillions financial bail-out package of the United States government and yet, it is bound to aggravate worldwide poverty and possibly hunger with the new economic stimulus fund that its banking moguls are batting for.
While the economic stimulus fund was conceived as a means of priming economic activities in the US and ensuring profitability of its commerce and industry, it does not take into account the chilling effects it would deliver to economies with heavy borrowings from the WB-IMF and other banks.
In Economic 101, we were taught that inflation sets in when the supply of hard cash exceeds the normal demand. Conversely, when the demand for hard cash could no longer be satisfied or, when there is a shortage of currency, deflation is bound to set in.
In most if not all economies, it is the central bank that determines the rate of interest – and of course - inflation, since it is the entity which produces, securitize, circulate and control the volume and value of currency.
In the United States, the Federal Reserve System is controlled by a consortium of 12 privately-owned banks – the largest shareholder of which is controlled by the Rothschild of London. Other bankers in control of the banking infrastructure of the United States are the Rockefellers, the family of JP Morgan, the Warburg family of Germany, the Lazard brothers of Paris, Israel Moses Seaf, Kuhn, Loeb and company of Germany , Lehman Brothers of New York and the Goldman Sachs of New York .
Like former US Senator Aldrich, the family of Prescott Bush (paternal grandfather of President George W. Bush and of course, father of former President George Bush, belong to the so-called “tentacles” of the big “banksters” imbedded in the US government.
For ages now, it is an accepted doctrine among bankers that money begets money and (all forms of) power. Banks take in deposits (hard currency or valuables) for which they pay a minimal interest rate which they, themselves impose. It then, loans out the hard currency in its custody, at an interest rate even much higher than the rate given to the depositors. Those persons, entity or governments who incur loans from a bank gets indebted.
Since 1776, the US dollar was backed by gold until April 5, 1933, when US President Franklin D. Roosevelt issued what many Americans called a “treasonous” Executive Order No. 6102, ordering all US citizens to hand in all their gold and gold certificates to the private Federal Reserve Bank. Since then, it became illegal for anyone to keep a large amount of gold whether in the form of bullions or gold certificate.
The late US President Abraham Lincoln once said that those who get indebted eventually become virtual slaves. In fact, he had expressed fear that there can come a time when the children of Americans who are heavily indebted to the banks might wake up one day to find that they no longer own anything but the shirts on their backs.
The Banko Sentral ng Pilipinas (BSP), unlike the Federal Reserve Bank of the US, is owned by the government. In fact, through the BSP, the government may also borrow money from domestic and foreign banks each time the need arises.
The BSP is controlled by a Monetary Board (MB) composed of private persons appointed by the President of the Philippines. They are handsomely compensated, although not one of them own stocks in the BSP. But they wield enormous powers. Because of that, some of them behave like they also own the economy. Some analysts believe that they are also in the payroll of international banks.
Similarly, the MB determines the interest rates that private banks may impose upon their respective borrowers and depositors. It is also the entity that determines the volume of currency it will circulate in the economy.
Since Filipinos can remember, the domestic currency was also backed by gold bullions stored in the CB vaults, until President Ferdinand Marcos declared Martial Law and eventually issued a fiat similar to the FDR’s EO 6102. As a rule, the government can only print as much currency as it can secure with gold. Each time the government incur budget deficits, it borrows money from the CB, which prints the hard currency. When the CB prints a volume of cash that is more than what can be secured with gold, the value of the peso gets depreciated and inflation becomes bigger.
With that act by FM, the Philippine peso’s security shifted from gold to only by the volume of US dollars that the BSP is keeping in its vault.
Since the 1950s, the Philippine government has already been incurring foreign loans – principally from US banks. In fact, much of the Philippine government’s loans have been retired and yet, the Philippines’ outstanding foreign borrowings still stands at about US$56-Billion, a currency that has, by itself depreciated so much and on several times. Necessarily, the purchasing power of the domestic currency also gets depreciated each time the US dollar losses some of its value. But the reverse is never true, especially when former Central Bank governor Joey Cuisia (during Cory's time) almost converted our Central Bank into a private foreign controlled system through a Central Monetary Authority.
So, with the inflationary effects posed by the US$3-Trillion financial bail-out package and the new round of economic stimulus funds being pushed by pro-banks US solons to jump start their attempt to recover from the economic collapse of the US – which was of their own making, Filipinos should better be wary. It is not the ordinary Filipinos’ fault, but our policy makers doing. Surely, hard times are here to come.


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