Sunday, May 10, 2015

Phisix Record 7,800: Hidden Bear Markets in Bank-Financial Stocks! BSP’s “Responsible” Policies

Zero interest rates have gone on for far too long. We had a crisis that was based on solvency problems: banks and households were borrowing too much. They needed to go through a process of deleveraging. Monetary policy cannot address that. That deleveraging is a process that needs to take place. It has taken place to some extent, in some sectors more than others. But, we've seen debt increasing on the public and corporate balance sheets. Though household and bank debt have decreased, total public and private sector debt have increased. And that is a function of monetary policy, which has made it very cheap to borrow. That is what low interest rates do: they encourage borrowing and penalize savings.  So, I am very concerned that we've distorted the markets.—Sheila Bair, Senior Advisor, Pew Charitable Trusts and Chairman, Systemic Risk Council; former Chairman, Federal Deposit Insurance Corporation; former Assistant Secretary of the Treasury for Financial Institutions; former Commissioner of the Commodity Futures Trading Corporation

In this issue:

Phisix Record 7,800: Hidden Bear Markets in Bank-Financial Stocks! BSP’s “Responsible” Policies

-Has Index Managers Been Losing Grip of the Market?
-Shocking Bear Markets in MOST of Banking and Financial Stocks!
-BSP Declares Hidden Taxation via Inflationism as Responsible!
-BSP Responsible Policies: Promotion of Debt Financed Speculation
-BSP Responsible Policies: Stagnant Wage and Jobs Growth for 2014!
-Financial Repression: The Incentive to Understate Statistical Inflation
-BSP Responsible Policies: Philippine Treasury Yields Surge!

Phisix Record 7,800: Hidden Bear Markets in Bank-Financial Stocks! BSP’s “Responsible” Policies

Has Index Managers Been Losing Grip of the Market?

Apparently stung and vexed by last week’s heavy selloffs, index managers went on a panic buying flurry from the opening bell until the session’s close at the start of the week! The panic buying spree went on for two successive days!


Index managers applied the three pronged index targeting operational tactic: panic buying day (for the first two days and on the Thursday selloff), afternoon delight (4 out of 5 days, red lines) and marking the close (upside index setting in 4 out of 5 days; rectangles). (chart from colfinancial)

And for these two days, the manipulators racked up a considerable 204 points or 2.63% gain which almost wiped out 90% of last week’s losses.

Unfortunately, they seem to have lost steam. Over the next three days, the Phisix fell .58%, .73% and .68% respectively. So at the close of the week, the domestic benchmark survived another bout of selling pressures to close up by 48.39 points or .63%.

Interestingly, about 45 points or 92% of the week’s gains have been from marking the close!

As a side note, Thursday May 7th, the Phisix opened with a steep 1.6% loss, however panic buying ensued (lower mid window). But unlike in the past where index managers succeeded to fill the deficit and or produced modest or even significant advances at the close, index managers only trimmed losses by 54.37% to end the day down by .73%. More signs of diminishing returns from interventions?

Like the week ending in April 24th, marking the close delivered the gist of the Phisix recovery.

Let me just state that without the serial “marking the close” sessions, which became a regular feature since the last quarter of 2014, there won’t be a record Phisix.

The Phisix today could likely be rangebound at best, or on a bear market at worst.

And I estimate that about a third of all the gains in the race to Phisix 8,100 have been due to “marking the close” sessions, which ironically, is a violation of the SEC’s Securities Regulation Code. Vested interest groups have been manipulating the index with brazen impunity.

Marking the close, again, has hardly been a standalone activity. Such have usually been combined or have been set up with an afternoon pump. The general principle seems as to create a buying momentum until the pre-runoff session so as to amplify the effects of the last minute pump.

Yet regardless of the legal dimension, unscrupulous activities are unsustainable. Last week’s market maneuvering seem to expose on possible clues that index managers could be running out of ammunition.

Usually, the effects of closing session pumps are amplified on reduced trading volume. However for last week, shriveling volume hasn’t brought about the desired effect.


Despite only Php 6.8 billion volume during Friday’s session, the third lowest (day) volume for the year, selective pumps failed to materially boost the index. The Phisix lost .68% Friday.

On a weekly basis, this week’s gains came with considerable shrinkage in peso volume (averaged weekly) trades, which accounts for the FOURTH lowest for the year (left window).

