Will it happen? Won't it? It seems to be there in every mind. More so in the financial world. Citi which never slept finally seems drowsy. Problems are cropping up for RBS, UBS, Barclays, American Express. Yesterday's saviors are now looking forward for someone too bail them out. Everybody is grabbing the begging bowl. Sentiments have never bottomed out the way they have this time over. Nothing seems good enough to stimulate consumption. When sentiments are down and people are unsure about their jobs what is top of mind for most people are worries related to their loans ( EMIs). After all rapid growth and positive sentiment in excess drove them to leverage and that too in a big way to build assets. Nobody saw contraction. Everything including egos were inflating at a rapid rate. Capacities got built up. People were not only hired for the job but also for the bench. Human resource thus became another SKU in the inventor management. There was enough money all over and it was seen as strategic to be prepared for further acceleration and growth. Nobody had the wisdom to realize that bubbles have to eventually burst. Alas when it did burst what happened??? Investments contracted with shrinking equities. Wealth disappeared overnight while debts stood tall before the dwarfed egos. With markets shrunk, demand destructed, debts ready to gobble debt-ridden there was only one way to go - down hill. The passage down hill unfortunately is quick and tumultuous ,comprising of never before travesrsed steps such as selling assets in distress, firing people to honor the large debts. Downsizing leads to further demand destruction and sorrow. This is how the contagion spreads.
In the meantime, government gets the money. Money which all of sudden seems to have more sting. So the government buys companies and conquers company after company at dirt cheap rates. Having gobbled all that was in sight and plight and having made people pay dear for their dreams and after having collected most of the money that people owed it by liquidating and squeezing them to pulp, the government offers dole. It cuts taxes, offers interest free loans to stimulate broad consumption. Thus money which was fairly concentrated in the hands of a few privileged ( at least who thought they were so till sometime ago) gets evenly distributed to drive up consumption. After all as in case of votes the government needs a large mass to spur demand. From this mass of people will rise a few entrepreneurs who take risk by deploying capital, land and labor behind their dreams and grow enterprise. Growth is accompanied by more growth and greed. This is followed by more investments, more jobs, more loans and more profits. Everything seems bright all over again and fear seems to be at a distant in the rear view. Optimism pervades all over. Demand rises at a frenetic pace sending the prices of all asset class spiralling out of control. The bubble starts developing all over again but the euphoria conceals the pain and the ensuing collapse. But alas if the sun rises it has to set and give in to the rule of darkness till again - - - -
