Thursday, September 18, 2008

The Pinoy and the Global Economic Worries

Unless what you're reading is Tiktik, you may have noticed that biggest news hogging the limelight the last few days is the collapse of investment firm Lehman Brothers and insurance company AIG, and the accompanying fears of a global economic crisis.

For laymen like me, it is hard to fathom what the big deal is all about. But it is somewhat of a big deal even for us who do not even invest in the neighborhood paluwagan.

A firm like Lehman Brothers invests in a plethora of stocks, commodities, bonds and other securities. Thus, the bankruptcy of Lehman will surely erode the confidence of other investors and will probably reassess their investing activities. A slowdown in investments will mean less amount of capital coming in for corporations. Less capital means a delay in the plans for growth. A delay in the plan for growth will mean less employment opportunities for the people, and may even lead to downsizing of companies. For the working class, this may mean less bonuses at year-end or even lay-offs. So we should be concerned about this news development.

In fact, the Philippines is not spared from the effects of the global economic problem. The Philippine peso dropped to P47 level, a 16-month low. Stock prices of publicly listed Philippine corporations were likewise not spared. Many more financial and banking institutions are most likely be directly affected if they have a substantial exposure to the troubled US firms.

So is it time to panic? No. This downturn is not of the proportion of the Great Depression. We'll get through this, but knowing what is happening will at least prepare us of what to do, and we can gear ourselves for some more belt-tightening.

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