Nathan Andrada’s Blog

The ball is in the US Senate with respect to the fate of the multi-billion loan package for two of the three struggling Detroit-based auto makers. Earlier this week the House of Representatives already approved their own version of the bailout package that would make US$14 billion of taxpayers’ money available for General Motors and Chrysler.

The plan, which still needs Senate approval, was greeted with pessimism by a number of Senate Republicans. They argued that until the auto makers restructure many of their contracts especially with the auto workers’ union, the federal government would just be wasting taxpayer’s money into something that is doomed for failure anyway.

Latest reports, however, show that the Senate Democrats’ efforts to strike a compromise with their GOP counterparts in order the achieve the needed votes to get the loan package passed, is facing a huge stumbling block. Public perception against the bailout has been mounting according to the latest poll conducted by CNN/Opinion Research  Poll Corp., showing 60 percent of Americans do not agree with the idea of using public funds to help the auto makers.

The outgoing White House administration as well as the soon to be sworn-in President-elect Barack Obama have stood for a bailout plan just to keep the ‘Detroit 3′ from filing Chapter 11 or bankruptcy. With the talks in the Senate due to collapse a likely scenario, the auto makers are left with no choice but to consider the bankruptcy route. Just this morning, Fox News reported that the Wall Street Journal is running a story about General Motors officials in the process of hiring lawyers and advisers with expertise in bankruptcy laws. Reality has set in for the ‘Detroit 3′ and it looks like their engines are bound for a bumpy ride in the coming weeks.

It was a shockwave that was felt throughout Wall Street all the way to Capitol Hill. Last Friday, many stood in disbelief as the economy absorbed yet another huge blow when it was reported that the November job loss numbers tallied 533,000 pushing the US unemployment rate now well ahead of six percent. It came as a shock to many analysts whom many expected it would be just around 350,000.

The job cuts came across the board, from the financials to retail and trade, suggesting that this recession was not at all willing to take any prisoners. For the congressional leaders inside the Beltway, these figures could finally end the divide that continuously delay the approval of a bailout package aimed at saving the beleaguered auto industry, particularly that of General Motors, Ford, and Chrysler, collectively known as the ‘Detroit 3’ or the ‘Big 3’.

House speaker Nancy Pelosi, initially adamant in giving the automakers of what they were asking when they faced the congressional committee on finance in the past few weeks, is now reconsidering the measure since a bankruptcy by these companies might result to a possibility of them eventually closing down. It is estimated that over 2 million jobs would be lost as a result of the collapse of the ‘Detroit 3’, which includes the industries that supply the parts for the mechanization of their cars. 

The US Congress is steadfastly working in this lame duck session to have US$15-17 billion of the earlier approved legislation to make cleaner cars, be used to pump the engines of GM and Chrysler at least until the new Barrack Obama administration gets into full swing. President-elect Obama has hinted in his recent ‘Meet the Press’ interview on NBC that he will not allow the collapse of the auto industry, so that should be good news for the three struggling automakers.

The world watches as the two superpowers, the United States and China, talked about economic matters in a time when their leadership is highly sought by the rest of the world amidst a crippling global economic and financial crisis. The third edition of the China-US Strategic Economic Dialogue in Beijing this week did just that. But the question is, was there enough substance that this summit produced to make any significant impact if at all.

It is the first time Chinese and American finance officials met since the crisis began in October. Both understood now each country is a dependent entity of the other at least in terms of trade. The crisis bared how the decline of US consumption can have adverse effects to China’s mass production. Thus, the summit tackled the issue of economic growth balance which has for years gone to the favor of the Chinese. China has also committed to improve their food and consumer goods safety standards in light of the recent troubles Chinese manufacturers faced abroad with their products from milk to toys, all involved in cases of health hazards.

But what analysts are most interested in is how the two sides are going to address the current crisis that would benefit not only their economies but hope to stimulate the entire world economy back on track. The Americans are mulling for a stronger RMB, China’s currency, in order to make US goods more competitive in the Chinese market. However, their Chinese counterpart is inclined to depreciate their currency because they need to save their rapidly declining export industry, which according to Chinese Premier Hu Jintao has lost its competitive edge.

It’s obvious that the Chinese are facing massive pressure inside because of the rate manufacturing companies are closing shop all over the mainland. Many, however, dispute this notion as nothing but political rather than economic because it is not that the Chinese exports have lost competitiveness but it is the overall fall of American consumption. Since no one is buying their goods, it is just imperative that their exports are expected to fall and a depreciated RMB is not likely to make any difference.

Many believe that the Chinese are simply positioning themselves politically over the Americans since they know the US has not much leverage coming into these talks. They would rather deal more constructively with the next officials of the new Obama administration rather than push for something concrete with a lameduck Bush administration.

If you are 20ish and has a habit of jumping from one job to another, now is the time to reform that attitude. The economic crisis, although still in its infancy here in the Philippines, is expected to go full swing next year. The problem is real and most of it is really out of the hands of ordinary middle class families and individuals, especially the yuppies, a slang term for young professionals.

There are things that young working professionals can do to secure themselves financially as our economy transverses this crisis. Start saving. Saving money, though, is easier said than done, because if it were, we would have ranked among the countries with high savings rate but unfortunately we are currently among the bottom of the sphere along with the likes of Bangladesh and Myanmar racking only 17 percent. People from our neighboring countries Thailand and Malaysia save three-tenths of their income while the Chinese save half of theirs.

Why is it important to save? Because it is a form of investing in your future (purchasing a home, buying a car) and bring security to a rather uncertain future (untimely health care costs, other emergency situations). Also, it is a good leverage against a burgeoning credit card debt, which is a situation that most young professionals find themselves into nowadays. A high debt with low or non-existent savings is a recipe for bankruptcy. Certainly, no one wants to be a young, hip, and broke professional at their 20s or early 30s.

Many Filipinos from abroad are coming home this December not because of the holidays but because they have been laid off from their work. Just recently, dozens of Filipino overseas workers were forced to pack their bags and left for home from Taiwan and Macau. In the previous month I was told by my mother that many people from our rural town came back home from China because the call center that they worked for there went out of business.

The ongoing economic and financial crisis has affected Filipino workers all over the world and this could mean peril for our economy. Their remittance dollars, which has been the lifeline of not only our overall economic health but also of our foreign reserve security, is seen to dramatically fall in the months to come. Technically, this will affect the strength of our currency which could trickle down to the competitiveness of our exported products and the national government’s ability to finance its external debt.

The effects on the lives of Filipino middle-class families, however, is much magnified. Income from our overseas workers are used to build homes and pay for children’s education, just to mention a few. When this dries up, it would be least to say catastrophic. Many of these workers are still ridden with debt brought by the high processing fees of their previous stint abroad. The lack of decent-paying work opportunities here in the Philippines is another reason why these workers dread the idea of even coming back home.

Foreign countries, where our OFWs (Overseas Filipino Workers) have been working, have their own problems dealing with the crisis and usually their initial response is protectionism. With this economic climate, their government and private sector are being pressed hard by their own constituents to prioritize locals over international workers like Filipinos in terms of jobs.

Our government, through the agencies that handle the welfare of our overseas workers, has to be ready for more reverse exodus of OFWs by allotting enough funds aimed at providing financial assistance to them.