In the last couple of months, we have seen the stock market rise, together with the increase in prices of commodities (including oil). Meantime, the forecast is that the US dollar, the world’s reserve currency, will go on a downward trend in light of a still faltering US economy, increasing unemployment, and the surge in the US budget deficit due to the US$800B allocation for TARP (Troubled Asset Reform Program).

...So the signs are not as encouraging as the stock market would like us to believe. But these stock market investors still hope that everything will be fine soon.  They interpret events and financial reports here and there as “green shoots.” I say brown for now.

Investor confidence, as you see, is tied up to the stock market, and as they say, reflects the economy of the country.  Caveat emptor: This incremental rise in prices is not tied to fundamentals. It is going to be the same traditional adage: P/E [price-to-earnings] ratios, my friend, will be the rule from now on.  We wait till the market gets its bull market run, maybe in a couple of years. Then we’ll be back to the same good old days of venture capitalists and future earnings speculation—and a lot of moolah to make everybody smile once again…

Developing countries will “bear the brunt of the financial crisis originating in the US and other developed countries.”  All economies will in fact be affected by the crisis, albeit differently, contrary to the view that emerging markets are “decoupled” from the US economy.

United Nations Assistant Secretary-General for Economic Development Jomo K. Sundaram gave this assessment in a public lecture on the Global Financial Crisis and Asia held at the Ateneo de Manila University on February 23, 2009.  It is interesting to note that the UN was the only multilateral institution that warned of an impending financial crisis as early as 2006.