Self Promotion: Forbes’ Jesse Colombo Endorses My View: The Philippines' Economic Miracle Is Really A Bubble In Disguise

Forbes’ columnist the articulate Jesse Colombo emails (published with Mr. Colombo’s permission)

I’m a Forbes columnist and economic analyst who is a fan of your newsletter/blog.

I thought you may be interested in a report that I wrote about the Philippines’ economic bubble…

I linked to your piece about the Philippines’ mall bubble in my report.

Thank you Jesse.

Here is Mr. Colombo’s article: Here’s Why The Philippines’ Economic Miracle is Really a Bubble

I am reluctant to write about the Philippines’ economic bubble after the devastation that the country has endured due to the recent typhoon. My heart goes out to all of the victims and their families. Please visit this page to learn how you can donate and help the victims of typhoon Haiyan. I have been writing a series of reports about bubbles in Southeast Asia, and the Philippines is one of the economies that I have been warning about even before the typhoon. My goal is to warn about economic bubbles to prevent humanitarian crises that result when bubbles pop.

The archipelago nation of the Philippines is part of the overall emerging markets bubble that has been inflating since 2009 after China launched a $586 billion economic stimulus plan to counter the negative effects of the global financial crisis on their economy. China’s stimulus plan called for an aggressive credit-driven infrastructure and residential real estate-based economic growth strategy that resulted in the building of scores of cities and other projects – many of which are still empty or unused – across the entire country. The stimulus plan succeeded in temporarily boosting economic growth, and drove a global raw materials boom (and bubble) that benefited commodities exporters such as Australia and emerging market nations. Very soon, investors the world over were clamoring into emerging market investments to diversify away from investments in troubled Western economies.

Record-low interest rates in the West and Japan, along with the U.S. Federal Reserve’s multi-trillion dollar quantitative easing or QE programs led to an epic $4 trillion surge of speculative “hot money” into emerging market investments from 2009 to 2013. A global carry trade developed in which traders borrowed large amounts of capital at cheap interest rates from the U.S. and Japan, and reinvesting the proceeds into high-yielding assets in emerging markets for the purpose of earning the “spread” or favorable interest rate differential. The explosion of demand for emerging market investments helped to inflate bubbles in those countries’ assets, particularly in bonds, which resulted in incredibly low borrowing costs for EM governments and corporations. Ultra-low interest rates have enabled government-driven infrastructure booms, as well as dangerous credit and property bubbles across the emerging world.

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