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The turning of the tide

Unless I totally misread him, I think John Mangun is saying that, with the current increase in prices of goods and services, we are merely experiencing the darkest hours before dawn.

In stark contrast to the gloom and doom being peddled over at Filipino Voices, Mangun opines that:

Now, the difference between the “future” price and the “spot” price is narrowing, indicating that the momentum is changing, and soon, the “spot” price will move the “future” price and that direction will be down.

In other words, while things will keep on getting worse for a while yet, the turning of the tide is no longer too far off. When things get too pricey, after all, people will stop buying; when people stop buying, demand falls; and when demand falls, so too will the price of things.

But as wonderful as that news is, I can’t help but be struck by the differences in approach taken by these two writers, especially since they’re talking about the same basic thing: the increasing cost of living.

Where Gagelonia rhapsodizes about “perfect storms” – I swear, if I ever meet the guy who made that movie, I am going to hurt him so bad for adding yet another term to the lexicon of filipino melodrama – and dire predictions and exhorts us to “hang on” as though we were about to go off the edge of the world. Mangun , on the other hand, chooses to tell us that this isn’t world’s end.

The difference in points-of-view is important to acknowledge because the first – Gagelonia’s take – does nothing but increase the sense of despair already pervading our nation. And he does so gratuitously, gleefully predicting darker times. But of course, since he’s a juh-nah-list, he’s allowed to do that, isn’t he? HAH! And juh-nah-lists have no responsibility other than to tell the story they want to sell; never mind if it destroys a nation’s faith in itself, and by necessary implication, it’s ability to look beyond its despair and so get on the road to recovery.

Imagine what the outcome of WWII would have been if Churchill had not talked incessantly of victory even in the darkest days. Imagine what it would have been like if journalists constantly dwelt on how numerically superior the Japanese invaders were compared to our guerillas. The determination to win would have been pummeled and quite possibly snuffed out.

And it’s even worse today. At least, during the war, if you felt frustrated, it was perfectly alright to go out and whack a few enemies. When you’re frustrated with economics, on the other hand, who do you whack? LOL! You could maybe drive a truck into a crowd of late afternoon pedestrians and start stabbing people with a salad fork. Or you could shoot some kids in the playground now and say “I don’t like mondays.”

Mangun’s approach, by contrast, was a sober assessment of a singularly thorny situation; one which laid out the problem (high prices) but which also demonstrated that the problem is not insurmountable. Where Gagelonia insinuates that we’ve nothing to look forward to but crap, Mangun attempts to show that there is hope. And, as Pandora found out, hope matters.

And for us especially, hope is what we need if we are to actually turn the tide at some point. Just like the basic law of economics Mangun was citing – about how there is a point when prices rise so high that deman simply drops off – there is a basic law of human psychology that if you batter the psyche long and hard enough, it will reach a point where it just accepts defeat as an inevitability. In the face of a sustained barrage of gloom and doom, higher goals are abandoned, defeatism becomes the default, and mediocrity becomes the acceptable human condition.

And that, is simply not acceptable.

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Filed under: musings, Quick Posts, , , ,

40 Responses

  1. Jen says:

    hey rom. very well put. *applause* *applause* 😀

  2. Bencard says:

    the prophets of “doom and gloom” are obviously driven by a cockeyed belief that economic bad news, regardless of cause, would topple the incumbent president before 2010, since nothing has work for them so far. they look at half-empty glasses with ulterior motives, and are saddened by positive economic news. i look at their views with jaundiced eyes.

  3. BrianB says:

    Buying less food, ROM, is the dawning of doomsday. People are already starving. Inquirer reports 4 million people are hungry. Children are the first to suffer. Hungry children usually grow up to be very “difficult” citizens. This is not the U.S. It’s not as if designer clothing and Starbucks are going away; the potential of poorer Filipios will vanish first before Starbucks.

    And I thought you were applauding sober thinking not hopeful thinking.

  4. rom says:

    BrianB: sober thinking, contrary to the belief of storm-crows, does not preclude hope, because if it did, how would any of us rise above our circumstances?

  5. cvj says:

    Rom, in an economy such as the Philippines which is basically driven by demand and where most of the demand is in basic necessities, how could you possibly translate Mangun’s Prices go too high, demand drops. as ‘turning the tide’?

  6. rom says:

    cvj:there’s this new concept, see? it’s called the law of supply and demand? when demand drops, supply builds up; and when there’s a lot of supply, prices go down. LOL!

    Seriously though, i understand that the demand for basic necessities never actually goes down. But Mangun, I think, wasn’t talking of basic necessities. Rather, he was referring to those things which are needed to produce those necessities – like oil or wheat. When these commodities get pricey, so too do the products that are made from them – including basic necessities like noodles, i guess. And so, alternatives are explored and as the alternatives become more accepted, the demand for the pricey commodities drop, causing a similiar drop in the cost of the end-products.

