10 Oct 2008, Posted by Matthew Reinbold in An Aside,New Work Ways, 2 Comments
Once-A-Generation Crisis Here; Just Breathe.
If you are a small business and hadn’t heeded the warnings that began to surface last year its still not too late. From this morning’s white board session come a set of reminders (a more digestible summation of Sequoia Capital’s slidedeck):
- This American Life – Another Frightening Show About the Economy podcast; nuanced, thoughtful conversation about what happened and what this all means
- Charlie Rose – Analysis of the Fannie/Freddie Purchase; while it was focused on the Fannie/Freddie purchase it covered a host of related economic issues.
It’s mostly common sense stuff, to be sure. However, there was also a time when denying mortgages to people without jobs was also common sense. The times we’re in represent a near perfect storm across a myriad of complex issues – unregulated credit default swaps, decreased purchasing power no longer buoyed by mortgage loans, over-leveraged investment, commodity volatility, and future uncertainty. The net result is there is no trust – we have no trust in the financial bedrock institutions to truthfully report their numbers, there’s not a lot of confidence in when (or if) the recently passed bailout package will work, and the assurances with which companies could count on banks being able to cover slowdowns in payment cycles has disappeared.
If this were a crisis that could be solved by quantitative means the fix would be easy. It would be a simple matter of adding up various columns of numbers and legislating a solution. However, what we face are emotionally qualitative problems: the afore mentioned trust, perceived value, speculation, and fear. The stock market is a numerical indication of perceived value . Right now, instead of a run on banks we are witnessing a run on stocks because people no longer are rational – they just don’t want to be the last one out since that’s where their savings are. Those aren’t things you can wave a check at. It takes time to restore confidence and win back trust.
Whether or not you understand what is happening it is important, this weekend, to take a breath. Accept that there will be no silver bullet. We’re going to be here awhile. Realize that talk of depression is media sensationalism – we’re not on the brink of soup kitchens. However, this is the greatest financial challenge of (at least) a generation. Come Monday, act appropriately.