In addition, the week’s gains has hardly been backed by broad market activities as advance decline spread remains substantially tilted towards declining issues.

This shows again how the rally has been centered to a few key index issues.

Importantly, this week’s push and pump has largely been skewed towards property issues. The property index soared by 2.5% and has been key to this week’s advances! 

Gain in the property index essentially offset declines in the industrial sector.

And current conditions seem to have shaped into an arena where foreign money (as sellers) and index managers (as buyers) have engaged in combat.

Because of the inclusion of foreign participation in special block sales, PSE statistics downplayed on the intensity of foreign selling for the week.

The Php 3.4 billion block sales of Century Pacific Food (CNPF) Thursday reversed a broad market selling by foreign money. The said block sales led to a net foreign buy of Php 980 million on Thursday which pared down the net foreign selling amount for the week to just Php 571 million.

The selling activities and countermeasures via interventions have spread to domestic treasury markets which remain under heavy pressure, and which has been experiencing increasing volatility (see below).

The domestic currency has been sold down too. The peso fell to Php 44.615 from last Friday’s close at Php 44.52.

Given the huge job inspired gains (in the hope that the Fed delays anew interest rate hikes) in Wall Street Friday, index managers are likely to use such opportunity to launch a counterstrike Monday.

Shocking Bear Markets in MOST of Banking and Financial Stocks!

In the past I lamented over my limitations[1]: Working alone gives me little time to delve or pry into more detailed data such as issues above or below 50-day moving averages or number of issues at record highs versus number of issues in bear markets or peso volume per issue relative to total volume. This perspective would surely have added depth to this insight.

Well I just did a piecemeal work on the financial index to gauge ratio between record highs and bear markets. And my suspicions have been confirmed. Additional circumstantial evidence unearths of how frail, disproportionate and or even how rigged the record Phisix has been.

Remember the banking and financial index represents the heart of the current boom-bust cycle. It is the industry from which most of the credit expansion or financing activities has taken hold.


Of the 13, three of which are not just Phisix composite members but belong to the top 10 largest publicly listed firms in terms of market cap weighting.

And here is where it gets interesting.

Stunningly, NINE out of the 13 or 69% issues in the financial index have been in bear markets!!!

As of the session close of May 8:

-Philippine Business Bank (PBB) shockingly halved -52.46% from—take note—March 2013 pinnacle!
-Philippine Stock Exchange (PSE) plummeted 25.1% from—again—the apex of March 2013!
-Asian United Bank dived 32.31% from—again—the acme of May 2013!
-East West Bank (EW) plunged 38.7% from—again—the peak of May 2013!
-Union Bank of the Philippines plummeted 29.53% from—again—the zenith of May 2013!
-Philippine National Bank (PNB) tanked 30.91% from—again—the top of May 2013!
-Rizal Commercial Bank (RCB) collapsed 39.18% from—again—the crest of May 2013!
-China Banking Corporation (CHIB) tumbled 30.43% from—again—the summit of May 2013!

As a side note, since including 15 charts here will mean an overload, I pre-posted them on my blog instead[2].

On the other hand, as for issues on the upside, two major issues, Bank of the Philippine Island (BPI) and Metrobank (MBT) have yet to surpass their respective 2013 watermark.

Meanwhile, Security Bank (SECB) which has slightly exceeded the 2013 highs seems as struggling to maintain its newly established position.

And the only clear cut record holder has been BDO Unibank (BDO)!

In perspective, with the exception of investment firm Bright Kindle ex-Bankard which was bought by PBB from and came into being only in October 2013, ALL 12 or 100% of financial index issues carved out landmark heights in the 1H of 2013!

Yet since the climax of 2013, EIGHT of the twelve issues (again with the exclusion of BKD) have not only failed to sustain a recovery, but continue to languish or even fathom to new depths! To include BKD, this makes 9 of the thirteen or 69% of index issues on bear markets!

The above only exhibits that the bull run of 2013 had been BROADBASED, which characterized a genuine bullmarket. This is unlike today where the bull-run has only been on a few issues—obviously designed to create headline effects.

Equity owners of financial stocks in bearmarkets must be scratching their head in bewilderment of the disconnect.

But the buck doesn’t stop here.

