I could never have thought that the world’s economy could be brought down on its knees in such a short while if you would have asked me before the economic crisis hit. Yet again, it’s not like there was a war looming in the air to contribute to this or anything. My view is that the great depression of the 1930s could be excused because the globe was just coming to form the repercussions of the First World War, and again the Second World War was just lingering in the air.
Many parties are to blame for the global economic crisis. These range from the economists with their low forecasts to central banks with poor policies through regulatory institutions that could not develop proper frameworks to govern the innovations in the financial markets. Financial institutions are also to blame for entering into hapless deals that almost brought the global economy tumbling in doom.
Blame time is over, and the blame game is not equally going to take the global economy to higher heights. Lessons and a myriad of them, for that matter, have been drawn to our attention as individuals, governments, institutions, and businesses. However, these lessons can only be beneficial when a proper review of the leading causes, effects, and effectiveness of the remedies is evaluated. My honest opinion would then be that teams of professionals be set up to look at all these items and then come up with policies that will be able to maneuver around such challenges in the future.
I have personally been able to make several inferences from the causes of the effects and the strategies that governments tried to apply to alleviate the situation. My approach to personal finances, business approach, and home establishments has been renewed. For example, at my privately owned equity firm where I work, I realized that the types of assets held by an organization are fundamental. I would not have made this statement this authoritatively had the financial crisis not occurred. Financial institutions lost a great deal as relates to toxic assets and bad loans. In as much as a business and as an individual, I do have assets; I believe the levels of asset volatility need to be weighed first. In as much as toxic assets need to form the asset structure, they should be held in moderation.
Being in a buy out firm in France, I noted with keen interest that speculators were venturing into buyouts at this particular time. This was the case because some investors could not foresee that this crunch was going to last long. This speculation made persons buy firms at an overvalued price only to realize that the crisis was ongoing and were making losses. From this, I believed that during such swings in the economic cycle, getting into buy out was tantamount to gambling. Further, organizations venturing into the buyout would end up in worse situations since they would have to offset the debt they had incurred before launching the buyout. Secondly, they would have to bear the losses that the firms that they were acquiring were making.
This also applies to real-life scenarios in my life. As a person, I have come to realize that I should not make snap decisions, especially when conditions are so volatile. There are moments when I am faced with challenges, and I have to come up with solutions. Say when I have argued with a close friend and I need to decide on the direction of our friendship, I have learned that emotions or short term excitements are not meant to inform the kind of decisions that I am to take in life. Integrity, to me, is core. I hold on to it so dearly. However, the global economic crisis occurrences just worked to open my eyes to how much our society currently lacks integrity. Talk of the banks that would offer loans at adjustable interest rates, which is not brought to the full attention of the customers who ended up suffering in the long run. This has worked to change my perception of banks and other financial institutions. My dealings with them are now with much more caution.
Another aspect of my perception that has been influenced is that investments that people make in the company stocks are beneficial but face much more vulnerabilities than when persons invest in government bonds and bills. This thought has been influenced because the wealth levels of individuals met a nose dive as the S&P 500 was down by 45% in early November of 2008 from the high experienced in 2007. I there tend to be more risk-averse in my dealings and trades more than a risk-taker. In a nutshell, my risk attitudes have since changed. As I trade currencies, for example, I would love to use small margins and small lot sizes so that if I was to incur a loss, then it is totally minimized. This means that the profits that I take in these trades are also little. However, this does not mean that as a person, I am not rational so as to prefer small to more. On the contrary, I am very reasonable, but I would love to consider caution in my rationality.
Basing on the movement of savings and investments droning the onset of the economic crisis, I have determined that persons need to indulge in proper budgetary allocations. This will involve persons setting aside funds for investments, savings, and consumption. This setting aside of funds, as I later came to realize, should be well determined by taking into account the inflationary tendencies and price level changes. This is because savings and investments were also falling drastically at the onset of the credit crunch. The fed reserve has experienced a shift in role from the lender of last resort to be the lender of only resort. The downfall of the S&P 500 influenced my perception of equity sources of finance. To some point, I have come to believe that debt capital should be considered just as equally as equity is.
