Global trade balance

The strategy for the world economic recovery must be nurtured with the right paradigm.

The first paradigm concerns the need for balance in managing the two
sides to the economy: real economy and the financial markets. It is
undesirable to promote the financial markets in ways that harm the
interests of the real economy.

I pose two examples to clarify this thesis.  The first example is
the Jobo bills of 1984 with interest rate as high as 43% which led to
closure of businesses, high unemployment and the exodus of OFW in the
80s.

The second takes the opposite action – the Fed Reserve’s close-to-zero
interest rate. The decision by the Fed in keeping and prolonging this
rate fuels speculative fever in stock markets, promotes the so-called
“currency carry trade”, develops global asset bubbles, raises oil
prices in the futures markets and gas pumps.

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The writer is an entrepreneur, and author of books “The Peso
Exchange Rate: Why Are We So Poor?” and “The Philippine Economy: Do Our
Leaders Have A Clue?” His  piece was published in the November 30, 2009
edition of the Business World, page S4/3.

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