    I also understand that “turning the tide” implies action on our part. And by that I meant that if we are hopeful, we would be more predisposed to finding alternatives at our own levels of consumption, rather than just whining about our lot in life. We can’t influence the price of oil directly, for instance, but by choosing lifestyles that aren’t as fuel hungry as those that we are used to, we help mitigate the problem.

  7. cvj says:

    Unfortunately, for many Filipinos, getting hungry is also an ‘alternative’ (though not in the sense of having a choice). Relatively comfortable folk like us can do with one less cup of Starbucks, but we’re among the luckier ones. (Unless, of course, you’re saying that it’s not really doom and gloom until it happens to the middle class. )

    Regarding your description of finding substitutes for oil (as an input to basic necessities), you have to distinguish between short- , medium- and long-run dynamics.

    In the long term, we may eventually find substitutes for oil as the dominant source of energy to power our economy and by that time, the latter may become worthless.

    In the short to medium term, large scale production and transport of necessities such as food is still dependent on oil so the trade off would be between higher oil prices and conserving energy (e.g. by producing nearer to the final destination to save on transport costs).

    Ironically, it is the higher price of oil that actually makes investing in its substitutes viable business propositions so, if we were to rely on market forces alone (and not on government fiat), a drop in the price of oil would not be good in terms of bringing these substitutes on-line.

    So while what you say in this entry may apply to the longer term, Dean Gagelonia’s analysis is relevant to the immediate future. John Manggun’s prognosis upon which you seek comfort, at best, offers a silver lining but only at the price of slower economic growth (which brings its own set of problems). By no stretch would i describe what he says as a turning of the tide.

    As to being hopeful, the trick is to remain hopeful despite the bad news. Here’s what economist Jeffrey Sachs has to say about actions that can be taken.

  8. cvj says:

    Sorry, here’s the correct link to the Jeffrey Sachs commentary.

  9. Bencard says:

    maybe cvj’s “hungry” poor should go back to the land and nature and use their hands to produce their own sustenance. the philippines is endowed with vast tracts of unproductive but fertile lands, waters teeming with fish and other sea foods, temperate climate that hardly needs fossil fuels to live in and raise livestocks. etc. these instead of squatting on urban centers, living in squalor and dangers. necessity is the best stimulus, the best incentive. no able-bodied individual, with a modicum of intelligence, should go hungry in a “land of plenty”.

    echoing rom’s point, when the price of oil becomes non-affordable to average consumers worldwide, efforts will be made to voluntarily cut down, curtail, or even avoid unessential use of energy, such as leisure driving, large-scale conservation effort, coupled with development and use of alternative source of energy, would drastically reduce consumption, and, therefore, demand for oil.
    maybe, it’s not too farfetched to think that oil’s obsolescence is just around the corner.

  10. cvj says:

    Bencard, that’s a reasonable suggestion which is why i’m in favor of land reform so land can be utilized for this purpose. There are also 3 million hectares of ‘idle’ government lands. Instead of allocating 1/3 of it to San Miguel/Kwok (at a dirt cheap 1 Thousand Dollars per hectare), the government should be focusing on letting the hungry poor make the land productive. The government is of course responsible for providing irrigation, roads and financing, and training to these would-be farmers.

    One minor correction Bencard. The Philippines is in a ‘Tropical’ (not a ‘temperate’) climate.

    (BTW, the above should be ‘Ding’ not ‘Dean’, my apologies to Mr. Gagelonia.)

  11. cvj says:

    Regarding oil’s obsolescence, here’s the projected energy requirements for APEC Countries (including the Philippines) up to 2030:

    The Philippines’ primary energy demand is projected to more than double from 44Mtoe in 2002 to 111Mtoe in 2030,
    growing annually at 3.4 percent; buoyed mainly by high growth in the demand for petroleum products in the transport sector….The economy’s energy import dependence is expected to increase from 51 percent in 2002 to 68 percent in 2030, importing most of oil and coal requirements for the transport and electricity sectors.

    If you want oil to be ‘obsolete’, 38 percent of that 111 Mtoe of Oil has to be replaced by something else in the medium term. When you do that, then you would have ‘turned the tide’.

  12. rom says:

    cvj: Ding Gagelonia’s analysis is relevant?! What analysis?

    You mean this?

    For now my own gut feel is that the storm clouds will get even darker and could move us dangerously close to what professor Leonor Magtolis Briones calls “the perfect economic storm.”

