The Deep Breath Before the Plunge

These past few days news of the US going into the brink of recession has been all over the television and newspapers around the world. Global economies try to cope up and analysts founder to explain that the world is not likely to sink in just because the US did, that the other regions of the world will provide their own momentum to keep the world economy expanding. But they are wrong, Alex Magno in his article Coupled in the Manila Star dated September 16 said, "Without exception, all the world's economies are, to varying degrees, trying to cope with an inflationary surge combined with a diminished growth momentum. The reason for this is that the inflationary epidemic is caused by rising commodity prices traded globally, principally oil and food." This is so true. Recently the loss of the giant investment bank Lehman Brothers and AIG, the take over of Fannie Mae, Freddie Mac and Merill Lynch have sent out ripples of financial volatility across the globe. Investors take in fear and stock markets plummet down to all time low. It is clear now how closely interconnected the world has become because of globalization. It is also obvious how the world has become dependent of superpower countries especially the US.

"Europe's financial institutions, already rattled by the fallout from the subprime crisis in the US, could be further weakened by falling property prices in the continent. The UK is in particularly bad shape, as we see in the rapid depreciation of its currency the past few weeks.

In Asia, we could hardly expect Japan to provide the economic leadership it used to enjoy. The Japanese economy will likely sink into recession this year.

Plagued by political problems, neither Latin America nor Africa are in a position to help shore up global growth."

We see now the dire outcome of the interlinking of global economies. If the downfall of one becomes the downfall of all, what will happen to countries like the Philippines? Poor countries only enjoy spectator privileges and cannot play a role to help others because they themselves need help. We can only watch as the US sink down further into the quicksand because we have been in the quicksand long before the US fell on it. Who can save us now? I personally don't know the answer. I am not an analyst and I know little of economics. I can only point out my lay opinion about what's happening around.

Alex Magno ended his article "We march in step. Not because we want to but because we need to. If our interest rate regime, for instance, deviates too much from those prevailing in other similarly situated market, it will force our currency to appreciate more that what would be healthy." A dire prediction indeed.

We take the deep breath before the plunge and hope that help will soon come to get us out of the quicksand before it is all too late.