As we are being told, the world is recovering from the global crisis – for a contrary view, ask the consumer in the street, or better still, check their shopping lists – it is perhaps time to agree the causes in order to avoid the consequences of a repeat….
If you think this might affect you personally but not the business, why not check The Grocer’s latest Top 100 grocery brands showing that in 2013, 33 showed negative sales vs. 2012, and 21 brands showed less than 3% growth, before allowing for inflation…..i.e. the Top 100 brands!
In other words, we are ‘deep’ in flatline, where any growth will be at the expense of competitors, by those players that are prepared to confront reality and act while others await a return to normal…
Opportunities await those that understand how we got here, recognise the symptoms as future warnings and get on with optimising our strengths, now.
American economist Hyman Minsky, who died in 1996, grew up during the Great Depression, an event which shaped his views and set him on a crusade to explain how it happened and how a repeat could be prevented, writes Duncan Weldon for the BBC.
Minsky’s key ideas:
Stability is destabilising: Banks and firms assume that the good times will keep on going and begin to take ever greater risks in pursuit of profit. So the seeds of the next crisis are sown in the good time.
Three stages of Debt, as indicators
- Hedge stage:
Soon after a crisis, banks and borrowers are cautious. Loans are made in modest amounts and the borrower can afford to repay both the initial principal and the interest.
- Speculative stage:
As confidence rises banks begin to make loans in which the borrower can only afford to pay the interest.
- Ponzi stage:
At this point banks make loans to firms and households that can afford to pay neither the interest nor the principal. Again this is underpinned by a belief that asset prices will rise.
Therefore financial crisis, again and again and again…
Armed with this insight, and using their own judgement coupled with a basic knowledge of retail finance, the business manager NAM can treat the economy as simply part of a ‘predictable’ business context, and get on with the opportunity, leaving doom and gloom for others…
Analysis: Why Minsky Matters is broadcast on BBC Radio 4 at 20:30 GMT, 24 March 2014. Or catch up on BBC iPlayer
If you think this might affect you personally but not the business, why not check The Grocer’s latest Top 100 grocery brands showing that in 2013, 33 showed negative sales vs. 2012, and 21 brands showed less than 3% growth, before allowing for inflation…..i.e. the Top 100 brands!
In other words, we are ‘deep’ in flatline, where any growth will be at the expense of competitors, by those players that are prepared to confront reality and act while others await a return to normal…
Opportunities await those that understand how we got here, recognise the symptoms as future warnings and get on with optimising our strengths, now.
American economist Hyman Minsky, who died in 1996, grew up during the Great Depression, an event which shaped his views and set him on a crusade to explain how it happened and how a repeat could be prevented, writes Duncan Weldon for the BBC.
Minsky’s key ideas:
Stability is destabilising: Banks and firms assume that the good times will keep on going and begin to take ever greater risks in pursuit of profit. So the seeds of the next crisis are sown in the good time.
Three stages of Debt, as indicators
- Hedge stage:
Soon after a crisis, banks and borrowers are cautious. Loans are made in modest amounts and the borrower can afford to repay both the initial principal and the interest.
- Speculative stage:
As confidence rises banks begin to make loans in which the borrower can only afford to pay the interest.
- Ponzi stage:
At this point banks make loans to firms and households that can afford to pay neither the interest nor the principal. Again this is underpinned by a belief that asset prices will rise.
Therefore financial crisis, again and again and again…
Armed with this insight, and using their own judgement coupled with a basic knowledge of retail finance, the business manager NAM can treat the economy as simply part of a ‘predictable’ business context, and get on with the opportunity, leaving doom and gloom for others…
Analysis: Why Minsky Matters is broadcast on BBC Radio 4 at 20:30 GMT, 24 March 2014. Or catch up on BBC iPlayer
