How did we get there?

All that glitters is not gold. Proverb

The new 2009 is already here, but the mood is somewhat gloomy. Instead of asking family and friends where they are heading this summer for vacations, the question goes “How did/does the crisis affect you?” or “Are you ok?” sounding “did you have time to stash some money away?” or “is your 401 sound enough?” or even more bitterly “yep, I know your pension flew away as mine did so”.

Once this year set in, I keep asking myself how on earth we got in this terrible state.

There are plenty of details making up a fully-fledged answer explaining the situation. To me, growth would be the dominant factor here.

Growth in its perverse interpretation.

A couple of years ago while organizing a marketing event, which turned out to be smaller by size than the one previously organized, I was told by a company rep, there should be a positive dynamics – every new year should show better results, which would be more visitors and participants. My reply was: it’s true, but if we keep on growing every year there would be no room for growth in 5 years. To console him, I explained how we were planning to diversify and change the format.

But this idea of constantly growing is stuck in so many minds. Business needs to grow to show better results for stock holders, investors, etc. etc. customers come last in this list Growth must be in place no matter if it is controlled or not. Portfolio of customers, turnover, balance sheet need to be reflecting “how well the business does”,

Stop…Here comes the problem. One cannot grow forever – there will be a critical moment when the growth is stopped just because the pick was reached. The key word here is “stop” or “when to stop”.

The financial crisis comes from the assumption that growth/positive dynamics can last forever. Or the self-lying thought “we will know when to stop”.

Crave and hunger for better results/more earnings/positive dynamics triggered uncontrolled growth in volume in any sphere: oil, computers, etc. Banking and finance people do or, better to say, did need growth, too. So, they gave money all around without thorough analysis of how the money will come back…

The bubble was blown up actively with huge pumps until 2007, then it burst…

Welcome now to new economic conditions, when people save and do not squander, when unreal-planned demand vanishes and companies disappear, when having a job is a privilege.