Watched Night of the Museum 2 last week, it was a nice movie. Really enjoyed it. However, there is this one particular phrase in the movie that struck me. It is the one uttered by the “animated wax replica” of General Custer near the end of the movie. To paraphrase what “General Custer” in the movie said, “I am remembered by that one failure that I made”. And that one failure he mentioned refers to his ill – fated “Battle of Little Bighorn” or more famously, “Custer’s Last Stand” (see Wikipedia for the details). The phrase struck me because it reminded me that history is not solely about the record of great deeds, of towering success, of stunning victory. In fact, more often than not, history records failure with more lucidity than success and General Custer doesn’t enjoy the singular distinction of being a great failure. There are many more failures like him that littered the pages of history. The reason for this is because history is the collective memory of a people, of a nation, of a race, of a civilization. It is not just about names , dates, and places of famous people, place or events. It is about past experiences engraved in the collective memory of a people. It is from this collective memory that we seek success by trying to emulate acts of great personalities and at the same time, avoid the costly mistakes of historical failures. There is however, something in common that successful great men in history and those men deemed as historical failures shared and that is they have ambitions and they have the audacity to realize such ambition. Many have ambitions but few possessed the audacity to achieve it and the few who dared to live up their dreams, some end up a success while others failed either due to an act of nature or to their own blunder but in spite of that, we “remembered” all of them equally. It is due to this reasoning that I came to the conclusion that “being audacious has its rewards; you either end up as a monumental success or an epic failure; either way, you’ll be remembered.” But of course, being remembered for as a success is way better than being remembered for as a failure.
Saturday, May 23, 2009
There is a huge uproar that is been going on for the last 3 weeks or so if one has been following Philippine based blogs. And recently, that “outrage” has even spread to mainstream media with several high profile columnists/journalists expressing their “indignation” on the matter. The heart of issue is about the taxation of imported books to the country which ultimately led to what Robin Hemley, an expatriate in the Philippines described as “The Great Book Blockade of 2009”. The whole brouhaha started when a book importer ordered a huge shipment of the popular Twilight novels of Stephanie Meyers (ostensibly to satisfy Filipino booklovers craving for vampire romance) and once that shipment arrived to the country, Customs led by a certain Rene Agulan refused to let the cargo out of the port not unless the book importer paid the “proper” custom duties on the shipment to which the importer initially refused citing the Florence Agreement. The Florence Agreement is an international treaty signed in 1952 by 98 countries around the world of which the Philippines is one of the signatories. The treaty’s objective is to promote international understanding by allowing the free circulation of educational, cultural, and scientific books. The means to promote such free circulation is through the removal of custom fees among the signatories of the treaty. It is because of that, no Philippine book importer had paid any custom duties for the last 57 years until that incident. The particular enterprising custom officer, Rene Agulan’s stated reason for his stance is that the Twilight novels were neither educational nor cultural and certainly it ain’t scientific at all hence, that particular importer had to pay custom duties somewhere between 1 – 5%. Because of the mounting storage costs of the withheld cargo, the particular book importer relented and paid the said duties. That act of “kowtowing” to the rapacious appetite of government for money (of which the government is perennially short of it due to ….) has set off a “bad” precedent. Every imported book shipment since then were levied a custom duties of 1 – 5%. This naturally raised a howl of protest from all the book importers, who refused to pay and sought out government explanation on the matter. What transpired was something of a tragic comedy. Sought for explanation, a wisecracked Department of Finance (the supervising government body of the Customs Bureau) undersecretary Espele Sales, who is also probably an expert grammar professor, cited a passage of the enabling law, R.A. 8047 to defend government’s action. According to her, the law provided for “the tax and duty-free importation of books or raw materials to be used in book publishing”. Because of a “missing” or “vanished” comma right after the word books, our creative undersecretary interpreted the passage as to mean only “books used as raw materials in book publishing” are exempt from paying taxes. Every other else is subject to tax. Geez! She must be a pretty darn good grammar