The biggest crisis of our life?

The past few weeks are among the most turbulent times in the global financial market. It may actually be the biggest economic crisis since the Great Depression (1929 - 1939). To most of us, we do not have any idea what that means.

The closest Filipinos can relate to are the 1983 economic crisis, when the US decided to stop financially supporting the Marcos regime. The next economic crisis after that was largely due to the military adventures launched by the now- Honorable Senator Gringo Honasan. Still, they were textbook readings for me as I was still a kid when those happen.

The 1997 Asian Crisis is a little bit clearer. I entered college in June 1998, Ramos welcomed us with the great accomplishments of his administration. Then the economic and political disaster named Erap (1998 - 2001). Most people really didn't care much about the economy back then, pro-Erap people pinned the economic woes on Ramos. Anti-Erap people blamed Erap.

And now the current global financial mess. This is the first economic and financial mess I am able to follow in my professional life. It is both intriguing and extremely exhaustive to understand. Mankiw and Mishkin (textbooks) tell you one thing while the whole world tells you another. One problem is that US textbooks go to great lengths to explain the US economy (as expected), while better systems exist.

Case in point, I am examining the effects of the financial meltdown on three developed Asian economies that are all heavily reliant on exports, Singapore, Hong Kong and South Korea. Singapore adjusts monetary policy through their exchange rate, Hong Kong adopts US interest rates while South Korea adjusts interest rates but heavily subsidizes different parts of the economy. And everything in between is chaotic.

How about the Philippines... we are more complicated actually. The Bangko Sentral ng Pilipinas adjusts key interest rates but banks follow the Treasury bills rate which is controlled by the Bureau of Treasury, which is under the department of Finance... meaning, Teves has more control over lending rates than Tetangco.

Our stock market is very small, nobody cares how the international crisis affects us. No international news agency reports what happens to our stock market. A few percentage point loss in the US stock market is enough to wipe out our entire stock market. in the late 1990s, The Economist included the Philippines in their Key Statistics for Key Emerging Markets, recently they dropped us in favor of Pakistan.

It is very depressing... but I am quite sure, there will be more crises, as in more crises that our generation will encounter through our lifetime.