Sunday, February 12, 2017

From War on Drugs to the War on NPAs: War as Justification for Socialism

… war has made possible for us the solution of a whole series of problems that could never have been solved in normal times.Joseph Paul Goebbels (1897-1945) Nazi Propaganda Minister, The Göebbels Diaries, 1942-1943

The Duterte government has announced “war” with the NPA.

This has really been a love-hate relationship, more than anything else.

Outside the captivity to media’s sensationalism, we’ve seen this story line before; specifically, just right after Mr. Duterte’s first State of the Nation Address (SONA).


But the administration has a very soft heart for the NPAs. Aside from earlier offering them with 4 cabinet posts, which had been toned down and offered to moderate socialists instead, early July, the president even urged NPAs to join his war on drugs campaign. So rebels (illegal entities) have been pressed to do the administration’s bidding, as well as, serve his political penchant. So two wrongs do make a right for this administration. (Could the vigilantes be in fact rebels?)

Ironically, the NPAs spurned the entreaty and gave the government a thumb on their nose, fromGMA Online: “The CPP, meanwhile, clarified that it does not have a "kangaroo court," saying that it also respects "the right to due process of criminal suspects." 

And still the ceasefire.

Since local NPAs look more like professional bandits, an NPA ambush occurred just days after the SONA. NPAs blamed the military, so the president made another fantastic volte-face by the lifting of the self declared unilateral cease fire.

This administration’s policies swing like pendulum: one moment here and another moment there.

Like last year, the NPA’s recent ambush of soldiers, which claimed 3 soldier’s lives, supposedly represented “the last straw” that prompted for the declaration of war against the NPAs.

The Armed Forces of the Philippines (AFP) initially announced a “no all-out” war. Apparently, with barely a day’s distance, and to reflect on the leadership’s mercurial mindset, the AFP reversed to declare an all-out war. The NPA responded by taunting the administration: Come, bring it on!

Paradoxically, not only has Mr. Duterte labeled NPAs “terrorists” after dandling with them, he called them“spoiled brats”!  

Question is, who spoiled them? None of the previous administrations appear to have cajoled or entertained them as much as Mr. Duterte.

Yet has Mr. Duterte only recognized now the difference between CPP-NPA-NDF the bandits as against CPP-NPA-NDF the ideologues? 

He even claimed last October that communist ideology was long gone, yet adamantly consorted with them. Why?

Mr. Duterte even offered them 4 cabinet positions at the start of his administration only to be pushed back by the military. Thus he offered the same posts to the “moderate” left whom continues to serve at his pleasure.


From what has been shown, there has really been little organizational control by the remote management exercised by top leaders of the CPP-NPA-NDF.

Current developments serve as proof of what I have previously observed that the CPP-NPA-NDF has signified a spent force from which has only resorted to lawlessness.

Said differently, the reds have not been about ideological political movement, but about the business of armed plunder at the countryside.

Yet the administration has been all too willing to accommodate peace talks with real armed criminals while mounting a bloody onslaught on the largely unarmed politically classified felons.

Current events only reveal that there is no reason for a dialogue with such rebels unless these groups will volunteer.

And to showcase such insincerity, the CPP-NPA-NDF’s has reportedly used the ceasefire as a window torecruit 1,000 new members!

Whether the numbers reported by the military has been correct or not, the laws of economics—the lowered cost of being a communist rebel—suggest that a devious party would use such window of truce as an opportunity to undertake recruitment. So the enlarging of the rebel force would be logically possible.

One shouldn’t expect much from the shift out of the love phase into the hate phase in the whirling love-hate relationship between Mr. Duterte and the CPP-NPA-NDFs.

To the contrary, one should really doubt if there has really been a fragmentation between the Duterte government and the CPP-NPA-NDF.

Perhaps, the alleged breakaway has merely been about publicity. We will see.

“War is a racket”, wrote two-time Medal of Honor and US marine Major General Smedley Butler. Though Mr. Butler wrote the book with the allusion of the capture of the government by industrial agents, specifically military industrial complex and their ancillary interests, this applies to the political angle as well.

War can be used to justify manifold and myriad interventions by the government in the political economy through forced production, rationing, spending increases financed by higher taxes, debt and inflationism, the institution of price, wage and mobility controls and others.

Given the socialist ideological leaning of the leadership, the incentives of a grander control of the political economy should be so seductive, especially given that the war on drugs has been held in abeyance.

