Archive for November 2011
The Global Economic Crisis’ Effects on Business
The global recession prompted due to several causes is a ghastly piece of news for each and every business in every country throughout the world. The tendency adopted in this recession by companies in their pursuit to survive during the chaotic time would be to enter into reviewing the headcount, as well as freezing the budget along with numerous cost reducing measures.
Nonetheless, it is possible that the growth of the company will be stunted in case you continue with the practice or overreact to the whole situation. It is seen with recession hitting the economy many of the internationally based business were enforced to reorganize their operations. This was mainly done by ceasing the functioning of the facilities of production. Millions of working people were required to quit their jobs due to the ongoing crisis. The course of action adopted by the company should be to come in the forefront and re-invent the proceeding of your company and at the same time think of procedures for global recovery.
The crisis is faced by the business is of great magnitude. Businesses around the globe were hit so hard by the economic crisis that several businesses had to seek monetary assistance from the government in order to survive. Several industries were in jeopardy and the others were facing the threat of bankruptcy. Practically for many monetary institutions it was like floor has been swept off under their feet. And as a conclusion the power if acquiring things by the public became feeble. The consumers were once again were very conscious about the budget.
Almost all people were forced to make their decisions carefully when it came to buying something as everyone was clueless about when the recovery from recession will take place. The trends in the market place began to fluctuate along with the demand of various products. Almost every business was affected by this global economic crisis but the companies that were hard hit were the companies having large scale operation along with those who provide their services at high prices. The consumers are now turning to the businesses which render similar services at comparatively cheap prices.
Businesses that can survive this economic recession in a better way are basically small as well as medium scale industries. Nonetheless, it does not suggest that they are not hit by economic crisis. The difference primarily lies in the fact that small as well as medium scale enterprises have comparatively undersized operations and have the ability to maintain the operation with fewer revenues. Such business usually has streamline way of operation which minimizes the total effect of the global crisis for survival.
The time span required by the international economy to recover is long as the magnitude of the crisis is large. Nations will have to strive hard to restructure their economy. What is further in store for us is hazy and the lucid picture is still to emerge. However, it is hoped that businesses will retain their normal position once again.
What Economic Crisis? This Is a Confidence Crisis
Sure, some will say the government went too far and saved the wrong people, but we are not talking about a bunch of people with economics degrees and years of experience running businesses. They did the best they could. At least they did something.
The Federal Reserve did all it could do, too. Ben Bernanke is an extremely intelligent person. He has studied the Great Depression and Japan’s “lost decade.” During the crisis, the Fed came up with ideas I would had never thought of. They increased the money supply drastically. They bought U.S. Treasuries. They bought distressed securities… they took drastic action. What else can you ask for?
So, if the government and Fed have done all this, why hasn’t our economy turned around? It’s a simple answer; human emotions have gotten in the way, big-time. The U.S. consumer has had the fear of God put in them. Many of them have lost their homes, their jobs. We all know someone who either lost their home or their job (or both) during the Great Recession. Consumers have fear in them and, until that fear goes away, the economy will not improve.
U.S. consumer sentiment sits today at its lowest since 1980, according to a Thomson Reuters/University of Michiganconsumer confidence index. Consumers are running scared.
Gross domestic product (GDP) in the U.S. is expected to increase an anemic 2.4% in 2012, according to a Bloomberg survey, down from a projected 2012 GDP of three percent only a month ago.
Our economy could be in serious trouble if consumer sentiment towards it does not improve. For years, U.S. consumers did not have any savings. Today, the personal savings rate in this country is approaching the “unheard of” level of five percent. And it is starting to affect consumer spending. According to the U.S. Commerce Department, consumer spending in June dropped for the first time in nearly two years.
But it’s not just consumers holding back; it’s big corporations, too. American companies are sitting on their biggest cash balances on record. In total, corporate America is sitting on over $1.0 trillion in cash and they are not spending. Instead of investing heavily in plants, equipment and expansion, companies are hoarding their cash, as they too are fearful of more difficult times ahead.
According to the Commerce Department, consumers are sitting on $620 billion in savings. Back in 2005, this number didn’t exist. There were no savings. At the rate things are going, and the rate at which fear has been setting in, by the end of this year, consumers and businesses in America will be sitting with $2.0 trillion in savings-money sucked out of the economy. Obama and the Fed can fight the economic downturn all they want, but with consumers and businesses pulling money off the table at such an alarming pace, we are blowing in the wind.
We are no longer dealing with an economic crisis. It has become a confidence crisis. And, until the confidence of consumers-who make up 70% of the economy-returns, the economy will just continue to deteriorate.
What Michael, Said:
“Many of today’s consumers have purchased properties with very little down payment. They’ve been enticed by nothing-down, interest-only, second and third mortgages. Bottom line: the lower-interest-rate environment sucked consumers into the housing market big-time. And that will eventually cause us all problems.” Michael Lombardi in PROFIT CONFIDENTIAL, June 22, 2005. Michael started warning about the crisis coming in the U.S. real estate market right at the peak of the boom, now widely believed to be 2005.