The same traits can be seen at non index banking and financial issues

There are more banking and financial stocks in bear markets, namely, PBCOM (PBC), PS Bank (PSB; also from 2013 top), City State Bank (CSB), Col Financial (COL), First Abacus (FAF; sideways but down 20+%), IRemit (I), MEDCO Holdings (MED) and National Reinsurance Corp (NRCP).

On the contrary, non index stocks at record highs have been a rare breed; such as AG Finance (AGF) and Vantage (V).

Uptrend stocks but yet to break record: BDO Leasing (BLFI) and largely untraded very low liquidity bank stock Philtrust (PTC)

So eight non index bank and financial stocks PLUS nine index issues total 17 issues. SEVENTEEN banking and financial issues which treads on bear market territory!

This is against uptrend issues comprising 4 major index companies and another 4 non index firms for a total of eight.

Overall, MORE than HALF or 53% of banking and financial stocks have been afflicted by bear markets as against only 47% on an uptrend. Only 3 stocks (12%) are at record Highs!

What kind of a record bull market has this been?

Note: Manulife and Sunlife are excluded from the above tabulation, as they are foreign companies whose prices are driven by global dynamics. Also excluded are Export Industry Bank which reportedly have been under government receivership and due for acquisition by BDO, and AsiaTrust which is now a shell company since its business was absorbed by AUB

The fact that a larger base of subsidiary issues has diverged from the majors implies that all has not been well for the industry.

And again, my suspicions that headline record stocks have hallmarked “representative bias, the survivorship bias and the fallacy of composition than from real developments” have been validated.

The public have been directed to see only the visible winners! Yet such comes at the cost of patently ignoring general conditions—or the sustained selling pressures on broad based issues in the face of a record benchmark!

And we are talking about the banking-financial system!

Record Phisix has really been a Janus faced phenomenon, incredible!

Have all the adulations of the Philippine banking system been about a few biggies weightlifting the industry or covering the shortcomings of the rest?

And how can such glaring divergence signify a sustainable bullmarket?

Importantly, the above shows why trading activities have been suctioned into a few but big market cap issues. Since there has been little broad market support, index managers have focused on what has been visible, perhaps with the intent not only to paint milestone numbers for political goals, but also to inspire broader market participation.

Unfortunately, having been repeatedly tortured; domestic equity markets seem to have hardly succumbed to the pressures and seduction from the headline manipulation through the benchmarks.

And so, the sustained pumping on concentrated issues by index managers which implies even more accumulation of imbalances!

Think of it, index managers have been massively hoarding overvalued equities at record highs, so once they lose control their portfolios will hemorrhage! Will loss containment measures and or gearing exposures prompt them to spearhead panic selling?

BSP Declares Hidden Taxation via Inflationism as Responsible!

And speaking of banking, the Philippine central bank, the Bangko Sentral ng Pilipinas recently issued a pat on the back press release which spews out a litany of banking statistics, to highlight supposed achievements of “responsive, responsible and remarkable performance”

The crow about low NPLs, loan to coverage ratios, capital adequacy among the many numbers exhibiting the supposed strength of the system and financial stability.

Thus they trumpet[3]:
Thus, it came as no surprise that international credit watchers and market analysts consider the Philippine banking system as one of the strongest in the region as it is currently the only banking system out of the 69 rated banking systems in the world that received a POSITIVE outlook from Moody’s in 2014 (two times in a row).  The country’s financial freedom score also improved by 10 notches on continuing modernization and liberalization of the banking system with the removal of limits to foreign bank entry in 2014 against the backdrop of an efficient regulatory environment.
While I am FOR liberalization, liberalization has much to be desired. For instance, a resident can’t buy foreign exchange from a specific bank and deposit them on the same day. So depositors would have to shoulder the risk of carrying converted foreign currency. This for the intent to supposedly thwart foreign exchange speculation.

The BSP hardly realizes that this only increases risks borne by depositors without preventing speculation. Speculation only migrates to the black markets which the BSP tacitly promotes.

And this represents 'responsive' performance?

How truly 'responsible' has the BSP been?

