It's been around one and a half month since the news about the fall of Lehmann brothers. That news itself was astounding to put it very mildly. What followed has been a nightmare given that many more financial icons have gone bust, few countries are on the verge of bankruptcy (Iceland, Pakistan, Ukraine, Belarus etc). Many of us do not have a first hand account of the "Great Depression" in 1929 but from what we can "Google" the comparison is inevitable though unwarranted. However, the big difference today is as Thomas Friedman says "The world is Flat". In a global economy the decoupling theory just doesn't seem to be working. All the major economies (US, Europe, Japan, Chindia) seem like four wheels of a car - so interdependent on one another. The biggest aftermath of this financial meltdown could well be the way we have known America to be. I believe this is an amazingly disruptive event in the history of US. The US economy will shrink, the political clout will reduce; the financial crisis may well signal the beginning of the end of USA as an economic superpower. I believe we are in a transient stage of economic power shift to CHINDIA.
Coming to India, we too are feeling the pain. The rupee is at its lowest rate, the stock markets just hit a new low few days ago, the Assocham news report that 25% employees will be laid off in India is disconcerting and the consumer confidence is at an all time low. However, on the positive side inflation is reducing (10.68% as on date), the interest rates are bound to reduce, crude has reached around $66 from a high of ~$148.
How really do we survive ?
First of all, we need to value the money we spend in corporate business just like our own savings. Let me elaborate with an example; When we shop for personal goods like car, mobile, clothes, AC , other household goods etc..don't we bargain to get the best deal. We really want value for our money. Now equate this with corporate spending. Are you spending the corporate money in the same way ? Do you think twice before spending on entertainment, office expenses, group lunch, conferences, phone calls etc. ? Are we looking at value for money in the corporate scenario ? I trust many of us don't !
The other things are quite simple. The good old fashioned socialism is back in vogue. Moderation is the key. Get into cash conservation mode. Just defer that vacation plan or a car purchase. Somehow, i feel that we have outgrown some of our own desires. We need three cars when there is a need for one, three homes - one for living, one future home and one as investment, need to change the mobile phone every six months (sprinkled with Blackberry & iphone), three or four vacations in a year etc.. etc...the list goes on.
My friends the whole crisis is a manifestation of corporate & consumer greed !! Alas, we have come a full circle! At this time i can only remember the phrase "..This too shall pass" and i leave you with this beautiful song..http://in.youtube.com/watch?v=6olU1D70eys
Sameer Tikoo
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1 comment:
Dear Sameer, one more very interesting blog.
You have very well captured the sentiment of the market and economic meltdown.
However I don’t fully agree with you that the "whole crisis is a manifestation of corporate & consumer greed".
Corporate greed, I agree, however consumer greed is nothing but the driving force, which aids the economy to grow.
What is causing market meltdown is not pure economic reasons, but also the market sentiments,
which is making the consumer go prudent, which as a result, is aiding the economy to go down.
I agree the Housing crisis in US and the Load Defaults could have made you write like that, but again, what happened in US was not purely consumer greed but market opportunity which consumers wanted to encash.
What will you then call the 10x over subscription of Reliance Power IPO. Consumer greed or Market Opportunity.
For sure the major driver in the current meltdown are the corporates like Lehmanns, who fuelled the hype in the market to bring short term gains for them selves.
Otherwise you blog is spot on .... You can just add Consumer is the King !
Ameet
PS : You can read interesting movie reviews on my blog @ http://ameetmattoo.blogspot.com
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