War on Mining: Flip Flopping Exposes the Underbelly of Environmental Politics

Way back in June 2016 I predicted that the government’s anti-mining program will eventually fail. [Why the War on Mining Will Fail! June 26, 2016]

Mr. Duterte’s official visit to China in October of 2016 has already partially validated my expectations.

In a speech to implore his Chinese economic and political bigwig audience to invest in the Philippines, Mr. Duterte revealed the real reason for his opposition to the industry: Americans.

I wrote then: (bold original)

So by Mr. Duterte’s logic, it has not been that mining is inherently evil or “detrimental” to the country. Instead, since the Americans are evil, and since they are engaged in mining, hence mining by Americans must be stopped.

The crux of which, mining is a RACE or NATIONALITY issue.


It is important to understand the roots of the anti-mining agenda.

The other week, scion Ms. Gina Lopez, the chief of the mining industry’s government’s regulatory agency, the Department of Natural and Environmental Resources (DENR), ordered the closure of 23 mining firms and suspended 5 others. This initially had the blessing of the leadership.

But Mr. Duterte suddenly had a U-turn. In response to the industry’s appeal to the leadership, as well as, their request for a published audit which served as the basis for the DENR’s decision, Mr. Duterte backed by other cabinet members vetoed the DENR’s orders to allegedly observe “due process”.

The embattled Ms. Lopez then turned to media to exculpate or uphold her position.

While she admitted that Mr. Duterte will have the last call, she has gone to implicitly criticize the direction of the leadership’s decision saying that the government shouldn’t side with big business. Additionally, she claimed that though the DENR, the agency which she ironically commands, has been rich in funds, it has been prone or vulnerable to corruption.

Apparently, this meant that the bureaucracy was more powerful than her to control!!!!

Unless the effects of the opioid will get into the senses of the leadership, the Duterte regime will most likely side with the miners, for some basic reasons.

One. Part of the reported $24 billion bonanza of investments Mr. Duterte garnered from Chinese investors and politicos included massive investments in the mining industry. A full-scale assault on the mining industry would either deter Chinese money from pushing through with their proposed investments, or that any preference for Chinese investments over the locals would surely fire up political “nationalist” controversies that could affect the Mr. Duterte’s popularity ratings. The latter would be a taboo for a populist president.

Additionally, considering the frail state of government finances, mining closures are likely to exacerbate the Philippine government’s balance sheet conditions which even the Department of Finance seems to recognize.

Besides, one of Mr. Duterte’s premier confidante, who holds a key position in the cabinet, used to be a miner or was connected with the mining industry. Although this has been denied in public.

Nevertheless, the political kerfuffle hasn’t been plainly about the creed of “environmentalism”, which Ms. Lopez has been ardently trying pursue, but rather about political control over the dispensation or the allocation of resources.

As a side note, though environmentalism has been a forefront, or used as justification for socialism, as vividly articulated by a UN official in 2015: “At a news conference last week in Brussels, Christiana Figueres, executive secretary of U.N.'s Framework Convention on Climate Change, admitted that the goal of environmental activists is not to save the world from ecological calamity but to destroy capitalism”—again it’s about control over resources. [Investor.com U.N. Official Reveals Real Reason Behind Warming ScareFebruary 10, 2015]

Public control of natural resources signifies a socialist principle. And even when under total government control, the next critical issue will be about the funding to get these projects running or in operation. Moreover, another issue will be the competition for position to run the public organization or who will decide how these resources will be utilized. Again, it’s all about power politics even under different forms of government.

The critical moment here will be when the government revenues fizzle out or will come under increased pressure to match expenditures. The exigency to finance the wanton growth in public spending will likely spur the government to close their eyes on environmental politics.

As a side note, interestingly, Mr. Duterte has also declared war on tax cheats. He does so by issuing a threat to kill them! Yes, this may be a jest for now. Could such signify as indications of the current tenuous or fragile state of government finances? The Bureau of Treasury has yet to publish December data which it usually doesat the first week of the month. Will they show another boom to boost the peso? Yet, the supposed joke would be put into test when the economy meaningfully slows. Time will tell whether the joke is on us.

So an increasing clash in the underlying agenda will eventually result to a broadening conflict between Mr. Duterte and Ms. Lopez. Eventually, such conflict will lead to Ms. Lopez’s departure.

As I have said before, Ms. Lopez has been used as a convenient tool for the ochlocratic dictatorship propaganda.

As a side note, because of the Surigao earthquake, Mr. Duterte flip- flopped anew to express support on Ms. Lopez’s orders to close Surigao mines.