expert! I mean for the past 57 years, nobody got the “interpretation” of the law right until she came along (incidentally, if you have to get a good lawyer, get Espele Sales because she could help you to walk free of bloody murder by simply reviewing the incriminating affidavits for grammatical error or typographical errors which thus void its usefulness as an incriminating evidence). Anyway, because of the tiff between the book importers and the Tax agency, it was alleged that for two months, no new books has entered the Philippines (and hence the term, “The Great Book Blockade of 2009). It is no wonder that I felt that there is a dearth of new titles in the shelves the past few months. Anyway, like all issues in this country, this particular issue has also 2 opposite sides/opinions. On one side, there are those who doubted the very existence of a “blockade”. They argued that books never “disappeared” from the shelves at all during the tiff, which is quite true, a dearth of new titles maybe but disappearance? So where is the blockade? Furthermore, these people argued that 1 – 5% tax is “minimal” and that the “ridiculous” book prices are more of the book sellers doing. On the other side, some people are indignant; indignant of the government’s insatiable demand for “blood”, sucking every penny out of people’s pocket just to line theirs. The more statesman – ly of them argued that the government’s action are in contravention of the government’s lofty goal of uplifting the people’s literacy. By restricting the free circulation of books, we defeat the policy of expanding knowledge and literacy. Furthermore, the action amounts to a censorship and is an assault to the people’s freedom. Also, the government’s unilateral action has reneged it’s commitment to the spirit of the Florence Agreement to which it is a signatory. As such, it sends a “wrong” signal to the world that the Philippines government is whimsical when it comes to policy adherence and applications. Well, that’s in a nutshell, what the whole Great Book Blockade of 2009 is all about. So what do I think about the whole enchilada? Well, personally, I’m against the imposition of the duties on imported books (even though I’m not really a fan of vampire fiction) and my reason isn’t those lofty ideals of freedom but something more “grounded”. You see Philippine books are pretty expensive! I should know because I’m a book lover, I like reading books and I also collect books (to date, my Anobii account listed 271 books and I not only buy books from the local stores but also during my foreign trips). A “really good (imported) book” in the Philippines, hard bound, excellent paper quality written by a noted author can command a price of upwards 2000 pesos. The paperback edition of such book with nice paper quality sells at around Php1500 to Php2000. A “good book” (one in which the author is not that popular) with a nice paper quality typically sells around Php1000 – 1500. Between Php800 – Php1000 are the “downsized” version of a typically good book or the so – called mass paperback copies. Below Php500 are books whose printed pages are of newsprint quality. By comparison, in China, a paperback edition book with nice paper quality costs around Php300 – 400 (converted already) tops. As a matter of fact, last December, during my vacation in China, I’ve bought 7 books for 341 RMB or roughly Php2500 total. Imagine 7 books for the price of 2 or maybe even 1 bought in the Philippines (the books I’ve bought in China are scholarly works on Chinese History). Now that is expensive. It is due to this high price of books that book buying and collecting is fast becoming an expensive “hobby” of the “well – to – do”. A “financially struggling” individual can’t “afford” to read and collect books even if he loves books. It is for this reason that an imposition of a few percentage points of custom duties on the cost of books would only make books more expensive and the matter worse. However, it won’t be that bad if we have a “functioning” public library system instead of a pathetic one that we have now. In other countries I’ve been to, the public library system was so well – managed and well – endowed that people actually flock to it and literally crammed it. An example would be the Hong Kong Central Library, right across Victoria Park in Hong Kong, one of my favorite places. The Hong Kong Central Library is huge, 8 floors tall like a shopping mall but instead of merchandise on its shelves, it’s all books. The place is so popular with the locals that every seat in the place is taken and one literally has to sit on the floor in corner with his back against the wall just to be able to enjoy his reading. You can’t find those here in the Philippines. Without an “effective” public library system and with books getting expensive, how do you expect Filipinos who want to read to be able to read? One Anobii member used to say that “a room without books is like a person without his soul”. Perhaps not everybody would agree with his view but I think everybody could agree with me when I say that “you are what you read or didn’t read”. So, ever wonder why our country is like this?
