Tag Archives: business challenges

What’s Important to You?

World is in different place than ever before. That’s true with every generation over the history of time. Ah, but do you know what pitfalls are this time? Have you taken steps to minimize effect of disasters, natural or government induced?

What’s different this time?   Most countries are broke.

So what are most countries doing? And why do you care?

They are relying on printing presses creating a rapidly expanding money supply.  Historically this has happened to many countries at one time or another. We all know the boom bust times in various South American countries.

This time it’s happening at the same time to most industrialized countries at the same time. Think China, Japan, Great Britain, US, India, almost all of Europe and Africa. Governments are increasingly tied to each other in the ways they exchange money and honor currencies.

Japan and China own trillions of the US debt. Countries have huge amounts of actual US dollars. That means re-pegging the value of US dollar won’t work. In past we were tied to gold standard. That would no work in US this time around. Countries that hold trillions of dollars outside the US could still sell the currency for any amount they wanted and US could not stop it.

Back in 2009 US public and private dept was in neighborhood of $55 trillion. That debt had significant impact on US economy. Today, US public and private debt has climbed to $65 trillion. Total US debt is up 150% since 2000. Additionally rest of world has added another $57 trillion in public and private debt.

This is referred to as “hot money” lending. But does it matter? McKinsey points out that debt, around the world, is outpacing economic growth. When economic growth can’t finance all these loans, only governments are willing to step into the breach.

This debt can only be paid off in 3 ways:

-Paid off by the people, businesses, and countries that took on the debt.
-Inflation
-Declaring the debt null and void…destroying relationships with those who provided the money in the first place. This has been used by many countries over the history of the world…but never by a number of countries in a very short period of time. No one knows the effect if several countries started down this path.

Federal Reserve Richmond, VA branch recently reported that 61% of all liabilities in US are now guaranteed by the government, implicitly or explicitly. In 1999 the percentage was 45% (mostly Fannie Mae and Freddie Mac). Today more and more of our financial institutions rely on the government to access credit.

Unfortunately, government guarantees are not shown on any government balance sheet…in US or elsewhere in the world. Governments are relying on massive currency and interest rate manipulation to fund themselves. World has never experienced anything like this by the major economic powers of the world.

Sooner or later this bubble will pop, like many others have over the years. But when?

Nobody knows. But what it means for your personal wealth is known. The biggest threat to your wealth isn’t a stock market crash. Instead it’s from confiscation and/or devaluation by our government. Think Greece last year that took 25% of savings from citizens bank accounts.

In the 1930’s people and companies suffered massive losses. But the actual wealth didn’t disappear. Wealth transferred from creditors to lenders. This time around we will have the above, but will also have major collapse in governments politically. The US government has pledged a large amount of the wealth of the citizens to other people…through all kinds of government programs. We are all familiar with Detroit bankruptcy. That will occur within America and many other countries…within a few years.  What’s a few years? Again, no one knows for sure, but within 10-20 years seems realistic.

Once inflation takes off it can have devastating effects quickly. Think back to the Carter years when inflation in US hit 20%.

US, and most countries of the world can’t sustain government spending that is vastly outstripping tax revenues coming in. Sooner or later the piper has to be paid.

Previously the world would have a 1930’s situation where loans would be called. Difference then and now? Governments were not the primary financiers of the world debt.  Banks and financial institutions had the primary role.  If government can’t pay all the people that have been promised money there will be riots on massive scale.

So what can individuals do?

10,000 doctors every year are refusing to serve Medicare patients. That means many people won’t be able to get doctors appointments. What you can do? Doctors, not participating in Medicare are starting to charge patients monthly fee to see them. In effect doctors are signing up the patients they want to see to give doctors the income they want. These patients at least are assured medical opinions will be available to them. Start understanding medical coverage options in other countries…like Costa Rica or Panama (there are lots of others.) Those two countries have doctors that were educated in US and majority speak English. Last those countries are just few hours away and charge fraction of US doctors and hospitals.

Above is only one example. Many people have majority of their wealth tied up in value of their homes. What happens in major downturn when housing prices drop? In 2009 housing values dropped by over 50% in some markets. For most Americans that means there houses are worth far less than they paid. What can you do? Work to eliminate as much debt as possible, especially credit card debt and auto loans. If you can, pay off your house…or go to 15 year mortgage. Objective is to reduce debt so you can cover any remaining debt in a down turn.

Wages have remained flat in US for many years. How many? Depends whose figures you want to use. Assuredly since at least late 1990’s. Differences in years typically depends on rate of inflation that is applied.

