How Long Will the Financial Crisis Last?
This seems to be the crux of everything going on in the world right now, doesn’t it? Until someone gets their bailout, until the economy corrects itself, until it’s decided when the financial crisis will be over nothing can move forward. It’s on the news, it’s in the newspapers, and you cannot seem to escape it.
It’s so bad even my long term optimism seems to be taking a beating lately. Ever since we started on our slow down in 2007 I’ve been predicting we will be turning the corner in the fall of 2007, then the spring of 2008, then the fall of 2008, but on every turn it just seems to be dragging itself out.
The huge financial crisis occurring worldwide is only helping to extend the situation even longer. The US problems in the mortgage and finance industry, which instigated much of the financial crisis, aren’t even a surprise, yet they continue to drag not only North America down, but also most of the world economies.
Possibly most devastating for the Alberta economy, where we are located, is the beating that oil and gas prices have taken. Just a few days ago, oil reached the $35 a barrel mark which makes many projects here simply uneconomical. It’s since rebounded over $40, but will it last? (Since I started this before Christmas we are down below $40 again).
It poses an interesting dilemma for the big oil companies. With energy prices at such low levels, it helps stimulate some aspects of the economy, but it also hurts their ability to expand and develop new sources of revenue such as the Alberta oil sands. For long term growth, these huge mega-projects are a requirement as they will provide long term profits.
Yet we come full circle back to the uncertainty of when the financial crisis will actually end. No one seems to be willing to make investments on what may be a huge gamble. When oil was at $145 a barrel, it was an incredibly easy decision to “gamble” on a $5 billion project that would make as much as $90 profit per barrel of oil.
When we look at the current state of the economy, it seems horribly depressing. The stock market has been devastated, mutual and retirement funds have been hit hard, the housing markets are taking a beating, worldwide governments are propping up companies and financial institutions with cash infusions and layoffs seem to be looming in many areas. Fear and uncertainty are running rampant helping to perpetuate the situation.
Unless this fear is conquered, the situation could drag out for quite a while. This is part of the reason why the governments have been infusing cash into companies in an effort to create a condition of optimism and hope, but has it been too little too late? The stock markets haven’t managed to rebound with any renewed confidence, the headlines still seem dire and the general mood still seems dim.
We are in a position where we have to put the blinders on when it comes to some of the news we see. The majorities of the companies on the stock market have not changed their business models and are still profitable, so why have they lost 30% or more of their value? Oil demand has decreased, but it is still essential to day to day living, should it have lost 75% of its value? The depressing, fear producing headlines sell papers, headline news and help to perpetuate the illusion the world is ending.
The US is in a recession; Canada has also apparently entered one as well, but not all of Canada. Much of Western Canada is still moving forward. All a recession actually is, is two consecutive quarters of negative or zero growth in the economy. Is it any wonder Eastern Canada’s manufacturing based economies have slowed down with the current crisis in the US?
This shouldn’t come as a shock to us, more it should come as a call to the manufacturer’s to change their business models away from depending on the US as much, cut their costs to become more competitive worldwide and streamline their entire business model.
Many of the concessions the unions won when companies like GM made incredible profits don’t apply anymore. The rules have changed and if the unions don’t change with the current times, the power of 500,000 unemployed union members is incredibly lessened.
For many years, unions served their purpose of protecting the workers from the unscrupulous owners who had all the power. Times have changed and unions will need to change with them or their power will evaporate along with the companies they help put out of business.
Governments have to realize where their revenues come from, what areas do actually need “bailing” out and which are just looking for handouts. When you hear some of the US companies receiving bailout money have actually used it to pay executives you have to wonder why they even received money.
In our own back yard, we have the coalition government fiasco that occurred earlier this year. Rather than take responsibility for losing an election, they tried to circumvent the rules and take over power. Prime Minister Harper himself has to take responsibility for being too arrogant and unaware of the political situation when he called the last election and wasn’t able to provide a majority government, but the other parties needed to take responsibility and step up themselves. Not force themselves upon the people of Canada.
As I veer off course with the lack of responsibility people take, the important part for 2009 to become a successful year is for everyone to have an understanding that it isn’t as bad as the media portrays it. While there are some people having a horrible time of this in the US and in Canada and losing homes and businesses, much of it comes back to businesses that shouldn’t have been operating the way they were anyway (Lehman Brothers?) and homeowners who shouldn’t have been able to buy homes they couldn’t afford.
People have to take some responsibility for bad decisions and move forward. If you make bad decisions, they will come back and haunt you. If you follow a solid business plan, or life plan, you will be rewarded. If you only ever read negative headlines, you will be depressed and discover the world is ending, if however you ignore the headlines and dig a bit deeper to find the underlying stories you may find yourself in a more positive state of mind.
The upcoming 356 days of 2009 will change many people’s lives. For some it will become worse, for others it will become better. The path that you take is entirely up to you; just take the time to reflect on how bad your situation actually is. Our Christmas was impacted significantly versus the last few years; we tightened our belts and had a wonderful time anyway. We could have complained we didn’t buy the latest gadgets and shower the whole family with present, but instead we took responsibility and cut back. It’s simply not that bad out there, unless you let it wear you down.
2009 will be a year of choices for many of you, make sure you make smart choices and hopefully you have one of the best years you have had.
In Closing
The next year will be a challenging time for many people, but the world will also continue to be an incredible place for those who choose to prosper as well. Karen prepared an article on goals and planning to help start your year. Planning your year, setting goals and most importantly keeping these goals front and center can have a tremendous impact on what you achieve over the next year. Take a few minutes to read through her information and use that as a start to setting and achieving your goals in 2009.
Thanks to all the readers who have contacted me, left comments and generally give me feedback. While 2008 wasn’t the best year ever, it had many interesting moments. I’m hoping you all have an incredible 2009 and it all starts out safely and happily, so Happy New Year to Everyone!
Bill and Karen Biko
KatSid Housez Inc.
info@housez.ca
403-870-4663