Monday, May 11, 2009
Spoiler Alert: This article contains some spoilers of the movie. If you wanted to be surprise, don’t read this article.
“Space……… the final frontier. These are the voyages of the starship, Enterprise. It’s continuing mission to explore strange new worlds, to seek out new life and new civilization, to boldly go where no man has gone before!” – Opening line of the Star Trek: The Next Generation series.
As a trekkie, I’ve been waiting to see this movie for a long time now. Correction, I’ve been dying to watch this movie for ages already ever since Paramount pictures began showing trailers and teasers of the movie sometime last year (or was it the year before?). And on the opening day (May 8), I finally get to relieved my frenzied anticipation and thankfully, the weather cooperated (it was raining heavily the day before; a storm was coming to town then). And thankfully, the movie didn’t disappoint and honestly, I was pleasantly surprised on how the movie is done. It is somewhat different from what I would expect because the movie contravened established Star Trek conventions or more appropriately, TRADITIONS. Despite that, it was a great movie and I like it. In my assessment, I would give it a 4 out of a rating of 5. The 2009 Star Trek film is the eleventh film in the Star Trek movie franchise and chronologically the first film or a prequel to the 10 films before it but probably, this film may not even be considered a prequel at all given it’s radical retconning (as in total revision of the story line to the extent that it stray away from the storyline’s continuity) but an “alternate” franchise altogether.
The movie is some sort of a biopic of Star Trek: The Original Series’ leading characters, most notably that of Captain James Tiberius Kirk and Captain Spock (although at the movie they haven’t earn their command stripes yet). It tells a little back story of their youth, their first mission on board the newly built Constitution class, USS Enterprise and how they eventually rise to their respective position at the ship and finally becoming the legend that we all knew. The main plot line of the movie revolves around the revenge of a future Romulan by the name of Nero against the future Spock in particular and Vulcan and the Federation in general. The plot started during the late 24th century when a giant star near Romulus, the homeworld of the Romulan Star Empire went supernova, which threatened to totally annihilate Romulus itself. The 24th century Spock (played by Leonard Nimoy, the “original” Spock) then working as Federation ambassador to Romulus frantically devised means to saved Romulus from certain destruction. He along with several Vulcan scientists were able to develop “red matter”, an unstable compound that when reacted with matter would induce the formation of a singularity, a “gravity well”, a.k.a. “black hole”. However, Spock’s effort went for naught as he wasn’t able to deliver the red matter on time to save Romulus from complete destruction. In spite of that, Spock still pressed on with his mission intent to stop the spread of the energy shockwave resulting from the collapse of the supernova and thus destroy other planets in the neighboring star system. As he was approaching his target, a marauder ship, an advance, heavily armed Romulan mining ship commanded by Nero, who happened to be on a mission outside of Romulus before its destruction and who had lost everything with the destruction of Romulus appeared. Hellbent on revenge, Nero pursued to destroy Spock but instead was “sucked” into the time – space fissure created by the black hole, as a result from the detonation of the red matter by Spock. The result was to “throwback” the marauder nearly 129 years (or was it 150 years?) into the past. The time – space fissure created an electrical storm phenomena in space during the early 23rd century that attracted the attention of the Federation vessel, USS Kelvin, whose first officer, Lt. George Kirk was the father of our hero, Capt. James Kirk. A battle ensued between the marauder and the USS Kelvin resulting into the self sacrifice of Lt. George Kirk by ramming the Kelvin into the marauder in order to save the lives of escaped survivors of the Kelvin. It so happened that one of the escaped survivors happened to be George’s wife who at that time is pregnant and in labor. And in a dramatic coincidence, she gave birth to our hero, the future Capt James Tiberius Kirk, while the baby’s father is in his last few seconds of his kamikaze run. For the next 25 years, our heroes (James Kirk and the younger version of Spock played by Zachary Quinto) grew up while the marauder and it’s captain, Nero planned their revenge. Nero eventually got hold of the future Spock and the red matter, both came into the fissure a few seconds after the marauder but only emerged after 25 years of the appearance of the marauder in the past. With the possession of the red matter, Nero finally set in motion his revenge, complete destroying Vulcan and is in the process of destroying Earth when he was eventually defeated by Kirk, the younger Spock and the crew of the USS Enterprise in a dramatic battle. The movie concluded with a meeting between the future Spock and the younger Spock and the beginning of the legendary 5 year voyage of the starship Enterprise as depicted in the Original Series.
