Douglas MacArthur was a terrible battlefield commander. His successes in World War II came primarily leading a US division in support of French action against the Germans. His 30-year relationship with Philippine President Manuel L. Quezon led to his being asked to supervise the creation of a Philippine Army.
Interestingly, one month after the Japanese attacked Hawaii, President Quezon arranged a perhaps illegal $500,000 payment, which was kept secret from the public until discovered in 1979.
MacArthur had two primary accomplishments in the Philippines. He declared Manila an open city without informing either the US or Philippine governments in advance and gave up Bataan to the Japanese with the largest surrender of troops in US history. But then again, in 1924, he put down a mutiny by the Philippine Scouts who were demanding equal pay and treatment as their white counterparts.
But the myth of MacArthur as some sort of “savior” of the Philippines will never go away.
For the past two years, I have said the Federal Reserve (the Fed) would not raise interest rates by any more than a token amount and not repeatedly as we were told. Once again rates were not increased and once again there will probably be another small increase in December. Yet, the myth that the Fed will return rates to “normal” is the myth from the local economic experts and bankers that never goes away.
Further, for the past four years, another set of experts—the “bubblers”—have been saying that economies and stock markets, including here in the Philippines, would collapse. This is based on another myth that situations and outcomes can never be different.
Going back several thousand years, Joseph explained to the Egyptian pharaoh about the business cycle—seven years of bounty followed by seven years of famine. Every business owner understands that universal truth. But about 100 years ago, economists—who had never run a business—decided that was a myth. Any ups and downs in the economy were not part of a cycle and could be controlled by the government and central banks.
They never succeeded until now.
In 1978 former Fed chairman Paul Volcker wrote a book The Rediscovery of the Business Cycle, which acknowledged that the cycle exists. During the last decade of massive debt creation and “money printing” by the central banks, they have
effectively broken the business cycle. Since 2009, the world has not had any recessions—downturns—but has not had any economic “booms”. The global economy is faced with flat growth and flat inflation—economic stagnation. Neither have we seen any general economic or stock market bubbles exploding. Sure, Greece collapsed but the other “PIIGS” —Portugal, Italy, Ireland, Greece and Spain—have just kept on. Historically, nonmanipulated interest rates react and change according to the booms and busts of the business cycle. No longer because there are no longer any booms and busts.
Imagine that Philippine Atmospheric Geophysical and Astronomical Services Administration found a way to stop typhoons from coming to the Philippines. No more destruction and, yet, no more life-sustaining rains. Welcome to the 21st century of a government-controlled economic system.
E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.