    Or maybe you mean the part where Gagelonia says that an analyst is getting “ahead of himself” because that analyst had the gall (the nerve, even!) to say that “the dark storm clouds would not necessarily lead to social unrest. ”

    Ooooooh. I soooooo totally agree with Gagelonia that the analyst is getting ahead of himself in predicting that our society MIGHT NOT get into trouble, because certainly (CERTAINLY) Gagelonia wasn’t getting ahead of himself when he predicted that we were edging closer to a perfect economic storm. Yeah. we’re about to go argentina. yes, we are. uh-huh.

    PUH-LEEZE!

    Of course Gagelonia’s fearless forecast will come through. Prices aren’t about to come tumbling down overnight. Anyone who says so is either an idiot or an infant.

    ~

    Did I not say that the turning of the tide is not too far off? That’s a bit diffrent from your implication that I’m saying that the tide is turning now. Somewhere up there, I also said that things will get worse before they get better. Again, is it not obvious enough that I’m NOT saying that the tide is turning already?

    As for Mangun offering a silver lining – you don’t actually have a problem with that, do you? Honestly, uncle. Would you really have the whole country thinking that we were in some bottomless pit we can’t get out off and that any talk about the possibility of recovery is blasphemous?

  13. rom says:

    cvj, bencard, EVERYone: uncles, please take the time to vote in my poll about the new header! 😀 i really want some feedback. Thanks.

  14. cvj says:

    Rom, as i said, John Mangun’s ‘silver lining’ i.e. falling oil prices because of falling demand, comes at the expense of an economic slowdown. That’s not exactly good news.

    As to ‘turning the tide’, you can refer to the link i provided (at 10:49pm) to see what is involved.

    (BTW, just voted. I miss the lady on the bike, but the above is more you.)

  15. rom says:

    cvj: oh yeah. you fixed the link. will do, uncle. and thanks for voting. 😀

  16. Bencard says:

    cvj, i think it can be done with the least government intervention. if one can live under the bridge or along railroad tracts, or eat from the garbage, he can clear a tiny plot of public land and “squat” on it so long as he does it peacefully and with respect. i’m sure the government will be more compassionate and understanding.

    re: oil’s obsolescence, i think your quoted “projected” energy requirements does not take into equation the reduced consumption i was talking about as a result of the various consequences of the prohibitive price of oil which rom commented upon.

  17. cvj says:

    Bencard, i do hope that government does what you recommend instead of handing over the land to the big corporations. It’s recently been reported in the papers that San Miguel is eyeing 1 million hectares of government land (1/3 of total government land) for their farming initiatives. (The Philippine Daily Inquirer seems to endorse San Miguel’s initiative but i don’t think that’s a good idea.)

    As i told Rom, on the projected energy requirements, the reduced consumption may only come at the cost of economic slowdown (unless an alternative energy source is mobilized at a sufficient scale to compensate for oil. In any case, any alternative source of energy will not be cheaper than oil (or coal) in the near to medium term because of the need to recover R&D and Investment costs.

  18. cvj says:

    Bencard, as far as your ‘least intervention’ is concerned, the government at the very least , has to help with irrigation, roads and financing, and training.

  19. Bencard says:

    cvj, are you talking about commercial-scale production? what i had in mind was just personal sustenance or home consumption level to stay alive or die with food in the stomach. our forefathers have done it through the centuries. why can’t we? reliance on the government had been minimal, if at all.

  20. cvj says:

    Bencard, thinking ahead beyond, we have to provide the poor a means of livelihood beyond subsistence so they can send their kids to school, provide for their healthcare needs and build up some savings. If they form viable livelihoods on the basis of their government allocated plots of land, then they would see less need to flock back to the cities to seek a better life.

  21. Jeg says:

    Pardon my ignorance but why is ‘economic slowdown’ a bad thing?

  22. cvj says:

    Jeg, mostly because of higher unemployment (and underemployment). If you’re already living at the margin, then it translates to malnutrition, not being able to go to school and the like. Think back to what happened in 1983 when the government allowed the economy to collapse in order for us to improve our credit standing. The past twenty five years since then has been devoted to getting out of that hole. Do you think it was worth it then?

  23. Jeg says:

    I keep thinking ‘economic slowdown’ is just bad news for those in the upper strata but good news for those in the middle. I imagine prices falling, especially real estate prices, prices of capital goods, etc. IOW, economic slowdown is a great opportunity for the middle class to seize control of the economy if theyre up to it. The question is, are they up to it?

  24. cvj says:

    Economic slowdown usually affects the poor and the middle class first. The rich have more buffer.

  25. Jeg says:

    I suppose that’s true of the poor in the cities. And the middle class in the cities. Not necessarily true for the poor and middle class in the countryside. The countryside produces things. The cities dont. If the countryside doesnt want to part with their produce at the price the city folk want them, then they won’t produce for the city folk. Theyll just produce for themselves.

