John Maynard Keynes: 20^th century economist and father of the ‘Keynesian’ Theory.

What the heck is Keynesian Economics? Simply put, “it is a macroeconomic theory that argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle” (wikipedia.com). In other words, this is a theory that gives the government a huge say in the economy.

Governments, whether they admit it or not cling to Keyne’s theory like it’s the gospel truth especially now. Governments feel the need to dictate the direction of the economy as they feel that only government intervention can solve the crisis.

Really? Here’s a thought. Isn’t government, to a large degree, responsible for the mess we are in? When you really look at the root cause of many of today’s economic problems, one major thought comes into my mind – cheap money. Cheap money or a very low interest scenario allowed for an unrealistic prosperity that was not only unsustainable, it was bound to crash – and indeed, it crashed big time. Particularly in the US and Europe, the stock market took the cheap money and recklessly gambled with it; while people took it and wantonly spent it like there’s no tomorrow. Yes, cheap money allowed for growth but when you really look at it retrospectively, the growth made many reckless and deleted the word prudence in their vocabulary. In other words, it was a bubble.

… catch part 2

Philippine Central Bank sees inflation accelarating in November
The Philippine central bank expects inflation to accelerate further in November
Inflation for November is  forecast to range between 2.4% to 3.3%
This is due to the  impact of recent typhoons in the main island of Luzon.
Inflation  already accelerated 1.6% on year in October.
The average inflation rate in the first 10 months is at  3.2%.
The central bank sees inflation to hover 2.5% and 4.5% for this year.
2010 inflation is seen between 3.5% and 5.5%.

Disappointing 3Q09 growth

· Philippine economic growth in the 3Q09 fell below expectations.
· COMMENT: 3Q09 GDP grew 0.8% Yoy, dragged by the decline in manufacturing (-4.4%) and a sluggish farm sector (+1.6%).

· Services, which account for over half of GDP, rose 4.0% on year,

· On the demand side, figures were slowed down by the negative growth in Capital Formation (-11%) and Exports (-14%).

· 2Q09 growth was also at +0.8%.

· Average forecast on the street was a +1.9% expansion, making the actual figure pale and worrisome.

· On a seasonally adjusted comparison, GDP rose 1.0% over the 2Q09 output.

· Poor results might impact in the long run especially after the IMF just revised expectations this year from +1% to +1.5%.

· Currently, Philippine growth would be happy enough to reached the lower end of the target growth range of +0.8% to +1.8%

· Consumer spending typically rises in the 4Q and remittances are at its highest levels in November-December. Reconstruction activities due to the typhoon could also prop up economic activity in the last quarter.

· Personal Consumer Expenditure growth remains critical next year as election spending triggers recovery.

· PCE merely grew +0.2% on a seasonally adjusted format, its lowest since revised data in 1995.

Do you really understand the risk you are taking with your money?

With regard to investment risk, it can be:

Low

High

Speculative

Before parting with your hard-earned money, take time to understand the risk you are taking.

Money is put into risky investments that turn sour, and everything is lost. In the end, there is nothing left to pass on to one’s children.

(Ecclesiastes 5:14, New Living Translation)