Since October 2008, we had been continuously hearing the words I mentioned here in the title... Are we really in a globally worst times, or in an much exaggerated situation. Did all these companies fail and suddenly tumbled in October or what there a hidden storm unpredicted. United States, a country which is considered the most powerful and developed nation did not predict and prevent an economic tsunami?! The countries which predict weather forecast every 10 minutes on television channels, care about puppies and kittens, failed to look into the fire that was going blaze down the very living of millions of people?? Who failed and where did we fail as a global village.
As an analyst, I would like to look into this from an entirely different view point. Simple question: When does an economy tumble? It tumbles down when there is no cash flow. OK, when does the cash flow stop?? The cash flow stops when the consumers stop buying. Right, why do consumers stop buying? Either they don't have enough money, or not able to avail enough credit, or do not have jobs to support the finances or a new consumer behaviour emerges where the concept of savings begin. Paradoxically, one of the 4 above could be the reasons.
Lets look into each phenomena, do not have enough money!.. means that people's needs are more than the actual means. Or the money is just sufficient to handle the inflated prices and needs. Secondly, there is no enough credit. 9 :10 was the credit standards of the bank in US, and in Europe the lending ratio was 10.5: 10, Where as in developing nations, the credit ratio was 7:10, which means the banks lend 7 rupees against the 10 rupees liquidity or cash reserve or funding dynamics. Now the situation had come that if the 9 rupees of 10 is not paid periodically back to the bank, due to the first reason here, the banks will run out of reserves. So its a cyclic reaction. The next was that foreclosures. I have seen a sea of cars put for sale in a stadium...remember the auction began at less than 1000$ for each car which could anyway be worth of 16000$ and above... and North Perry street adjacent to where I live, is abandoned with empty houses..lot many so beautiful and well designed. Banks are struggling to maintain these houses, and keep paying the basic bills to the government. What happened to the people suddenly?? There was no major concept of savings in general. Which means, when the worst had hit, there is a no fall back plan. Companies think about the BCP and Disaster recovery plans...not able understand why and where there failed to be a Financial Disaster recovery plan...something failed strategically over the years. Last one, the loss of jobs and its direct impact on the people and the consumerism. Though its late, every dollar in hand counts today.
I remember reading in my history classes, the way East India Company conquered the trade in India, and slowly paved a way for the British to rule... because the economy and fate of the people depend on the strong trade and commerce. For a moment, though it hurts, the reality is that 8 out of 10 products that I purchased in the last ten days, do not have the stamp "Made in USA". Virtually, the entire market is flooded with products from Taiwan, China, Bangladesh, Vietnam and India. My friend Lori and me were discussing this in detail... she expressed her anger that the last ship of 1945 World War II, which had been auctioned to Mexico, is now on its final journey to India to be dismantled and used for the strong steel it has..you know what, to be made as "Manhole covers" and exported back to USA. US Steel company failed for the first time in history and nearly 150 banks are struggling to make it, consumer retail product companies, airlines, manufacturing and the worst hit American Automobile industry. Lori also said in anger, that people do not acknowledge the fact that we should buy indigenous products so that jobs are created here and people earn a living. May be she is hinting at a strong lesson to all of us all over the world. First create opportunities for your own products, your own people and your own industry. Global Economy and concepts are universally accepted, but we cannot in that urge let us fail as individual countries. The minute a developed nation's economy is hit, it had its own chain reaction across the globe. May be, its a real time for all of us to think on what products to buy and make the cash flow in the economy viable for the growth of Individual Nations.
May its again time for us to raise our flags and call for a Gandhian era, where at a time, we banned the foreign goods.... Save Yourselves!!!
No comments:
Post a Comment