GEORGE SOROS CANNOT DO CURRENCY SPECULATION in the PHILIPPINES —provided BSP will properly do its job.

Subject: GEORGE SOROS CANNOT DO CURRENCY SPECULATION in the PHILIPPINES —provided BSP will properly do its job.





If currency speculation by George Soros et al can ruin economies, then it is a serious, real, and present danger against which nations have to find a potent solution.



I pose a question to economists in the egroups in the hope that better solutions to currency speculation than what are already known may be found. In the absence of any suggested solutions, I will present the so far available solutions that I am aware of.



While George Soros et al can perpetrate currency speculation in other countries, they cannot do the same in the Philippines —provided Bangko Sentral ng Pilipinas (BSP) will properly do its job.



The reason is utterly simple: In other countries, currency speculation is allowed (or merely discouraged through indirect means), in the Philippines it is prohibited. In other words, it is a classic case of free market vs. regulated market, or deregulation vs. regulation.



There are two central bank circulars which, if properly enforced by BSP officials, will prevent George Soros from engaging in economic-sabotage currency speculation in the Philippines . The first one was promulgated way back in the early 1960’s when then Pres. Diosdado Macapagal abolished currency control and instituted decontrol, today’s currency liberalization.



Unfortunately, 35 years later, the present crop of central bank officials did not recognize that the pertinent old central bank circular, which they failed to implement when needed most during the entire duration of the Asian crisis, was already the main antidote to dollar speculation during the crisis, hence they fallaciously stimulated IMF-prescribed high interest rates of as much as 38% or higher, resulting in 36% or P600-BILLION bad loans, with corollary foreclosure of collateral and bankruptcies to many entrepreneur-borrowers.



After my repeated—though on and off—written recommendations to Bangko Sentral from April 1998 to August 2001, BSP eventually enforced its long unimplemented anti-speculation circular in August 2001, resulting in sudden appreciation of the peso from P53.05 to P51.85.

The second central bank circular was issued on December 24, 1999. It is specifically directed against non-residents like George Soros. BSP got the idea from an article on some economic solutions, of which this is the really important one.



I will explain the two central bank circulars in my next emails.





M. L. Tecson





=========================






From: Marcelo Tecson
Subject: A QUESTION TO ECONOMISTS, with due respect... Fw: Re: ANY ECONOMIC SOLUTIONS to CURRENCY TURMOIL ...
To: Worldwide-Filipino-Alliance
Cc:
Date: Saturday, July 7, 2012, 8:54 PM



Quote:

“Currency speculation, driven by the urge to make quick and big profits, will be here to stay.” --MarP



My Comments:

It is hard to believe that the world’s and the country’s top economists—such as those often mentioned in past emails like Nobel laureate Paul Krugman and Ateneo/UP economics professor and former BSP Monetary Board member Dr. Vicente Valdepenas—did not and could not formulate the economic solution to the above CURRENCY SPECULATION problem, apparently the root of financial disasters in the 1997-1998 Asian crisis.



For, if the world’s entire economics “profession” (as well as other experts for that matter) could not find the needed elusive solution, then it means that any nation’s economic stability is fragile because its local currency is under constant threat of unpredictable sudden attack by currency speculators, like George Soros, and even the world’s greatest economists produced by Harvard, MIT, Wharton, UP, Ateneo, La Salle, etc., are helpless against these economic-saboteur speculators.





With due respect to them, do ECONOMISTS in the egroups agree/admit that their “profession” is indeed HELPLESS against CURRENCY SPECULATORS who can undermine the currencies and economies of nations at will and with impunity???



Mar Tecson






--- On Fri, 7/6/12, CoraMar127


From: CoraMar127
Subject: Re: [Worldwide-Filipino-Alliance] ANY ECONOMIC SOLUTIONS to CURRENCY TURMOIL ...
To: Worldwide-Filipino-Alliance@
Cc:
Date: Friday, July 6, 2012, 5:39 PM

NY, 06 July 2012



MarT:



Currency speculation, driven by the urge to make quick and big profits, will be here to stay.



At the root of it is GREED, even inordinate Greed.



Years back, George Soros "shorted" the British Pound. He profitted to the tune of $1 billion I think.



This is the kind of game those "Masters of the Universe" on Wall Street play daily.



MarP







=======================================================



In a message dated 7/6/2012 4:00:46 A.M. Eastern Daylight Time, martecson writes:



Quote from the herein forwarded email of Mr. Eduardo Gimenez:



"Regardless of the source of the flow, we know it to be (assume I to be for purposes of this exercise) $10 billion a day. $5 billion coming in every day and $5 million going out every day. As long as this flow continues the peso remains stable. In come the speculators. George Soros begins to pass the word around that the Philippine peso is overvalued. At the same time he sells or short-sells billions of pesos. Other currency traders are watching and word passes quickly to every bank trader all over the world. “THE ACTION IS IN THE PHILIPPINE PESO”. Traders who have significant peso holdings begin to dump their holdings by converting them to dollars and bringing them out of the Philippines .

