Debt as Modern Slavery (Part 1 of 3)

Part I – Currency Wars, Chimerican Crisis, and the Debt-based Monetary System

By James Matthew B. Miraflor

Presented to the Southeast Asia Regional Socialism Conference of Partido Lakas ng Masa, together with Transform Asia Gender and Labor Institute, November 27, 2010, College of Social Work and Development (CSWCD), University of the Philippines Diliman

Revised on November 29 and 30, 2010

Warm revolutionary greetings to all of our comrades here. I was tasked to discuss on the debt and the financial crisis. As we know, this is a very difficult topic to talk about, as it is related to the most complicated inventions in human history – banking, monetary system, fiscal policy, and investment practices, among others. No one can pretend that the whole thing is already understood completely, for even its inventors have often been labeled as not knowing what they are doing.

Thus, to make things simpler, it is good to begin with a discussion of the current updates in the global financial and monetary practice. Right now, the United States is conducting what it calls as “quantitative easing” (QE). Simply put, this is simply printing dollars out of nowhere. The Federal Reserve already printed $600 billion to buy securities from the US Treasury. The printing press has now become, to paraphrase Ben Bernanke, the secret weapon of the American economy. This devalues dollar vis-à-vis other currencies, making exports to the US more expensive and favoring domestic producers’ access to US market.

Seen as a form of subtle protectionism and as “revenge” over China’s supposedly “undervalued” currency, it had the effect of depreciating the value of dollar worldwide. For export-oriented economies of the world, this may spell ruination, as it means that American exports will be relatively cheaper. This may have the effect of import-substitution in the United States as cheaper American goods replace goods exported by the manufacturing giants like China and Germany to the US market. In the Philippines, this had the effect of shrinking the relative value of the dollars migrant workers send back home, and compromising Business Process Outsourcing (BPO) companies which earn in dollars.

During the conference. University of the Philippines Diliman - CSWCD.

But beyond QE’s immediate effects lie a more structural cause. It is this cause, which will later be called as debt-based monetary system, that I will attempt to discuss in this paper. Knowing what the systemic impulse behind the production of money is brings us closer to a good explanation on the current phase of the finance capitalist system the whole world is now in. It also allows us to understand alternatives which we may have to implement as a global community if we are to avert financial disaster and transition to socialist alternatives. 

Call for a Fixed Currency Peg for the Philippines

Image via Wikipedia

Countries that were most affected by the 1987 Financial Crisis

Let me quote from Cesar Purisima: "I will not recommend competitive revaluation. We should allow the market to determine the exchange rate. Our role is to smoothen these adjustments."

Now is a very good opportunity to challenge G20's effort to preserve the failed global financial system by preserving the floating exchange rate regime (putting US in a very good export position at the expense of our OFWs and exporters). We must call on the Aquino administration for the return of a fixed exchange rate, probably pegged at P50=US$1 in order to protect our migrant workers and what little is left of our export industries, including the Business Process Outsourcing (BPO) industry.

The G20 does not want this (maybe some members, but not the US-allied countries). The Aquino government, despite its token protestations, does not want this because it puts us in a good position for "debt prepayment". But OFWs will be with us on this. Well-meaning economists, even those in the neoclassical frame (but they may remain silent so as not to alienate the mainstream), will accede and even support us on this matter. By fixing the exchange rate, we also permanently remove a strong excuse for debt prepayment and force the government to use it reserves for capital build-up and technology transfer.

It is time to fight fire with fire. If the US will continue with its "quantitative easing (QE)" (the Federal Reserve already printed, out of nowhere, $600 billion to buy securities from the the US Treasury) and unilaterally decide on the foreign exchange markets, then we should protect our currency from the market. This is what China and Malaysia did during the 1997 Asian Financial crisis and had been a factor for its survival and development.

The time is ripe for this call.

Below is an article on the impact of QE on the Philippines and government response:

Migrants, Remittance-dependence, and the Philippine Economy

As our contribution for the Philippine process of the Peoples’ Global Action on Migration, Development and Human Rights to prepare for the 2nd Global Forum on Migration and Development (GFMD) which was hosted by the Philippines on October 27–30, I was tasked to present for the Freedom from Debt Coalition on the effects of migrants remittances on the Philippine economy.

What I did was to look on important macroeconomic indicators, specifically employment, fiscal indicators, and monetary indicators (many of which were made available by the Philippine government for the public on the NSCB website). This was my presentation:

FDC presentation for Migrants

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