One of the obvious “loop hole” of the film’s script is the numerous “continuity error” that punctuated all throughout. There are about a dozen of them that a not – so – fanatical trekkie like me could find and expose. Such blatant “mutilation” of canonical rules would for a “traditionalists” trekkie, who uphold trekkie canons as bible truth, be considered as “blasphemous” if not an outright “sacrilege”. However, all of this are neatly “smoothen over” (and ultimately assuage the hard core trekkie’s indignation) by the most convenient of all the plot devices available to a science fiction film, that is TIME TRAVEL and it’s PARADOXES. Personally, I find the script is cleverly done. For one, by retconning the storyline, writers had the creative freedom to come up with an entertaining piece without being bogged down by numerous conflicting canonical conventions. There are many films (Star Wars the prequel trilogy) and TV series prequels (Star Trek: Enterprise series is one such case) that got mired in negative reviews simply because the writers are trying to be faithful to the establish canons. As such, in an effort to create a plausible back story to an established canons, some of the plots are deemed illogical while others are seen as somewhat “forced fitted” into the story line. I simply couldn’t imagine how the film would look like if the writers followed the established canons to the letter. Probably, it would not be as entertaining as this movie. However, some errors do occur in the script. Foremost among them is the part wherein the Romulan captain Nero stopped an attack once he discovered that the ship he is on the verge of destroying is actually the USS Enterprise. And he was able to do so by “reading” the markings USS Enterprise off the ship’s hull. Imagine an alien who could read English! For obvious reasons that Earth based movie goers couldn’t understand a word of the Romulan language, the conversation even among the alien Romulans are uttered in Federation Standard a.k.a. American English in trekkie universe (the classic explanation according to a trekkie lore as to why Romulans or for that matter any alien race “seemed to speak” Federation Standard is because they are fitted with a device called a Universal Translator) but to have a Romulan read Federation Standard?! Unless, Federation Standard is part of the core curriculum of school aged Romulan in the late 24th century, the writers must have seriously erred in the script and at critical juncture!
Directing and Special Effects
For science fiction movies like Star Trek, special effects played a very prominent role in the movie if not for much of it. Personally, I think JJ Abrams did a good job with the film direction. If you are familiar with the battle scenes of the previous Star Trek movies, the battle scenes in this movie are much more “clear cut”. The battle scenes of the last few movies in the franchise use CGI effects. It is very fast paced and quite short such that it literally “finishes” in just a blink of the eye. The relative shortness and fast pace of the battle action doesn’t leave a lasting imprint on the mind. The battle scenes in the current film however are more clear cut and “realistic”. The style of which reminiscences that of another sci – fi series, the new Battlestar Galactica (the 2008 version). Furthermore, the design of the Constitution class, USS Enterprise is more swanky, more sleek than the Original Series era starship, which is quite “geometric” in appearance. The internal design of the ship is also much different from the previous incarnations of the USS Enterprise starship in that the inside previous starships are literally more spacious with little “protrusions” of pipes and metals. The only thing that one can see inside the “old” Enterprises in their various incarnations is the desks containing the computers complete with view screens. In this latest version of the starship Enterprise, the internal layout is more cluttered with the engineering room looked more like a pipe maze. Overall, the feeling is that the ship’s internal layout resembled more of a submarine or an aircraft carrier layout than the “regular” starship layout of the trekkie universe.