The way warning signs should be treated in organizations, for me, was much influenced by the happenings of the global economic crisis. I have come to form the opinion that however baseless allegations in an institution seem to be, consideration for them should be given. This is because effects at first were sidelined with governments and ministers of finance while political leaders were working to alleviate fears of the magnitude of the ramifications to be expected. In as much as some sideshows in an organization may serve to waste organization time, I am now of the opinion that firms need to set up ad hoc committees that will spare some time to handle any issues coming up in the organization; however small they may appear. With the effects of this economic crisis, other countries could not get an opportunity to sell their consumer products. The previous perception I had was that the trickle-down result of a financial mishap could not affect other countries as gravely as it did affect countries like Cambodia. This has made me view partners and other stakeholders carefully in terms of what happens in their realm and the possible ramifications in the whole industry that as a business I operate in.
The unemployment that followed the global economic crisis kept me thinking of ways that firms may engage in so as to limit the cases of unemployment. I was an ardent supporter of job specialization and the benefits thereof. I have to mention now that I consider that to be a cause of unemployment at times. My view is that once one joins a firm, there needs to be continuous training and job rotation so that in cases when some units or departments have to be closed, still the employees will have something to do other than remaining redundant. Further, I have come to realize that sustainable employment is essential in an organization. My thinking has been changed from job specialization to job diversification. As an organization, we should be in a position to employ multi-skilled workers and reduce job losses that are created by economic downturns.
The world was caught off guard by the global economic crisis. Leaders and policymakers had to keep shoving in the dark, trying to find solutions; some of them ended up deepening the already gross state of the economies. This got me thinking; what if, as a business, we did simulate possible grave positions and the solutions that would relate to them? Won’t that make it much more straightforward when faced with such challenges? For me, the answers to the two questions were yes and yes. The government of the US came in to bail out the central banks. As a business, my thought was if there was going to be another institution that would bail us out if we went crumbling. This placed an idea of having to diversify investments in various places and industries so that one sector would help should the other in times of financial crises.
My perception of government participation in business operations has changed at the onset of the bailout and the support that the firms got from the Obama administration. Previously my thoughts were that businesses should be allowed the autonomy to operate with minimum interference from the government. Considering what the US government did to salvage the awkward position that the central banks on Wall Street were in, the justification for government involvement in private business tends to make more sense for me as an individual. Another corrective strategy involved the use of regulatory responses for the financial institutions. I am now of the opinion that a business needs to come up with a dynamic yet consistently updated code of ethics to improve its performance.
I have come to the realization that as an organization, challenges are bound to face us, but the approach that we need to give it should be procedural. The global economic crisis was a challenge that posed great a question as to how issues need to be solved. As persons and as organizations, we do not try to give haphazard solutions or tries that are not well thought of. My perception now is that quick fixes are not the best solution to problems. Instead, the root cause of the problem needs to first be identified and then a procedural methodology given to the challenges that we are exposed to. The approach that the global economic crisis was given was, to some extent, a trial and error approach. Governments and institutions would come up with suggestions and possibilities without a clear understanding of what magnitude those solutions would work to solve the problems that had cropped up.
One of the possible solutions to the global economic crisis that has long affected my view of issues is that of the stimulus package that the governments, and especially the US government, did give. In a way, the stimulus package was being contributed towards by the taxpayers’ money.
In as much as the ramifications were not to be felt in the short run, the long-run effects were going to be gross on the citizens. I now look at business solutions differently. As an organization, I would like to determine how much we are going to suffer in the long run as a business. On the other optimistic side, I would first love to pick how much I am to gain by choosing a specific remedial action.
The last lesson that is worth mentioning is that: trouble does not last forever. With the current improvements that are noticeable and the optimism in the air, it only serves to teach me that I should never give up in life. However, challenging circumstances may appear; there always lays a solution for them. Now than ever before, hope is my friend but hope with effort, resilience, and perseverance. I recognize that nothing comes easy and that I need to be diligent and focused on my action. Along the way, sometimes I may face distracters, but while holding on steadfastly to my dreams, I am bound to soar high with wings like eagles.
The global economic crisis has informed my opinion in several ways about how to source funds, where to invest, and government participation in businesses. Stakeholder effects have since gained much more importance from my perspective. It is unfortunate that such world-shaking occurrences are the ones to inform our thinking but still, the lessons learned are to be appreciated. As an individual, I now know that investment should not be haplessly made based on the profitability of the firm but that there are other canons to be considered. As a government, I realize we need teams in place to not only set up policies but also carry out continuous monitoring of the same. I pray that every other stakeholder has learned something from the effects of the global economic crisis.