Wednesday, 7 January 2009
Business As Unusual?
Just a short thought, regarding business and consumer conditions.
For some, what we are currently witnessing, this is just a normal slowdown happening at the end of a business cycle. For others, consumer are being scared by the media, to a level unjustified with the reality on the ground.
What to believe?, where is the truth? who is providing accurate and real information?
At some point, the information used to be concentrated in few hands, and propagated according to state or personal interest, there was only one truth, and it was the one in power or the wealthiest.
Today, it's different, internet, up to now, has allowed a diversity of sources allowing people to get different point of view - some time the difference is shockingly wide.
In today's world, gullibility is unforgivable.
When you hear Comrade Jan Vapavuori, telling that unemployed people will be helped by the state and banks to overcome mortgage difficulties, You have to clearly understand what is at stake. Banks are the focus of the message, and that they cannot fail, now or tomorrow. It tells you as well the degree of deterioration we could endure in the quarters ahead.
The state will do whatever is in his power to maintain those institutions whether or not they had sound lending practice (wait to see how sound and foolish they behaved in the Baltics, and locally). No risk management, fatty bonus, uncorrelated executive pay and gigantic overconfidence could clearly summarize the mis-behavior of those "unsound" institutions for which the state will hand , as a ransom for failure, tax payer money.
So business as "unusual"; time has changed but merely noticeable for the common mortal as its thinking is better structured to extrapolate past information. When times are good they borrow , over borrow and forget about saving. When time get sour, they clearly worry, but still consume as they cannot extrapolate something that has not yet happened. But when the shoe start to drop and unemployment start to rise, housing start to fall and stock market crash...they extrapolate and stop consuming, bringing the economy on its knee whatever the try to revive it, whatever the level of state stimulus.