Characters and Actors
One of the most impressive things about the latest Star Trek movie is the degree of imitation by the current crop of actors to the original cast members. In particular, Karl Urban’s portrayal of the irascible Dr Leonard McCoy was such an “exact” replica of the speech, the accent, the mannerism as well as the irascible character to the “real” McCoy portrayed by DeForest Kelley that one would think that Karl Urban is a younger clone of DeForest Kelley. Other actors too are equally “faithful” in their imitation at varying degree. Such “faithful” rendition of the original characters allows trekkies to easily accept these new actors in their roles because for the longest time possible, most trekkies didn’t even dare to imagine somebody else would be playing the parts of the original actors in the roles that the latter are typecast into. Accent apparently played a large role in the maintenance of this “imitation”. For example, Montgomery Scott, the Enterprise chief of engineering is played by James Doohan in the Original Series had a heavy Scottish accent and Simon Pegg, the current “Scotty” also exhibit such heavy Scottish accent (complete with the character’s condescending attitude). Pavel Chekov is another case. The character in the Original Series played by Walter Koenig has a distinct Russian accent and Anton Yelchin, a Russian with also a distinct Russian accent currently portrays the role of Chekov in the movie. The movie however is not a simple “imitation” exercise by the current actors of the original casts. They are also given some creative license to develop the characters. The most readily seen example is the portrayal of Kirk by Chris Pine and Spock by Zachary Quinto vis – a – vis to William Shatner’s portrayal of Captain Kirk and Leonard Nimoy as Spock in the Original Series. Shatner’s Kirk is decisive, arrogant, and bold. These are the same qualities that Chris Pine was able to elucidate in his rendition of Captain Kirk. However, Shatner’s Kirk is cool and calculating, more of a risk – taking explorer rather than a gung – ho, swashbuckling adventurer that Pines’ portrayal seemed to suggest. Furthermore, Pines’ Kirk seemed to be more like a James Dean type of rebellious bad boy than the more “gentlemanly” officer image of Shatner’s portrayal. Probably, the script called for such a portrayal since this version of Captain Kirk does have a stormy childhood. However, still, I would prefer a more “gentlemanly officer” type of Kirk even if it has some sprinkle of James Dean in it. Spock on the other hand as portrayed by Leonard Nimoy is an expressionless being trying hard to get in touch with his “human” side and for that, Nimoy’s Spock is the “model” Vulcan for which all subsequent Vulcan portrayals are based in the Star Trek universe. Zachary Quinto’s Spock conversely looked more like a human trying hard to be a Vulcan. Again, this maybe what the script calls for, to accentuate and ultimately explore the inner struggle of Spock between his “humanity” and his Vulcan lineage. Well, I just kind of that felt that it was quite odd for a “model” Vulcan to suffer identity crisis and trying hard to be a Vulcan. Anyway, despite that probable script’s attempt at ‘reinvention of the characters”, I felt Zachary Quinto’s take on Spock is done pretty well. I mean it is hard to portray a Vulcan especially their ubiquitous hand greeting signal. As for Chris Pines portrayal, I think he has to be more “mature” in his portrayal relying less on physical brawn. Other than that, I think he does well. There is another thing I’ve noticed in this current group of actors. They seemed to be more “cheery” when compared to the original casts. I mean Kirk is the quintessential leader and he almost always maintained that “coolness”, which William Kirk played to perfection. Nimoy’s Spock is ever expressionless and DeForest Kelley’s McCoy is the usual irascible self while George Takei’s Hikaru Sulu wears a long face that seemed to suggest a calculating and scheming personality. In short, the original casts’ portrayal seemed to be more “stoic”. Conversely, the current actors seemed to wear a smile constantly even if they’re serious and thus, they seemed more “cheery”.
Overall, as I said, the movie is a 4/5 in my book and it is one of the few movies that I deemed as worth watching the second time around, which I did last Sunday by the way (I’ll probably go for a third one soon).
