June 1, 2004

A Keynesian Moment

Here's a thought. What if the difference between the country's GNP and GDP growth rates becomes consistently notable, such as around 2%-3% because of our expertise in exporting people as against products and services. Given that the Philippines has one of the lowest savings rate in Asia, it should also have one of the highest marginal propensity to consume, and therefore one of the highest expenditure multiplier. Perhaps that could guarantee that the country will never slip into a recession. That's because the money infused has diverse sources and will go right into the heart of the economy. Let's contrast this with the entry of hot money. Portfolio investments come from a couple of foreign fund managers. Their entry could propel the stock market into unseen heights, but we've also seen what their exit can do. This is why the Philippines survived the Asian Financial Crisis and the Tech Bubble: there wasn't much hot money to talk about in the first place. I reckon that the quality of foreign currency seeping into the economy via foreign-based nationals is of higher quality because of the arguments above. Remittances sent here can't be pulled out because there are better investment avenues abroad unless our own people decide to invest abroad. Even if that theoritically happens, it can't happen overnight, unlike the pullout of a major multinational company or a selloff by a foreign fund manager. Hmmm, textbooks define interest rate risk, currency risk, political risk and the like. But what do you call that risk when you have an economy that has too much money concentrated in the financial system or in one sector leaving it vulnerable to shocks? Economic structure risk? hmmm...

If I've been long and laboring, it's because I just woke up. To state again, my thesis here is that if the consistent difference between the GNP and the GDP growth is significant enough, the country will never fall into a recession. Of course, like all rules there could be exceptions. I mean, if we have another actor as president, that could throw off all the economic theories I've ever heard of. But enough of that. Do not feed negative thoughts with more energy.

It's funny but I was napping a while ago. I had a dream that an analyst on TV declared that "the market died yesterday." He went on to point out several stocks that have already begun their descent. With that thought in mind, I forced (yes forced) myself awake thinking that I have to sell my PLDT. Considering that I was in deep sleep, I found that to be a remarkable resolve on the part of my subconscious. The first thing I checked was the time: 12:30 PM. Dang. I just missed the market. Just now I checked what happened to the index. It rose seven points. Whew. PLDT closed at P1075. Whew again. What would the act be called if I managed to sell? Sell on Dream (as against sell on news)? hehehe. That's enough for today.