Climate of distrust

A climate of distrust is upon us. This is now a fact of life we must remember when decisions are made, especially by public officials.

We all know about fake news and how many are still deceived by it. A spokesperson in the Trump administration called it an “alternative truth.” You believe in your truth, and I believe in mine. Of course, truth is truth, and there can be no alternative truth.

We have our share of tall tales. There was that false narrative that went “viral” prior to and during the Presidential elections in 2022 about the Tallano gold myth.

Dr. Ronald Mendoza of Ateneo led an academic group that studied it using an empirical analysis of an extensive social media dataset of almost 24,000 social media posts compiled by the Ateneo Policy Center using CrowdTangle. The Ateneo group found evidence that the Tallano gold myth spread across partisan groups and proved resistant to fact-checking efforts.

I bring up these points to provide perspective on the factual news story in Esquire Philippines about the BSP being the biggest seller of gold in the world in the first half of this year. The news of the central bank selling a large amount of gold awakened latent feelings of distrust because of the bad history of the old central bank’s handling of gold during the Marcos martial law era.

According to The Los Angeles Times, between 1978 – the year Marcos ordered all gold producers to sell only to the CB – and by the end of 1984, the Bureau of Mines reported that 124,234 pounds of gold were refined. But the Central Bank, in annual reports covering the same period, accounted for only 110,319 pounds of gold – 13,915 pounds less than it bought. The discrepancy was not explained by the Central Bank, which at the time had zero credibility after it was caught cooking the books to show we had more foreign reserves than we actually had.

So now, the BSP sold nearly 25 tons of gold between January and June, decreasing the country’s reserves by 15.69 percent to just 134.06 tons. Other countries among the top sellers of gold in the first half of the year were: Thailand (9.64 tons or 3.95 percent of its total reserves), Uzbekistan (6.22 tons, 1.67 percent), Mongolia (1.33 tons, 22.06 percent) and Singapore (1.18 tons, 0.51 percent).

My initial reaction was that it was all in a day’s work. The BSP buys and sells assets like gold as part of its function of managing our reserves. Gold was at a record high, so it is easy to assume the BSP was just cashing in, as we would cash in on a stock market issue if it hit our target price or reached unusual record highs.

It is possible to sell too early, as the gold/stock price can go even higher. But that’s alright because we have already locked in the profits we had in mind. The gold price may indeed zoom way beyond our expectations if a war in the Middle East gets worse. But an unexpected peace agreement can force the gold price down. You win some, you lose some.

The public reaction to the BSP gold-selling story wasn’t questioning the BSP’s sale of gold as part of portfolio management. Social media comments showed the public was wondering why the BSP was selling so much gold at this time (incidentally, with a Marcos in Malacañang too) when many nations are buying gold. The BSP’s strategy may be defensible, but the optics do not look good. Hence, the suspicions.

For one thing, why exchange gold for US dollars/treasuries given how creaky the US political situation is? Trump could win, and who knows what craziness he will do that could tank the dollar. Or maybe the BSP sold that much because, after discreetly defending the falling peso for a while, it needed to raise more cash to fund its contribution to the Maharlika Fund?

Last week, it didn’t help that the BSP took the whole day – from the time the Esquire story came out in the morning to the time it finally released its official statement in the late afternoon. The time gap gave the story and the suspicions wings to fly and be shared widely on social media. Our news cycle is now 24/7.

I hope the BSP higher-ups learned some lessons here. They may think it is beneath them to explain their actions to the public in simple terms. They probably think there is no need for the hoi polloi to understand what they are doing. That’s why we miss the late Paeng Buenaventura, and Say Tetangco, who were quick to respond to calls or text messages.

As public officials, the highest-paid at that, they are obligated to keep the public in the loop on matters of interest to them in real-time. It is also important for the BSP to keep the public’s trust at the highest level. How they handled the case of the Monetary Board members was correct, even if somewhat unfair to the two people involved who, I believe, just made an honest mistake about what their perks were. Protecting the good image of the BSP supersedes everything.

This is also why that national ID mess must be cleared up quickly. How can the BSP be trusted to buy and sell tons of gold if they can’t manage a simple assignment to print the national ID?

Incidentally, the BSP’s current leadership should take a second look at the transfer of the museum and part of the BSP Complex to Clark. The design looks too extravagant and probably too expensive, like the Senate BGC building. Just because the BSP prints money doesn’t mean they can indulge in frivolous spending.

In a climate of distrust, officials cannot ignore suspicions. It affects present and future credibility. For the BSP, that’s everything.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco.