My latest interview with Pam Atherton of A Closer Look Radio, covering the superconnection between peak oil, European fiscal crises, local economics, and even the iPad. It’s all about institutions in transition and what you will do to assure your future success.
Egads, Reuters has a really great set of scenarios for how the Greek crisis could play out.
Good stuff, very positive to see in major media.
We’ve been sitting back, examining the situation of sovereign debt in Europe and watching its impact on global markets.
Today, Greek debt is reduced to junk bond status, and a two-year bond’s yield has reached 26%. It was 18% yesterday.
As much as European officials say that this won’t have any systemic impact, that is often what people say when they don’t want it to have impact.
Think of multiple scenarios for this outcome. Use game theory, scenario planning, or old-fashioned guessing – but think it through.
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:
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?
Between the Greeks staying in the European monetary union, or Detroiters keeping their dry cleaners and doggie-daycares afloat, there is a considerable amount of talk about the role of currency. The crux of the European issue is that the Portuguese and Greek economies are so different from the French and German ones, it is difficult to keep one currency with the same rules and assumptions in play. The fringe actors are no longer able to keep up the facade required for membership in the club.
We are seeing a microcosm of this in local towns in America, and the issue comes down to the ability to maintain a central currency. We note with interest an uptick in stories about local currencies not seen since the banking meltdown of 2008 and 2009.
Last year, two Detroit tavern owners were sitting at the bar, sampling their beverages and bemoaning the local economy — no one in the city had cash, and when they did, they spent it in the suburbs. Then the pair hit on a solution: Print their own money.
It is, after all, perfectly legal for anyone to issue currency, as long as it doesn’t look too much like a U.S. dollar. Thus was born the Detroit cheer, a local scrip accepted by a handful of city businesses, including a pizzeria, an electrician and a doggy day care center.
But why would people go to such trouble? Money is money, right?
When the Treasury prints billions to bail out banks and automakers, people look for alternatives. These folks may look nutty now, goes the quip, but wait till the dollar goes the way of the Argentine peso. Then you’ll be exchanging a wheelbarrow of cash for a bay buck, local currency boosters say.
What could this mean in terms of business strategies? One of the most likely implications would be a return to local distributors, those able to deal best with the local market and even local currencies. Compare this to the recent trend of market consolidation in a variety of industries. It just doesn’t match.
First Greece and Portugal, but they are on the outskirts of civilization. First Detroit and Western North Carolina, but those places aren’t prime time.
Next…California? Spain? Iceland? New York State?