P.S. To better understand the terminology of trekkie “speaks”, please refer to Memory Alpha, a Star Trek Wiki hosted by Wikipedia, http://memory-alpha.org
Wednesday, May 06, 2009
Note: This is just an opinion of mine and not based on some economic model, nor is it based on any factual data or figures. Furthermore, I’m no economist, just a regular businessman. I don’t have a degree in Economics either, just plain old fashion common sense.
A few weeks back, my eyes caught on an intriguing title of a magazine cover (either TIME, Newsweek, or Fortune, can’t remember). The catchy title goes like, “Cheap Oil Forever” or something to that effect. Anyway, I was so “stimulated” by the catchy front title that I proceeded to read that particular article on the magazine right on the spot at the bookstore. The central claim of the bold statement is based on a comparison of the oil price behavior made in the previous price cycle during the 1980s oil shock and the current price cycle. According to the article, both cycles though different in their peak prices exhibit similar behavior and from the comparative analysis, the author concluded that the current price cycle has already seen its peak and already went pass of it and the ensuing price trend would only see prices going down if not stabilizing. In short, oil prices is not likely to “skyrocket” in the short term foreseeable future much unlike the price fluctuation seen in the last two years or so. Wow! This is really a bold statement, indeed! Just last week (I think), the IEA, the rich western countries’ energy advisory group, projected a shortage of crude oil production capacity as early as 2011! With shortage as the logic goes, oil prices would revisit that unbelievable price tag of $147 a barrel in the next two years. That assertion though of IEA is hinge upon the complete economic recovery of the US and the OECD economies (the Organisation for Economic Cooperation and Development, the organization for advance economies mainly western countries) by 2011. Contradicting? Yes, absolutely! That the price of oil would buck the established historical trend is both “seemingly anomalous” and unnerving. However, the assertion of full economic recovery by 2011 though is not without basis. The news for the past month or so on the economic front is somewhat optimistic with American authorities claiming to see the “green shoots” of economic recovery based on encouraging economic data so far at hand. In addition to that, China’s economy is coping pretty well with the crisis and it’s export shows signs of improvements as of late. All this fueled market rallies around the globe, reacting in a way that suggests that the end (to the free fall of asset prices and to economic contraction) is already here and that we have already “bottomed out”. The most optimistic in fact, believed that there is nowhere to go from here but up. Pardon me for being a killjoy but I’m still unconvinced that this is the case especially the latter (that there is no way to go but up) though I don’t deny the fact that we had already turned the corner and “bottomed out” but recovery? I felt that assessment is too early to call (and I’m not alone in that assessment). Also last week, the former NEDA director, Cielito Habito, wrote in his column in the Philippine Daily Inquirer about the future economic prospect. Specifically, there is a debate whether economic growth pattern from 2010 onwards would be an “L” (sudden contraction of the economy as seen in 2008 followed by a prolonged recession or at least, an extended period of lethargic growth in the short term), a “V” (a sharp rebound; a momentary “dip” on the economic growth rate followed by an unusually strong recovery), or a “U” (a sudden contraction of the economy followed by a slow recovery). And this is the reason why the magazine article is such a “bold statement” because it presupposes that the global economy will experience a slow recovery or a “U” if not an extended recession, an “L” which goes against the recent raft of evidence of economic optimism. The recent market’s reaction on the other hand assumes a “V” shaped recovery if not at least a short “U” type of recovery. As I explicitly said, I don’t believe that a “V” shaped rebound is in the offing but a prolonged recession (the “L”) seemed to be contrary to what is happening around. Instead, I believe (as a growing number of analysts and economists do) that the world economy will experience a “U” shaped recovery if not an extended period of lethargic growth (or a modified “L”) in the short term. And I had my reasons for believing so. The current economic malady was borne out of the financial meltdown in the US brought about by the overextended debt burden of the typical American household. The debt situation was in turn derived from Americans assuming the mantle of being the “global consumer of the last resort” or being the “consumer of the world” for the last decade or so. This unflattering mantle came about during the last decade of the previous century with the internet boom. As we all know, the Americans have this 301k pension fund, which are heavily invested in securities and with the booming stock