"In 2 or 3 weeks there is a “run” on the peso that changes the dynamics of the flow. After 2 weeks, instead of $5 billion in and $5 billion out every day, traders are now collectively taking $6 billion out and putting only $4 billion in (including the OFWs). Suddenly, the currency goes from stability to instability. Speculators are now managing it so that every day $2 billion leaves the country ($6 out and $4 in). In 30 days $60 billion dollars is pulled out of the Philippines . In 60 days $120 billion dollars is yanked out. The peso has nowhere to go except into a tailspin and into total collapse. This happened several times. When the peso went from 2:1 to 4:1 then to 7:1 until it went past 50:1."





Question/comments on the above quote:

May we in the egroups know what economic solutions, if any, were prescribed by learned economists from the best universities in the world and in the Philippines--such as Harvard, MIT, Wharton, Columbia, UP, Ateneo, La Salle, UA&P, etc.--to address once and for all and prevent the repetition of the currency turmoil described in the above quoted part of Mr. Gimenez's email, especially that which took place in the 1997-1998 Asian crisis that hit Thailand, Indonesia, the Philippines, Malaysia, and South Korea?



Please note that the harmful currency transactions described above may be classified mainly into:

1. CAPITAL FLIGHT, or the sudden repatriation to home base or safe foreign havens of volatile foreign funds previously brought into the country, and



2. CURRENCY SPECULATION, or the unloading of PESOS to buy DOLLARS for hoarding or speculative purposes, with the intention of reselling the DOLLARS once the PESO depreciated and thereby realize exchange gain.

Such act of dollar hoarding or speculation is in fact a major trigger to peso depreciation because it creates an artificial tightness in dollar supply that consequently increases its value vs. the peso. In which case, while some economists may consider currency speculation as normal and acceptable transaction in the foreign exchange market--as UP Press communicated to me years ago--it may in reality be construed as ECONOMIC SABOTAGE.



Mar Tecson



==================================





On Wed, Jul 4, 2012 at 1:07 AM, Eduardo Gimenez wrote:

Gene,

This wannabe economist doesn’t have anywhere close to a good picture. The relative valuation of currencies is something that today is a matter of speculative transactions so massive that it boggles the mind. These transactions aren’t bound by any rules. George Soros explained this clearly in his book that deconstructs the wholesale collapse of every Asian currency (except China ) in 1996-97. It really isn’t that complex once you get some understanding of derivatives, hedges, etc.

Around $1.5 trillion a day crosses borders in this huge speculative currency market. It is so vast that it is difficult to get a good handle on it. But at its core, understanding a currency in this vast ocean isn’t all that difficult. Let us set one hypothetical number and follow it through this exercise. That number is $10 billion. More precisely, $10 billion a day. Let us make this number represent that part of the $1.5 trillion that flows in and out of the Philippines every day. This may seem huge but let’s bear in mind that less than 5% of that $10 billion a day is “real money” involved in real transactions that include “buying-and-selling” goods and services. The rest (more than 95%) is speculative. It is banks (including the Central Bank) buying and selling foreign currencies to protect and to hedge their currency positions.

Regardless of the source of the flow, we know it to be (assume I to be for purposes of this exercise) $10 billion a day. $5 billion coming in every day and $5 million going out every day. As long as this flow continues the peso remains stable. In come the speculators. George Soros begins to pass the word around that the Philippine peso is overvalued. At the same time he sells or short-sells billions of pesos. Other currency traders are watching and word passes quickly to every bank trader all over the world. “THE ACTION IS IN THE PHILIPPINE PESO”. Traders who have significant peso holdings begin to dump their holdings by converting them to dollars and bringing them out of the Philippines .

In 2 or 3 weeks there is a “run” on the peso that changes the dynamics of the flow. After 2 weeks, instead of $5 billion in and $5 billion out every day, traders are now collectively taking $6 billion out and putting only $4 billion in (including the OFWs). Suddenly, the currency goes from stability to instability. Speculators are now managing it so that every day $2 billion leaves the country ($6 out and $4 in). In 30 days $60 billion dollars is pulled out of the Philippines . In 60 days $120 billion dollars is yanked out. The peso has nowhere to go except into a tailspin and into total collapse. This happened several times. When the peso went from 2:1 to 4:1 then to 7:1 until it went past 50:1.

Nothing else has happened to the economy except for speculative attack. This happened throughout the region in 1996-97. It resulted in one notable effect. When the peso, the Thai-baht, the Korean-won etc. lost half their values, all hard assets in those countries lost half their values when measured in dollar terms. It became so much easier for American companies to buy out stressed modern Tiger-Asian manufacturing companies. They were now worth less than half what they were worth a few weeks earlier. All the Tiger Economies became bargain basements for American companies who wanted new factories CHEAP.

The effects of currency speculation lead to so much instability that it is evident some other system of currency valuation will need to be put in place. The system using a basket of goods and services that I described in an earlier message sets fair exchange rates and removes speculators from the currency scene.


Danding