In 2013, I quoted a media interview where the BSP governor bragged about their potential response to the proposed tapering by the US FED[4]
This week in an interview on Bloomberg TV, the gentle BSP governor signaled a forthcoming change in the BSP’s policy stance noting that since the Philippine economy is “strong”, “we don’t see any real need for stimulus at this point”.
Stimulus? What stimulus has he been talking about?

Now to flashback to the year 2009, where the BSP governor announced an overhaul in economic policies as I previously highlighted[5].
“There are views that Asia must boost domestic consumption and end its dependence on exports,” Tetangco said. “In the longer term the view is that Asian economies may need to look more at their own domestic economies as the engine of growth.”

According to Tetangco, counter-cyclical support to aggregate demand in the form of expansionary fiscal and monetary policies, along with strong policy actions to ensure financial and corporate sector health could contribute to faster recovery.

“Maintaining an expansionary monetary policy stance to the extent that the inflation outlook allows, could support market confidence and assure households and businesses that risks to macro-stability are being addressed decisively,” he said.
So the stimulus has been all about “expansionary monetary policy” intended as “counter-cyclical support to aggregate demand” meant to “boost domestic consumption and end its dependence on exports”. 

In short, flush credit into the economic system! How did the BSP implement this? By suppressing interest rates which consequently meant manipulating the yield curve. 

Stimulus means to provide resources to a politically privileged sector. And since resources are scarce, then this means resources given must be taken from somewhere or from someone. So by suppressing rates, such redistribution or transfer entails subsidy to debtors at the expense of creditors, the savers, insurance and pension and currency holders. 

Who are the major debtors? The government and politically favored firms and the financial elites.

In other words, BSP’s policies represent an invisible forced redistribution of resources from savers to borrowers or from the average residents to elites and to politicians ! The BSP has engaged in legal plunder of people’s resources. 

And this is responsible?

BSP Responsible Policies: Promotion of Debt Financed Speculation

The BSP lately boasted of an increase in “financial inclusion” where the penetration level of population with bank accounts has grown to 31.3%. That’s based on a survey from World Bank’s Findex.

The BSP didn’t say that of the 31 of every 100 people with bank accounts, only 15% saved with banks, and importantly, only 12% have engaged in borrowings from the bank. So essentially, the ‘subsidies’ from BSP’s financial repression stimulus policies have been channeled to ONLY the privileged 12% of the population!

Of course, borrowing by the 12% of the population has not been equal. Some borrow more than the others. Borrowing represents a means to an end. Therefore people use borrowing to attain different ends. Some borrow to buy cars, for travel, for stock market and property speculation, for business, for consumption and etc…

And collateral used for borrowing also differs. For those moneyed and well connected, borrowing can even emanate from unsecured loans as character loans.

Nonetheless, the collateral based borrowing dynamic means that the more the collateral, the greater the potential borrowing. This also means that credit activities will tend to flow towards those with more collateral, the moneyed class or the elites.

So BSP redistribution will benefit mainly the political class and economic elites.

And this is responsible?

Besides when government greases the credit markets, a self-reinforcing feedback loop between collateral values and borrowing activities occur as previously explained, as part of the Reflexivity Theory.

This implies that an increase in credit activities tends to increase the value of collateral. And an increase in collateral gives more room for credit activities. Parlayed into assets: high prices of securities extrapolate to higher collateral values which encourages more borrowings that eventually feed into higher prices which reinforces the feedback loop.

So the greasing of the domestic markets not only benefit the elites via access to more resources on credit, importantly the greasing of credit markets encourages debt financed speculative activities.

How does statistics ward of rising credit risks when financial policy itself encourages such risk activities?

As Professor Masaaki Shirakawa former Governor of the Bank of Japan and former Vice Chairman, Bank for International Settlements noted[6] (bold mine)
Following the global financial crisis, there were many measures introduced in the area of regulation and supervision to make finance safer. Most of these measures are desirable. But, it is not enough to have a certain liquidity or capital buffer for a given amount of debt. What is more important is to avoid too much debt itself
And whatever happened to this statement?
To reduce the possible financial stability impact of extended periods of negative real interest rates. Right now because of excess liquidity in the system, the industry doesn’t seem to mind much that real interest rates are negative. But ladies and gentlemen, when the tide turns, those projects that you may have “approved” based on a specific expected value may not provide you the “return” you anticipated. With this in mind, our policy actions have been aimed at helping you manage your own risk appetites.
Who said it? Well no less than the BSP governor in a speech last October[7]. 