market, the value of their future “savings” correspondingly ballooned. Couple this “boom” with easing government restriction on the use of pension fund savings, the average American felt that they are “rich” even if their so – called wealth are in papers only. This “boom” wealth has drastically altered the American psyche and underpinned much of their consequent spending spree. You see, an average person would save a portion of their income as an insurance against future needs but with an extraordinary gain in their “creditable savings” due to the internet boom, most Americans believed that setting aside cash for future needs is no longer necessary and that future pensions and future income streams is as good a substitute to savings. As such, Americans began to spend and spend and spend even more. The internet bubble burst before the turn of the century didn’t give much of a dent on American propensity to spend because the government’s aggressive monetary policies and easing fiscal policies enabled the securities market to continue rolling on. As such, this created an illusion that “good times are here to stay” fueling even more spending spree. Eventually, a point came when this unrelenting spending spree gave rise to a voracious demand for resources that stretch global supply capacities to its limits and by the law of supply and demand, when supply dwindles and demand increases exponentially, exorbitant price increase inevitably follows. Inflation is the end result and we see the $147 a barrel crude oil in the market. As inflation began to bite into the income of the average individual by reducing their buying power, the inflation looks set to spiral out of control and governments worldwide began to drastically change course on their monetary policy from free – wheeling credit to one of restriction. This in turn took the wind out of financial markets resulting into a series of events that led to the current state of things. The current “Great Recession” differs from the previous recession episodes of the 90s and the early part of decade of the 21st century in that American savings are seriously affected. Previously, American savings are “protected” through government’s aggressive monetary policies but the financial meltdown has practically wiped out American savings. This could be gleaned from the news that people are coming out of their retirements to work for a living. And this is exactly my point as to why the current “Great Recession” would drag a bit longer or that recovery would be weak and slow. Americans can no longer spend. They don’t have money to spend. They need to rebuild their savings that they’ve lost. And as Americans were the “consumer of the last resort” or the “consumer of the world” with the American economy contributing a hefty share to the global economy, good times won’t be back for the rest of the world for quite some time. That however, wasn’t the “shocking” part of my “intuitive” assessment. I believed that the current crisis has “shocked” the Americans back to their senses (the common one). From a propensity to spend unleashed in the 90s to a propensity to save, Americans found out that there is no real substitute to savings than putting aside a portion of the hard earned cash in the bank and get this. No amount of government intervention would make people spend again, well, not at least the type of spending that we seen in the last few years. Remember, Economics is not a mathematical science but rather a social science that studies a person’s behavior in allocating resources or in layman’s term, how people spend their money. When people collectively became frugal because they felt they don’t have financial security to spend, no amount of government intervention would force people to spend. They would just save whatever money is thrown at their way. Not even disincentive to save such as zero interest rate on deposits or penalty on savings would force a change in behavior. People would just dug a hole in their backyard and bury their cash. With a much reduced spending resulting into a much reduced overall demand, economic growth would be stagnant, lethargic. The only time would economic growth return to “normalcy” is when spending goes back to “normal” and that can only happen if Americans manages to rebuild their savings or more specifically, when the Americans felt that they are financially secure enough to spend, which could take some time under a “favorable’ economic condition. Just exactly how long would this take? Well, if the 1997 Asian Financial Crisis is any gauge since the severity of the 1997 debacle is as catastrophic to Asian as the current crisis now hounding the Americans, it took some economies several years to recover. Of course, the stronger ones recover first while countries like the Philippine took practically a decade to get out of the rut. And the Asian economies were able to get out of the crisis because of “favorable” conditions. I mean the American economy then is on a bull run and China is equally bullish back then. As of now, there is no economy that is going to pull the world out of the rut. Many pundits are saying that China would save the world economy as its