To minimize this, acquire the things you need if times get tough. For some that’s food storage, for others it’s cash, or other products and supplies that are important to them.  If there’s run at supermarkets toilet paper becomes pretty valuable. Natural disasters have cleared the shelves of supermarkets many times. The economy doesn’t have to tank to cause major disruptions. People who have taken, even just a few steps, to prepare for emergencies that would affect them sleep better.

Most people live day-to-day. They assume things won’t happen. They listen and believe the media. Remember, no government cares much about their citizens. We are each just a number. Any of us that think differently aren’t thinking.

U.S. Dollar Is Gaining Like It’s the 1980s. Is That Good or Bad?

Read interesting article on Bloomberg over the weekend, written by Chikako Mogi and Shigeki Nozawa.

We know the dollar is strong, but the global financial markets are lacking a cohesive direction.

1985 US Treasury Secretary Jim Baker introduced the Plaza Accord. By persuading Japan, Germany, France and UK to join in a coordinated plan to weaken the dollar. The dollar was to strong, which adversely affected US exports.

Then and Now

In 1980’s US had the leadership and strength of purpose to develop the Plaza Accord which benefited the US and the rest of the world. Today, while the Fed is in a position to raise rates, it is hesitant to do so. Makoto Utsumi was minister at Japanese embassy at time of Plaza Accord (and now chairman of global advisory board for Tokai Tokyo Financial Holdings Inc.) Today, “The common understanding for the need for policy cooperation shared at the Plaza Accord is lost and it’s not clear where the true leadership is in each country or in the world.”

International Monetary Fund reports that global imbalances were hindering global growth. There is a Group of 20 foreign countries which meets to address slowing Chinese economy. Their meeting ended without any concrete policy on how to proceed. There is serious lack of coordination or agreement on how to proceed to avoid an economic disruption.

Why? The Plaza Accord came about because of long established relationships between treasury officials of various countries. Those relationships take years to develop and don’t exist in the world today.

It’s understandable that the G-20 meetings lack agreed upon decisions. Getting 20 countries headed in the same economic direction is like herding cats. There are just to many countries involved to expect agreement.

That leaves it up to the G-7 countries. This group of countries  has worked together in the past to return currency markets to an orderly balance. But it is expecting a lot that the G-7 countries can accomplish what they did in the past. 30 years ago they controlled 50% of world’s GDP. Today they only control 34%.

So What Should We Expect?

-The Fed to keep interest rates low longer than expected. That does not mean the Fed won’t raise rates within next few months…but it is unlikely Fed will raise rates much. Fed goal is to protect US economy.

-Unfortunately, there does not appear to be the leadership necessary to coordinate a world wide economic policy that can benefit majority.

-That means, in the US, we can expect the stock market to continue the current trend of ups and downs.

-Fed in the past had plan and policy telegraphed well in advance. That enable companies and countries to plan 2-3 years ahead…instead of current 2-3 months.

Most important take away for all of us?

Two points

-In all things people, companies, and countries, need to be looking ahead 2-3 years.  We all need to be evaluating short-term in relation to longer term plans, except in dire emergencies.  Is it hard to do? Not really. Only question is if we are disciplined enough.

-The importance of establishing  long term relationships. Personally and in business.

 

Here is link to entire article on Bloomberg. .

Tom’s Take: What Did You Learn from Your Toughest Situation?

It’s not always fun to re-visit the toughest situation you have dealt with. It could have been in business, or a personal situation.

What did you learn from the situation that you can apply today to business challenges facing you? Dealing with tough situations shape us and challenge us. We’ve each dealt with them. What can you apply today to improve?

Are You a Top 12% HR Organization?

HR Departments in the Top 12% know how to translate and integrate talent challenges to the overall business strategies of the business.

The other 88% of HR organizations? Still spend majority of their time on reactive activities and being bogged down.

Top HR organizations make a point of understanding the business challenges facing each Department. With the help of the management teams in each Department they structure onboarding and retention strategies, training, compensation, coaching and the motivational steps to keep the best employees.

Aberdeen Group ran a survey of 1300 business leaders. 6 of business leaders Top 10 challenges are work force related.

HR organizations at the top not only understand the business challenges of each Department, they also identify how to measure the ROI of all HR initiatives. Measurement drives the performance of any organization.

HR must continually be challenged, and challenge themselves to understand and measure the contributions from their efforts. When it comes to staffing, that means understanding the skill sets the organization is going to need going forward. Often those skills are different than exist now. Then HR needs to anticipate and recruit in advance.

The days of reactive HR Departments is rapidly ending. Reactive HR organizations will find their services sub-contracted out. Pro-active HR organizations that measure the impact of their performance on ROI will be in demand…and those HR people will finally start to get the respect and pay they deserve.