Just Another Recession?

falling recession

Hope is not a strategy.  ~Michael Bloomberg

One of the hardest hit industries over the past several years of this current economic crisis is defence spending.  While nations need to protect themselves from groups who wish them harm, the level of spending enjoyed prior to 2009 is currently unsustainable.  As a result, troop strength is being reduced, major defence programs cut or greatly curtailed, and spending on supplies and equipment for current forces slashed. That sector of the economy is certainly in a major slowdown, as are other sectors.  A global economic recession has hit us all.

Okay, I understand that we all have to do with less in these tough times, but where is that money actually going? There is actually more money in circulation, not less.  So, I am afraid it is not going into programs to stimulate the economy or encourage innovation and job creation.  I am afraid it is going into the pockets of bankers.

Why do I say this?  Here is a sobering bit of reality.

The current US administration has made available more than $12 trillion in cash infusions, loans and guarantees to the financial industry, what has been termed “bailouts” of a sector critical to economic stability and “too big to fail”.  But for state governments that are facing massive budget deficits, it has thus far provided only one quarter of 1 percent of that amount in federal stimulus funds—about $30 billion. The White House is feeding the banks with cash while states across the country lay off workers and slash spending on education, health care and other social programs.

RothschildAnd many of us believed the bailout money used to keep the banks afloat would then allow the banks to renew lending at favorable rates, thus stimulating the economy.  Wrong!  Didn’t happen that way!  In fact, banks have been more restrictive on lending than at nearly any other time in history.  They are using the bailouts to pay off their debts and continue their casino betting practices, while the US and UK continue to pile up unsustainable levels of national debt.

This is not just another recession and, if we just sit tight, things will pick up again.  I believe there is a fundamental shift occurring in where money is being concentrated and how it is being used.  Here’s a statistic that tells me this is not just another recession.

Over the past three recessions in 1981, 1991 and 2001, the car rental company Hertz never experienced its annual sales contract more than 3.5 percent in any given recession. In November and December of 2008, it saw a 20 percent fall. In January of 2009, Hertz announced a reduction in its global workforce by 4000 employees in a bid to decrease costs due to reduced demand. Hertz had already reduced its workforce by 22 percent in the last two years. Today, however, Hertz is doing just fine, having improved efficiency in the car rental and return process through the use of hand-held technology and Internet reservations, thus reducing the need for more jobs and more hiring.

Fundamentally, we are entering a different type of economy where jobs are being replaced by technology at a rapid rate and economic stimulus means bailing out the banks, not creating new jobs or revitalising state and local economies.  Bright and eager graduates from Oxford and Cambridge are seduced into jobs in the banking sector rather than business, social or educational opportunities. And all the while, the national debt is mounting.  Without a robust economy spinning out jobs, innovation and growth, how will the debt be paid down to a level where the world once again has confidence in the dollar and the pound?

Just another recession? Don’t think so.

Tight Lines . . .

John R Childress

About johnrchildress

John Childress is currently Visiting Professor in Strategy and Culture at IE Business School in Madrid and a pioneer in the field of strategy execution, culture change, executive leadership and organization effectiveness, author of several books and numerous articles on leadership, an effective public speaker and workshop facilitator for Boards and senior executive teams. In 1978 John co-founded The Senn-Delaney Leadership Consulting Group, the first international consulting firm to focus exclusively on culture change, leadership development and senior team alignment. Between 1978 and 2000 he served as its President and CEO and guided the international expansion of the company. His work with senior leadership teams has included companies in crisis (GPU Nuclear – owner of the Three Mile Island Nuclear Plants following the accident), deregulated industries (natural gas pipelines, telecommunications and the breakup of The Bell Telephone Companies), mergers and acquisitions and classic business turnaround scenarios with global organizations from the Fortune 500 and FTSE 250 ranks. He has designed and conducted consulting engagements in the US, UK, Europe, Middle East, Africa, China and Asia. Currently John is an independent advisor to CEO’s, Boards, management teams and organisations on strategy execution, corporate culture, leadership team effectiveness, business performance and executive development. John was born in the Cascade Mountains of Oregon and eventually moved to Carmel Highlands, California during most of his business career. John is a Phi Beta Kappa scholar with a BA degree (Magna cum Laude) from the University of California, a Masters Degree from Harvard University and was a PhD candidate at the University of Hawaii before deciding on a career as a business entrepreneur in the mid-70s. In 1968-69 he attended the American University of Beirut and it was there that his interest in cultures, leadership and group dynamics began to take shape. John Childress resides in London and the south of France with his family and is an avid flyfisherman, with recent trips to Alaska, the Amazon River, Tierra del Fuego, and Kamchatka in the far east of Russia. He is a trustee for Young Virtuosi, a foundation to support talented young musicians. You can reach John at john@johnrchildress.com or john.childress@theprincipiagroup.com
This entry was posted in John R Childress, John's views on the world, leadership, strategy execution, Uncategorized and tagged , , , , , , , , , , , , , , . Bookmark the permalink.

One Response to Just Another Recession?

  1. Right on. It’s difficult to think how we get out of this mountain of debt. The options are inflation, deflation (default) or grow our way out. The sheer size of the unfunded liabilities rule out the latter option. Most people are expecting inflation. Markets tends to surprise. This suggests a deflationary depression, something nobody under the age of eighty has experienced in the United States.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s