BUSINESS WORLD Economic Crisis Could Turn Out to be a Blessing in Disguise Posted by on Jan 27, 2009, 02:19

There are a lot of greedy people in the world, and bank scandals along with corporate theft are unfortunately here to stay. Human nature dictates this. People will always exploit a loophole no matter how tight the regulations. However what is certain is that new regulations will now be put in place around the world considerably tightening up loopholes, making banking transactions more transparent, introducing simpler mortgage agreements, and making banks in general act far more responsibly. Import lessons are being learnt - how to avoid making the same mistakes again, what to regulate, ways to avoid companies becoming too big to fail, what techniques best stimulate the economy, and how much or how little money to throw at a particular problem.

Now let turn to the general public around the globe. The economic crisis has forced most people to examine their own spending habits, savings and pension plans (or the risks of having neither), credit card debts, and in short just how much they are spending on everything...from drinks down at the pub to food and the monthly electricity bill. Already there is evidence emerging that people are trimming their spending and reducing where possible their debts.

These major transformations of people's spending habits and the redesigning and beefed up policing of the banking industry one believes will have profoundly positive benefits in the years ahead. For years the auto industry had looked upon greener, more fuel efficient vehicles as a nice idea, but something really to be tinkered with rather than fully exploited. But now fuel efficient and smaller vehicles are the priority for all manufacturers, and those that don't commit risk going out of business sooner rather than later. That is not to say that we will all be driving around in hybrids in 2 or 3 years. That is completely unrealistic.

But one believes that the current crisis has probably brought their wide scale introduction forward by at least five if not ten years. The oil industry's powerful lobby may well try and apply pressure to water down greener commitments, but there is simply too much public and political pressure now to prevent real and long overdue change from occurring. A switch to cars powered by sugar cane fuel has reduced debts to the oil cartels and brought significant additional benefits to the economy. This year it has reached record highs and also dropped by a record amount. There must be universal acceptance that allowing such dramatic swings has no long term benefits for anyone - including the producers.

Allow oil to be priced way too high ($150 a barrel) and business expansion starts to dry up, people spend less, transport companies go out of business, heating bills go through the roof, and public spending on all manner of things start to diminish. On the other hand if oil is far too cheap then that introduces a whole different set of problems for the producers and distributors. One thinks the industry will be forced to explore new ways of future oil pricing which offer more stability for both consumers and sellers. The huge swings in price we have seen this year have simply been too dramatic to sustain.

If the price of oil continued to bounce up and down so crazily in future years it would be almost impossible to try and price anything... from setting fuel tax levels and prices at the pump to calculating home heating bills. How would Governments be able to accurately predict and budget for income from oil taxation or sales? The numbers are always huge, so any radical alteration introduces major problems for strategic financial planning. So again another need for real world evaluation of systems, pricing, and supply issues. Nobody can argue that they haven't caused harm to the financial markets this year. We can argue over how much or how little.

Again experts are now assessing their value, the threats they can pose, and if there should be a future in allowing people to bet on whether a company will survive. As a general principle, such forms of gambling should be confined to being placed at a horse racing style bookies establishment, and that the amounts involved should be legally limited to a paltry "fun wager" amount.  Can it be right for a company to simply bet millions of dollars in the hope that in so doing they will wipe a company out by driving down its share price? How does that help the economy in any positive way?

Let those same people use their considerable business minds to invest money into more productive ways, such as backing through share investments, new companies where they envisage real growth potential. Short term selling has been restricted in some countries during the current crisis, but with time new restrictions will at least reduce the potential for harm to companies, and lead to bans on the practice in some countries. The crisis has forced countries to cooperate, share information and ideas, act in unison, and forge new alliances. There is a definite feeling that we are all in this together, and although individual governments may have their own territorial solutions to the problems there is the realization that the global economy can only "heal" when most of the nations get their financial systems back on track.

A lot of people won't give a dime to a beggar in the street, but there are now numerous cases emerging of people being prepared to make financial sacrifices particularly in work places to prevent misfortune for others. People are now willing to take pay cuts to save their own jobs or those of colleagues. That re-evaluation of the needs of others during a crisis, along with a new found camaraderie of spirit for survival; that will bring future benefits. They could be small from simply new friendships emerging through to having bigger impacts such as a new commitment to supporting charities or local good causes.

In conclusion, there is no doubt that the next 12 months are going to be horrible, and maybe the following year will be a tough one too, with people losing their homes, businesses, jobs, marriages, cars, holidays...you name it. But when we finally emerge from this greed inspired nightmare, allow a few years of calm to pass, and then reflect on what has changed as a result of the events of 2008, which is when people will begin to see that everyone has learnt and acted on some important lessons, and that much has been gained.  We can't all be individual financial winners, but we can all benefit from the improvements that have taken place to safeguard our future at so many levels.