Once again my calendar says it’s December, but by every other measure I would swear it’s late August. Are my clocks part of a conspiracy to convince me I’ve gone ticking mad? As another year closes out (a tough year, for sure), I present to you my first ever Business Essentials Holiday Grab Bag where we can pause to reflect (sometimes satirically) on some happenings of 2008 and I can share some projections about the tomorrow we’ll soon experience together.
2008—A SWIFT KICK IN THE BANKS!
This past year has been rough and unsteady for most of the world and no amount of disguising language will fool anyone who lived through it. The first quarter began with a bang for The Big Apple and those who love upsets. The NY Giants took the Super Bowl Trophy from the denied-legendary-status New England Patriots. Fidel Castro, the great survivor, stepped down after 49 years dressed up as G.I. Joe with thumb-your-nose action and the writer’s strike ended giving us back reality shows that have no written dialogue. In March oil opened above $100 per barrel for the first time, and by July, prices peaked at $147 per barrel. Today prices have retreated to $55 a barrel—nearly 70 percent below the peak! What gives? It now seems that oil and oil retrieval costs, as well as the old standby excuses of ever-shifting supply and demand and punishing OPEC Ministers have little to do with the “Adventures in Price Manipulation” that overfill American oil company coffers with record-bashing profits (Exxon Mobil’s most recent quarter produced $240 million in profit per workday—up 58 percent from ‘07). Early in ’08, President Bush proposed the first economic stimulus package of $145 billion (most received checks of $300 or $600 to get us back to the malls). At the time, the plan was called excessive but now seems almost quaint. Sadly, we also marked the 5th anniversary in Iraq.
The middle of the year unleashed a killer earthquake in China and a brutal cyclone in Myanmar, bringing devastation and a shocking death toll (150,000+ lives lost). The stark images provided perspective for first-world inhabitants as to what constitutes true hardship and bad times. In other headlines, California began performing same sex marriages (the “flip” to their later “flop”), unemployment had the biggest jump in 22 years and intense fighting erupted in the breakaway region of Georgia (not the Peach State) where cold war tension still persists. Endorsing Shakespeare’s eternal wisdom (400 years ago he warned “Neither a borrower nor a lender be”), China — now owed a staggering $550 billion by us — inked a $3.5 billion oil contract with Iraq, elbowing the U.S. out of its expected first-in-line-for-spoils status and proving how difficult it is to be the school tough guy when you have to hit up your classmates for lunch money.
As fall approached, the Democratic National Convention opened in Denver with Barack Obama, and running mate Joseph Biden, becoming the party’s nominees. The Census Bureau released new data that would define the coming election and the receding middle class: 45.7 million Americans had no health insurance, the poverty rate was a monstrous 12.5 percent and half of all workers made less than $50K per year. John McCain, the Republican presidential candidate, caused excitement by choosing as running mate Governor Sarah Palin — a relative unknown from Alaska.
The Summer Olympics began with a night of artistic brilliance that redefined what an opening ceremony could be. Whispers about underage Chinese gymnasts grew deafening when the squad kept losing baby teeth during its routines. It mattered little though as Michael Phelps’ performance overshadowed all others by winning eight gold medals. His standoffish reputation wasn’t helped when a post-Olympic poll showed taunting his peers by swimming home from Beijing to Baltimore came off as a bit showy.
The Republican Party made official the McCain/Palin ticket; a series of well-watched debates followed. China joined an elite club when Colonel Zhia Zhiagang waved to the camera and his people after completing that nation’s first spacewalk. In October, it was announced our Gross Domestic Product shrank for the first time in 17 years, but few noticed as the nation was transfixed by the campaign. Of course it all culminated with the election of Senator Barack Obama as our 44th President and first African-American to hold that office — sadly, some 80 million eligible voters chose not to cast ballots. Given the wave of change Obama rode into office upon, the task before him is immense. He must make good on his own pledges while inheriting a country facing two wars and an economy in tatters.
THE EMERGENCY ECONOMIC STABILIZATION ACT OF 2008
With the country carefully watching our economic ceiling for a cave-in, it was the floor that buckled badly in trying to swallow us up, creating turmoil and near-panic in both the U.S. and overseas financial markets. Everyday, “Godzilla Approaching” financial alerts crawled across our monitors listing economic headlines from hell: Fannie Mae and Freddie Mac placed under government conservatorship, Merrill Lynch acquired in emergency purchase by Bank of America, Lehman Brothers declares bankruptcy, AIG receives $85 billion bailout from Federal Reserve, etc. What followed was unprecedented in our history. The Emergency Economic Stabilization Act of 2008 gave literally untold authority to the Treasury Department to use more than $700 billion to buy troubled financial assets. More than that, it presented blunt force trauma “politics” at its most surreal (the kind that’s red, black and blue, and every shade of gray you can imagine). Our elected leaders pleaded for us to support the bailout (using a tone one could call “Reverse FDR”) by painting panicked visions of a smoking economic apocalypse. After sufficient time in the skillet, they then tried to soothe us with reassuring talk of our historic resilience, relentless productivity and unstoppable desire to get back to our true talent—conspicuous consumption.
It should be noted that a key objective of the bailout was to prevent any further erosion of confidence in U.S. markets, which had become terrifying. It was much like promising a new toy to a petulant child that is acting out. To date, the petulant child continues to frighten and embarrass us with high decibel tantrums (read: massive, disproportionate and punishing market drops resulting in the Dow being off 40 percent) with the only difference being that now the defiant and wholly unlikeable child’s also screaming for his new toy. This brave new economic world will dominate business news for some time to come, altering business plans, scaling back forecasts, limiting investment, reducing workforces everywhere and cutting off capital expenditures at the knees. It will depress us. Scaling back, covering up and hedging your bet will become a standard management practice whereas becoming creatively adventurous and expressing hope or an optimistic viewpoint expectant of success will be viewed as naïve, reckless and uninformed. This environment will produce an opportunity — a potential leverage point for those with eyes fixed forward and ideas bigger than the risks.