An unbiased appreciation of uncertainty is a cornerstone of rationality-but it is not what people and organizations want. Extreme uncertainty is paralyzing under dangerous circumstances, and the admission that one is merely guessing is especially unacceptable when the stakes are high. Acting on pretended knowledge is often the preferred solution.
The current shopping mall boom will not only depend on a sustained low interest rate environment but will likewise depend on the greater rate of growth of income—via economic output from both formal and informal economy and from remittance transfers—relative to rate of growth of supply of malls. Debt will temporary augment spending, but has its limits.Once supply of malls grows faster than the consumer’s capacity to spend (income and debt), then trouble lies ahead.I don’t know yet how much of the banking industry’s loan portfolio are exposed to these malls. But given that the Philippine retail industry from which the shopping malls are categorized, accounts for approximately 15% of the domestic economy and 33% of the service sector and employs some 5.25 million people, representing 18% of the Philippines' workforce (according to Wikipedia.org), there is a possibility of significant exposure.This also implies that shopping malls will be faced with stiff competition among themselves. While this should be a good thing since competition should mean lower rental prices and provide more quality services, unfortunately the policy induced boom has clouded the effects of competition—giving the incentive for both consumer and investors to jump on the debt bandwagon which magnifies on such errors.It’s one thing to have bankruptcies as a result of failing to satisfy the consumers via competition, and it’s another thing when the public has been enticed to a cluster of business errors (malinvestments) which accrue from price signaling distortion brought upon by manipulated policy rates and from other forms of policy interventions.
(1) Debt liquidation leads to distress setting and to(2) Contraction of deposit currency, as bank loans are paid off, and to a slowing down of velocity of circulation. This contraction of deposits and of their velocity, precipitated by distress selling, causes(3) A fall in the level of prices, in other words, a swelling of the dollar. Assuming, as above stated, that this fall of prices is not interfered with by reflation or otherwise, there must be(4) A still greater fall in the net worths of business, precipitating bankruptcies and(5) A like fall in profits, which in a " capitalistic," that is, a private-profit society, leads the concerns which are running at a loss to make(6) A reduction in output, in trade and in employment of labor. These losses, bankruptcies, and unemployment, lead to(7) Pessimism and loss of confidence, which in turn lead to(8) Hoarding and slowing down still more the velocity of circulation.The above eight changes cause (9) Complicated disturbances in the rates of interest, in particular, a fall in the nominal, or money, rates and a rise in the real, or commodity, rates of interest.
The masses have never thirsted after truth. They turn aside from evidence that is not to their taste, preferring to deify error, if error seduce them. Whoever can supply them with illusions is easily their master; whoever attempts to destroy their illusions is always their victim.