Debt bubbles and bonds

Government offensive of accelerated increase budget for 2024 without a deeper discussion in National Assembly of Panama in December 2023full of desire to demonstrate masculinity and emotions instead of reason, he impresses that the Creole autocracy makes the Panamanian nation lose the war against transparency and corruption, further worsening the national politics and economy, leading to future economic depression.

The investment risk of any businessman who sets his sights on Panama is to earn enough money to meet their needs, so the three biggest risks they have faced in the last five years are: that their portfolios do not generate returns to meet their expenses, that their portfolios fail , and what we are heading towards in 2024 current “chicago boys chivia’os”: to confiscate a large part of their wealth with super expensive taxes.

Decades ago in Panama, when there was no need to power a huge device Assembly voter, Panama debt was increasing, and tangible financial wealth was also growing to the point that those governments’ promises to pay (cash securities, bonds, and stocks) could not be fulfilled. Faced with this debt problem and its “bank panic” and similar episodes, it led them to the mint 1 balboa coin as a relief measure against the problem of non-payment of debt and in response to the fall in the stock market, which also led to a devaluation of money and, in turn, a reduction in financial wealth relative to real wealth, so that the real (inflation-adjusted) value of financial assets is once again low relative to tangible wealth.

Currently in Panama, debt-inflation bonds in hard-currency dollars create money for re-election even though financial assets show negative returns relative to real assets. In addition to being the most anti-capitalist, this is the most unfavorable part of the cycle for the capital of Panamanian businessmen, which continues until it returns to the opposite extreme thanks to the politics of our Nobel laureates. economy in search of future presidential pardons with re-election.

What will the 2024 budget increase do at the end of the debt bonds? An unsustainable bubble, because debts grew faster than income. The Panamanian government, in its role Coordination of fiscal policy and monetary policy assumes that national consumption will be financed by debt. The liquidity injected into election campaign donors to buy financial assets so that the Panamanian capital market can “boom” will be unsustainable. Panama’s wealth gap and inequality will increase due to the benefit of those with financial assets “who agree to tenders” with the Panamanian state.

The July 2022 and October 2023 protests mark high tensions among Panamanians because of the pronounced inequality that is increasing, with an open and explicit conflict where we are on the threshold of revolution. In Panama, history has shown us that polarization carries a greater risk than military dictatorship or revolution. Who wants to invest in a politically unstable territory, where there is a very strong perception of corruption and social inequality?

Let’s hope that the next Panamanian ministers of the economy will be in charge of measuring the economic health of our country and our neighbors, where the migrants in transit come from, to understand whether things will improve or not, or will things get worse and why? We need changes that will allow us to reverse the determining factors which are worse for us: certainty of punishment, corruption and subsequent clientelism.