Archive for the ‘recession’ Category

People, Government and Recession

Let’s begin this with a tiny story, A friend of myne who had a small firm selling a kind of product which is meant for a group of unique organizations. One day he said to me “We should hire people to sell this product”. I said “That’s a good idea lets hire some” thinking that we will get people with expertise in selling such products or familiar with the kind of work. Instead he hired few people who neither are having knowledge about the field nor experienced. So I asked him “How do these guys sell our product without knowing how to approach a client to present what we have” and the reply I received was “They are sales persons it’s their job to do. As we did the first part of hiring them, they will sell the product. Its dam simple”. Well, I left wondering it would happen magically.

Let’s come to the running story happening around us, big banks and financial institutions started investing money in providing mortgage to people who wanted to buy a house. Sadly, they thought the same as the guy I have said above thinking “by providing mortgage to buy a home would give them profits because it’s a profitable business” without using their common scene of knowledge that weather people really need this loan or were they in a situation to pay it back with those huge interests. Nope, nothing like that happened. They assumed that economy is booming like never before and keeping aside the basic rules of lending won’t be a problem. In my opinion, they forget the fact that the revenues they earned on home loan in the past are those which validates the basic rule of lending not the otherwise.

Now let’s see what our think tanks are planning on recovery, rise the taxation to 50% (could be more) on basic earnings. Wow, what a break through, I’m goanna die with tears of joy, let’s not forget about the basic things again, I always believed that under such crisis floating money around the business cycle would do better than stocking it (a.k.a savings for future). Let’s take it like this, what actually would make people to spend? Let’s say need! So what kind of need could trigger spending? I believe, ability to save more.

Confusing right, let me explain, if governments put taxation on savings rather than income will trigger people to spend or save the money in a different form which could offer an opportunity to save more on certain spending like buying a home (I know buying a home sounds freaking but it’s an option too) or the kind of spending that could trigger more demand which will create more jobs and social wealth. It’s a win-win for everybody.

Finally, what Im trying to say is, governments should include the people in dealing the crisis and on how to repair the system, more importantly restoring the confidence. Not just limited to bailing out business without considering customers of those business.