economic stimulus plan is deemed a success and that its domestic consumption is rising. China, however though the world’s third largest economy is far from being the “consumer of the world”. This is because their per capita income (the average income of their citizen) is below par. As such, present global economic recovery could take a much longer time. Speaking of China, the tremendous economic growth of this export juggernaut the past decade has partly contributed to the rising price of commodities of which crude oil count amongst it. What would happen to the crude oil prices if the US economy were to hobble along in a slow recovery while Asia, mainly China’s economy is bustling? Would the scenario of a $147 a barrel oil come back? Well, for one, China’s economy and to a certain extent, Asia’s economies are not as badly affected as that of the US and Europe in this current crisis, which could allow them to recover faster economically compared to the US and Europe and as such, Asian economies could provide some solid demand for commodities like crude oil in the near future and thus, provide support for prices. However, Asian economies and China in particular though big as they are, are merely a fraction of the size of the US economy. Therefore, it is inconceivable that they would be able to absorb the demand slack from the US and thus, tighten supplies and stoke debilitating price increases but nevertheless price increases attributable to China and Asia in general are to be expected. What is more worrisome is the current stimulus package being implemented by the US. The flooding of dollars in the world market serves as a volatile fuel ready to ignite a hyper – inflation in the coming years. This is because prior to the current crisis, the American dollar is trending lower vis – a – vis to the other major currencies around the world such as the Yen and the Euro. In layman’s term, the American dollar is devaluating in the global currency market before 2008. It is due to the crisis that the trend is reverse since the Dollar is the global currency of choice and American Treasuries are a safe haven for Dollar investments. However, as the crisis bottoms out, money would begin to flow out from the low yielding American treasuries and into other markets which offers better yield. Furthermore, recent pronunciations of American policy makers doesn’t really encourage holding onto the Dollar. I mean phrases like “Rebalancing the economies” sounded more like Americans should “sell more and buy less” (which translates to America should export more and import less). Less spending, lower overall demand also support US policy makers’ Dollar depreciation tact. On top of that, we have the flooding of Dollars in the international market. All this doesn’t really augur well with the value of the Dollar. As the value of the Dollar depreciates, prices would correspondingly increase since commodity prices selling in the international are produce locally (as in their respective countries) and as such are priced in local currencies (all production costs are valued in their respective local currency and not in US dollar) and with the fall of the Dollar and the corresponding increase in the value of their local currencies. It would require more dollars to buy the same amount of item even if the value of that item doesn’t change at all in terms of the local currencies. In short, prices would increase and in our case, the prices of crude oil would certainly “jump”. The only question is at what magnitude? This in turn depends on the strength of the underlying demand and the extent of the depreciation of the Dollar. That is a bad news for Dollar and other dollar – linked economies (countries whose currencies are closely peg to the dollar) as they not only have to grapple with slow growth but also with inflationary pressure (for non – dollar linked economies, the net effect could be zero if their currencies correspondingly appreciate against the dollar). This would turn provoke a policy response from the US FED in the form of raising interest rates in order to “mop up” excess dollar liquidity. The net effect would be further slowing of the economic growth and recovery as the economy is starved out of cash in circulation as people prefer to keep their money in banks and earn high interests. With that, we would end up with a classic case of stagflation, stagnant growth and high inflation (if the inflation didn’t subside fast enough), which is about the next worst economic state, next to Depression and /or the Great Recession (another way to “appreciate” what “stagflation” is, is to relate it to income; in stagflation, your income doesn’t improve at all but the cost of living would tremendously increase). Then again, it may not happen since demand may not be present to support stratospheric crude oil prices. But then again, who knows and that is why the “bold statement” magazine article pique my interest.
P.S. I don’t want to be right this time around. I prefer to be proven wrong. After all, I’m just partially correct with my last assessment on China, see “The Coming Collapse?” 9/26/07 (ok, I’m probably way off the mark, which is a good thing). “ )