    For the city folk, especially the middle class, slowdown means they won’t get to ride cars and go to malls and buy new cellphones. Theyll also send their kids to public schools (which Im sure you approve) or home school them. The oligarchic rich, if we’re lucky, will leave.

  26. BrianB says:

    Bencard,

    I see Mangun’s point being applicable here too, but try chewing on this: luxury cars in this country is twice as expensive as in the U.S. Same car type model, Filipinos pay twice as much but then you still see a lot of benzes, Beamers and even Jaguars. I kow people who’d just think of buying one and ta da! Prices go up but I don’t think the professional consumers will not stop buying. What will happen quickly is that low-level employees will demand higher wages to compensate, business will cut back, more unemployment… But rich will keep buying cars and going to abroad. In fact, I think with our depressed state, more of them will stay abroad more often.

  27. […] relief from high commodity prices is on its way, simply because high prices is driving away demand. Smoke makes the case why we should keep our collective chins up, instead of dwelling on the negative: […]

  28. Bencard says:

    brianB, the “filthy” rich crowd will always be able to afford luxury, come hell or high water. but how many ferraris or lamborghinis or private jet can each of them have; how many filet mignons or dom perignon can they consume in one seating; how many mansions do they need to live in at a given time? being relatively too few, this group hardly drives a nation’s economy as consumers. having said that, luxury goods cannot be banned in a democratic society and no one can be prevented from wishing to have them.

    i guess, what we are talking about here are the poor masses and the middle class whose whose primary concerns are food on the table, health and education for themselves and their children, a decent home to live in, and security for their persons and properties. these people should be encouraged to ride bicycles, public transportation and alternative sources of energy, among other things. the need for a national railway system is nevermore imperative. maybe a return to horseback riding, or horse-drawn calesas should also be considered. i, for one, am not gonna lament the elimination of jeepneys, “rolling coffins”, private vehicles, even the ubiquitous tricycles and motorbikes, from the nation’s cities and towns and highways.

    maybe this escalating cost of oil is a boon in disguise. maybe it will become unreachable and thus compel the majority of the public to go back to basics and let oil be used primarily for the production of food and other essential goods.

  29. BrianB says:

    Agree on the vehicles. I walk to work every day and my day’s not complete without ogling a real fine ass on my way to work and home.

  30. Jeg says:

    Im counting on the economic slowdown to break the oligarchy. Meralco would wither as middle class entrepreneurs will look for sustainable energy sources. But Im afraid that’s wishful thinking. Knowing the Pinoys, the economic slowdown will give rise to calls for the government to take over businesses, and the government will oblige. Who knows? Maybe that’s the plan.

    And hell yeah on the vehicles Bencard. Let’s wean ourselves away from a high-energy-consumption lifestyle. But again Im not too optimistic. Our middle class, instead of using less energy, will clamor for nuclear energy. And yes the government will oblige.

  31. rom says:

    Jeg: what’s wrong with nuclear energy?

  32. Jeg says:

    Ignoring the obvious ones (waste disposal, our country being prone to earthquakes, etc), it’ll enable the unabated exploitation of our planet to the detriment of our kids and grandkids. Imagine how easy it would be to strip-mine a mountain. Our high-consumption lifestyle would continue and even intensify. And you know what high-consumption means: we’ll be neck-deep in our own waste.

    Another is that it’s capital-intensive. We would just be replacing one set of oligarchs with another. cvj mentioned natural monopoly. Nukes would be that. Here’s a scary thought: government would probably be running it.

    What we need is a lower energy though-put plus a more distributed capitalism: small wind-powered or water powered power plants for example. The planet can’t take the abuse that nukes would allow even if it were 100% safe.

    But true to my sunny disposition, I think the human race is doomed. Nukes is inevitable. 😉

  33. cvj says:

    Brian, as i told DJB, i don’t think you can use that article against Zubiri because it explicitly says that:

    The report points out biofuels derived from sugarcane, which Brazil specializes in, have not had such a dramatic impact [on food prices]

    Jeg, i don’t think Meralco would wither if they still have the power distribution business.

  34. BrianB says:

    I wonder why these lazy-assed hacienderos never went for it, though. But will this mean the haciendas will stay?

  35. BrianB says:

    Also this from wikipedia:

    “Some question the viability of biofuels like ethanol as total replacements for gasoline/crude oil. One concern is that sugarcane cultivation will displace other crops, thus causing food shortages. However, these concerns do not correspond to the current situation in Brazil”

    It seems to take up much land area, an ethanol producing plantation.

  36. cvj says:

    Brian, i think the Brazil model is what Zubiri is trying to emulate.

  37. BrianB says:

    CVJ, it’s like sugar all over again. Suagr to Ethanol becomes another cash crop model and another reason for our economy to stagnate.

  38. cvj says:

    Brian, you may be right as Brazil has a huge problem with the landless.

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