So has he had a change of heart? Perhaps due to pressures from vested interest groups?

Encouraging debt based speculation represents ‘financial stability’?

And this is labeled as responsible policies?

BSP Responsible Policies: Stagnant Wage and Jobs Growth for 2014!

Going back to the domestic credit markets, how does the rest of the economy accessed credit outside banks? Well, of course through the informal sector!

From the BSP[8]: For loans, informal borrowing is still the most common practice in the country. The percentage of those who borrowed from family and friends in the past 12 months increased to 48.7% in 2014 from 39% in 2011. The Philippines is also one of the countries in the world where more than 10% of adults borrow money from private informal lenders. In 2014, 13.5% of Filipino adults reported sourcing credit from an informal lender, up by 0.8 percentage points from 12.7% in 2011.

Since an informal economy means they are beyond the ken of the government, then the above data should be taken with a grain of salt.



And because of the Cantillon Effects of money—where initial receivers of money supply expansion (bank borrowers, particularly the elites) benefit from present prices as against the latter recipients of money (the average residents) and where relative price changes work against the latter through higher prices—the massive credit expansion in the domestic financial system which has been highlighted by 9 successive months of 30% money supply growth has only harassed and reduced the standards of living of the average citizens with no access to the formal institutions.

Proof? Here is the BSP’s data on 2014 employment, labor and wages.


The formal labor force increased by a measly 2.5% in 2014! This supposedly lowered unemployment rate by a marginal 6.8% from previous sting of 7+%. 

I wouldn’t bank on the accuracy of this data though. That’s because of a substantial number of informal sector labor. The International Labor Organization estimates Philippine informal sector labor as varying from 40-80%. The Philippine Statistics Authority in 2008 estimates a 10.5 million strong informal labor force. Even at 10 million, this would account for about 25% of the above estimated employed labor force.

Again given that informal economy is beyond the scope of the government, estimates are likely shrouded by statistically significant errors.

Yet wouldn’t it be a curiosity, why has the 6.1% 2014 GDP produced job growth of only 2.5%?!!

Because capital offset labor? But investments since 2013 have been in a decline!

Where has, and where will, the supposed strong consumer demand coming from?

And here is THE zinger.


It’s not only just a paltry 2.5% increase in jobs. 

Shockingly, non-agricultural nominal daily wage rates grew by ZERO PERCENT and a NEGATIVE 1.6% in real terms in the Metropolis!

Based on NSCB data the National Capital Region (NCR) contributes around 36-37% to the national GDP in 2011-13.

So TWO-FIFTH of the labor force endured stagnant wage growth, and worst, stagnant wages also implied a reduction of purchasing power via negative real wage growth!

The table above is from the BSP’s annual report[9].

And for non-agricultural sector outside NCR, nominal daily wage rates grew by a miniscule 3.7% and by an infinitesimal 1.3% in real terms.

Most possibly the growth in these areas could be due to money illusion effects from recent food-agricultural inflation.

And even in the agricultural industry, for regions outside NCR real daily wages grew by only a puny 1.6% and microscopic .3%!

Yet even without considering that statistical deflator used must have been underreported*, which means that growth rates have been overstated, the above data represents a striking revelation that BSP’s bubble policies have only increased economic hardships.


And given the remarkable stagnation in wages, where will demand come from? Who will patronize and where will money come from to spend on the frantic race by the supply side to build at double digit growth rates, real estate, shopping malls, financial intermediaries, construction or hotel?

Have these not been the nurturing of imbalances that represents roots of financial instability? How does statistics know of the qualitative content of such credit risks—when statistics are numbers based on history?

And this is called responsible?

Financial Repression  The Incentive to Understate Statistical Inflation

*Aside from methodological flaws in inflation measures, there are incentives for the government to understate statistical inflation.

The goal of financial repression is to transfer resources from the public to the government and government favored enterprises (a.k.a cronies) without provoking social uproars.

Besides, how do you impose negative real rates? Tell the public that they are being indirectly taxed via loss of purchasing power through their peso?

Let me repeat the BSP governor’s October speech: “the industry doesn’t seem to mind much that real interest rates are negative”. Of course, the industry won’t mind, they are the beneficiaries!!! They have access to formal credit or are the first beneficiaries of money expansion! Of course, this depends on the industry too.

