Collectively, we have desperately wanted to ignore the larger implications of what people falsely call the “Crisis of 2008” or the “Banking Crisis” or even less correctly, the “Subprime Crisis.” The implications are too big, so it’s better not to pay attention, soothing ourselves with discussions of “green shoots” and chipper news reports that “the American consumer is BACK, baby!” The last thing our news media wants to do is continue the study of what happened, what it really means, and what’s next. This is a shame, as we are guessing that there is much in the way of “crisis” to come.
Here at Competitive Futures, we absolutely recommend studying disruptive events with the goal of creating strategies for the survival of YOUR company. Over and over again, we say a crisis for some is not necessarily a crisis for you, if you plan ahead. S
o when we predict major disruption, it’s not that we want to gather up a few bottles of tequila, some old records, good friends, and just wait for “the end.” Quite on the contrary, we think that it’s time for action, no matter how disruptive the news may be.
So then, just some of the news:
- Japan, the world’s second largest economy, may begin missing payments on its bonds, rendering it functionally bankrupt.
- Los Angeles, the second largest city in the United States, the tax base of which includes media, defense contracting, and major shipping, is nearly out of cash. It’s bond rating has been reduced by Moody’s to Aa3, a medium-grade risk investment.
- Greece has been saved by preferential loans of thirty billion Euros from fifteen of the EU member states. Nobody, however, is discussing what happened, why it happened, or how to keep it from happening again.
The pattern emerging here is that we have major early warning signals that the current “crisis” is part of a much larger reorganization of society and economics. Whereas last time we focused on the debt shenanigans of private companies (AIG, Wells Fargo, Bear Stearns, Lehman, et al.) this time the focus is on nation-states themselves. This isn’t about stocks, from which people expect some risks, but government bonds, which are supposed to be the dullest part of anybody’s portfolio next to shoelace futures or large stockpiles of sugar packets.
Nobody is talking about how much of a rupture this could be, which is no surprise given how little people wanted to discuss the last “crisis.” Before, this was presented as a crisis of economy – “The economy has taken a bad turn; we will bail out the private actors and things will return to normal. Oh yeah, and regulate some stuff…maybe, so that this doesn’t happen again. Not that we knew what happened.”
Now, with the bankruptcy of major cities and states and entire countries, we have a crisis of the global system. Nation-states are attempting the regulate financial actors that are orders of magnitude larger than the agencies that purport to have legal control over them. It doesn’t really work, but when push comes to shove, the people accept the sovereignty of their elected governments to print currency, engage a stimulus, or create new regulatory regimes. The inverse is not true for nation-states. Once nations have failed, our final unit of geopolitical analysis is finally gone. If Japan defaults, they can’t really send out Mizuho Financial to negotiate on their behalf or print a stimulus. The Yomiuri Shimbun isn’t really the official spokesperson for the nation – their foreign ministry is. And after all, it’s the government that backs the currency the businesses use, not the other way around.
You might imagine, after being caught flat-footed in 2008, that our managerial culture would be more sensitive to these emerging patterns and their potential implications.
Some will pay attention, and those people can position themselves for success. Will that be you?