The propensity capricious decision-making process, aside, I believe that the logic anchored on power politics and government financing will ultimately set the tone for the mining industry.

I Am Not Alone: Economic Cabinet Members REJECT the Free Tuition Program!

When the Philippine government announced last December that free tuition program will now cover state universities and colleges for this year (2017), I wrote: [Wow, BSP Chief Sees The Rise of Populist Politics/Retreat from Multilateralism as Scary Developments, Scary Stuff for 2017! December 18, 2016]

What is great news for populism signifies a HORROR for economics.

Yet how will free lunch welfarism not impact the government’s balance sheets, and consequently, affect the peso and interest rates and the real economy?

It appears that I am not alone after all!!!

Three of the incumbent government’s ministers submitted a position paper to excoriate or reject the free tuition program

From the Businessworld: “ECONOMIC managers said a free tuition policy for State Universities and Colleges (SUCs) will be ineffective, noting that tuition forms only a portion of a student’s expenses, while also putting the budget under pressure. In a joint position paper sent to Executive Secretary Salvador C. Medialdea on Tuesday, Socioeconomic Planning Secretary Ernesto M. Pernia, Finance Secretary Carlos G. Dominguez III, and Budget and Management Secretary Benjamin E. Diokno withdrew their support for the Free Higher Education Act, which will institutionalize free tuition for all SUCs…” [Businessworld Economic team rejects free tuition in state schools February 10, 2017]

Part of the objection from the paper was predicated on technicalities: tuition fees do not cover the entire expense of the poor: “According to the economic managers, the proposed free education is not expected to have much of an impact on enrolment by poor students. “Tuition does not comprise the biggest share of college education cost... tuition constitutes merely one-third of the total cost per student per annum,” the economic managers said. Tuition covered by the grant is only P20,000, a third of the total cost of P60,000 per student yearly. They added that the larger portion of tertiary education cost is living expenses. According to the position paper, living expenses amount to P35,000 for 10 months while instructional materials cost P5,000. “Accordingly, we argue that with the government’s provision of free tuition to all SUC students, poor families would still be unable to pay for the remaining two-thirds balance of college education cost, thereby still preventing them from sending their children to college,” they said.”

Yet the problem of technicality will likely be solved superficially with technicality: in particular, plug such holes by throwing money at them. This will hardly “sell” to a committed or dogmatic welfarist.

Then the admission of the likely gaming of the system through legal loopholes and administrative inefficiencies: “The position paper also said that the proposal for free tuition will mostly benefit those who are not poor. “An untargeted tuition subsidy to all undergraduate students enrolled in SUCs will mostly benefit those who belong to the upper 80% who can otherwise afford to pay for college education, while many deserving and qualified poor children, who are unable to enroll in SUCs due to financial constraints, will be left out,” said the economic managers.”

Again, technical problems will be addressed with technical solutions; the likely answer to this by a doctrinaire welfarist will be a means tested program

Finally, this should serve as a centerpiece of position paper:

Moreover, using government funds to subsidize tuition will only transfer the financial burden of free education to the poor as the country’s overall tax system is “regressive” in nature.

Amen!

I have made this argument repeatedly here. THERE IS NO SUCH THING AS A FREE LUNCH (TINSTAAFL)!

Nevertheless, to see key cabinet members vehemently balk at one of the core planks of the leftist dogmashould signify a momentous praiseworthy development!

Tuesday, February 07, 2017

Season of Third Liners: Multiple Manifestations of BW-SSO Strain Surfaces!

Remember the BW-SSO bubbles of the late 90s and the new millennium? 
 
If I am not mistaken, there may be multiple episodes of the same dynamics at work today…

These stocks have been experiencing total vertical runups. (Of course, such are always rationalized) Yet there have been minor ones too

To recall, BW and SSO occurred during the bear market phase (1998-2002) of the 1986-2002 secular cycle. In those days, speculators were nostalgic over the lost speculative credit finance price chasing hunt of the mania phase. And that they found these issues as objects to vent on their wistfulness.

Perhaps the past may be seen in similar shades today.  

Current events exhibit signs of the conspicuous shift of extreme market speculations from the majors to the third liners.

I’d call this the season of the third stringers/liners

Yet such a shift hasn’t been symptoms of healthy price actions but of a terminal blow off phase.

This adds to the string of evidences of the grasping at the straws or of the frantic attempts to reinstitute the glory of the old days.

Oh, have you seen yesterday’s awesome 'mark the close'?