Yet should the BSP tell the public that they are subsidizing industries like real estate, shopping malls, financial intermediaries, construction or hotel which are mostly projects of the elites? By the way these sectors, in 2014, accounted for 50.35% of industry loans.

Moreover, suppressing deflators enhances statistical G-R-O-W-T-H! Will the government not want bigger growth data to ensure easy access of funds from bank and credit markets from both domestic and international sources thereby securing political spending growth trends?

Finally, understating statistical inflation essentially undervalues government liabilities like pension and other welfare based payments. 

Will the government not want to wangle more money from their constituents for political objectives?

BSP Responsible Policies: Philippine Treasury Yields Surge!

Hasn’t the mainly bubble industries been vacuuming funds from the public, allegedly for capex, through various equity and bond markets offerings? Hasn’t these signified a transfer not only of resources but of risks to the gullible public facilitated by BSP policies?

How about purchasing power losses by the average citizenry from the invisible transfers in favor of the Forbes list of the Philippines wealthiest?

How about insurance and pension companies whom are being forced to move out the risk curve for the purpose of matching asset-liabilities? Have these not been signs of financial instability? Does the statistics suggest that balance sheet matching have neutral effects?

And these assumptions are ‘responsible’? 


Does the domestic treasury market agree to the BSP’s gloating?

Treasury bills (1, 3, and 6 month) have become so volatile, obviously from attempts at suppressing them.

And increased volatility the domestic treasuries has prompted a divergence in the yield curve as well. While the yield spread of long term maturities compared to 1 and 2 years has flattened, compared to 6 months these have steepened. That’s because yields of 6 months bills have been pushed lower, but not enough to send them to November levels. 

However, yields of 1 and 2 year papers have increased more the gains of 10 and 20 year yields, hence the narrowing spread. Meanwhile yields of 2 and 3 year papers have spiked beyond May 2013 tapering tantrum levels. 

Overall, yields of domestic treasuries from 1 year to 25 years (with the exception of 5 years) have significantly vaulted higher last week! The collapse of 5 year yield has caused a minor inversion with 2,3 and 4 year sovereigns.

And overtime, Philippine treasury yields have been climbing at relative speed but with short term rates increasing faster. And these are signs of stability?


Aside from domestic factors, signs of reappearance of bond vigilantes in global bond markets have added complexity to current conditions. 

10 Year yields of ASEAN neighbors such as Malaysia, Thailand and Indonesia has also considerably picked up. (chart from investing.com)

If bond yields continue to move higher and will get transmitted to as bank lending rates, how will such increases affect the banking system’s loan portfolio, liquidity environment, credit risks standings, asset prices or even capital buffers? 

With the chronic addiction to debt from zero bound rates, how will the Philippine economy and her financial assets perform under a tightening of the financial system? 

Lastly if exogenous based volatility intensifies, how will these impact domestic financial markets or the economy?

Does the BSP know? Or are they, like the mainstream bubble apologists, assessing conditions from the lens where risk has been assumed away?

Here is a quote from JM Keynes[10] to aptly describe BSP responsible policies:
Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth.

Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency—is responsible?

Finally, as for chronic addiction to debt. During the 2013 interview by the Bloomberg, in response to the taper tantrum, the BSP governor swaggered “we don’t see any real need for stimulus at this point” to imply of the strength of the economy.

It’s been almost two years from then, and despite a short bout of tightening, the Philippine economy remains under heavy stimulus. Proof: the BSP chief in October “the industry doesn’t seem to mind much that real interest rates are negative.”

So why still the stimulus?

In contrast, the BSP’s recent pitch on “deflation” risks suggests that he wants more stimulus. But he seems as waiting for the right statistics to reveal of weakness to announce it.

So whatever happened to “we don’t see any real need for stimulus at this point”? 

Got hooked on stimulus? A developed addiction? Or has this been about stimulus dependent Potemkim economic village?







[6] Money and Banking Interview with Masaaki Shirakawa March 25, 2015



[9] Bangko Sentral ng Pilipinas, Annual Report 2014 p.109 bsp.gov.ph

[10] John Maynard Keynes The Economic Consequences of the Peace, 1919. pp. 235-248. PBS.org
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