rev/dr. 'biodun adedipe1 september 2009 global meltdown: challenges and opportunities for...

REV/DR. 'BIODUN ADEDIPE 1SEPTEMBER 2009

GLOBAL MELTDOWN:CHALLENGES AND OPPORTUNITIES

FOR CHRISTIAN BUSINESSES AND PROFESSIONALS


OUTLINE

WHAT IS CRISIS? A PERSPECTIVE ON WEALTH ABOUT THIS CRISIS CAUSES IMPLICATIONS WHAT NEXT? THINGS TO DO END NOTES


WHAT IS CRISIS?

“PEOPLE ARE IN A STATE OF CRISIS WHEN THEY FACE AN OBSTACLE TO IMPORTANT LIFE GOALS — AN OBSTACLE THAT IS, FOR A TIME, INSURMOUNTABLE BY THE USE OF CUSTOMARY METHODS OF PROBLEM SOLVING.”CAPLAN, 1961


WHAT IS CRISIS? (CONTD.)

“…AN UPSET IN EQUILIBRIUM AT THE FAILURE OF ONE’S TRADITIONAL PROBLEM-SOLVING APPROACH WHICH RESULTS IN DISORGANIZATION, HOPELESSNESS, SADNESS, CONFUSION, AND PANIC.”LILLIBRIDGE AND KLUKKEN, 1978



“…CRISIS IS A PERCEPTION OR EXPERIENCE OF AN EVENT OR SITUATION AS AN INTOLERABLE DIFFICULTY THAT EXCEEDS THE PERSON’S CURRENT RESOURCES AND COPING MECHANISMS.”JAMES AND GILLILAND, 2001



THE LAST OF THESE DEFINITIONS MAKES CLEAR THAT CRISIS IS A PERCEPTION, WHICH THEN MAKES IT LARGELY A MATTER OF HOW THE INDIVIDUAL RESPONDS TO THE TRIGGER OR DEVELOPMENT.

ECONOMIC MELTDOWN IS A WORLD PERCEPTION OF LARGE SCALE LOSSES AT A TIME THAT ONLY A FEW PEOPLE ARE MAKING GAINS!


BUSINESS PURPOSE THE ULTIMATE END OF BUSINESS IS TO

CREATE WEALTH, BY SERVING VERY WELL CLEARLY IDENTIFIED CUSTOMERS, REPEATEDLY AT A PROFIT.

MELTDOWN OR NOT, A DIVINELY-INSPIRED BUSINESS VENTURE WILL ALWAYS BE IN ‘BUSINESS’.CUSTOMERS WILL COME SUPERNATURALLY!


WEALTH

AN INDIVIDUAL IS WEALTHY WHEN S/HE HAS ACCESS TO ALL THAT S/HE NEEDS AND MORE.

THIS IS CHARACTERIZED BY ABUNDANCE.

IT ALSO MEANS HAVING THE ABILITY TO PRODUCE WHAT IS NEEDED.


WEALTH (CONTD.)

A WEALTHY PERSON CAN ALSO BE SAID TO BE RICH, HAVING A LARGE AMOUNT OF MONEY OR POSSESSIONS.

WE SEE FROM THESE DEFINITIONS THAT BEING WEALTHY IS FAR MORE THAN BEING RICH. RICHES ARE POSSESSIONS ONLY, ALREADY OWNED. WEALTH ENCOMPASSES EITHER OR BOTH OF

POSSESSIONS AND CAPABILITY TO GENERATE POSSESSIONS.


WEALTH (CONTD.)

IT IS PREFERABLE TO BE WEALTHY THAN TO BE RICH.A WEALTHY PERSON MIGHT BE LITTLE IN

POSSESSIONS AS AT NOW, BUT HAVE HUGE POTENTIALS TO CREATE WEALTH.

WEALTH HAS CERTAIN ATTRIBUTES THAT ARE IMPORTANT FOR US TO KNOW RIGHT AWAY.


WEALTH (CONTD.)

WEALTH CAN CREATED, AND THAT DEPENDS ON FOUR THINGS PRIMARILY:WHO YOU KNOW.WHAT YOU KNOW.WHAT YOU DO.WHOSE YOU ARE.

THESE ARE THE KEYS TO CHRISTIAN BUSINESS PEOPLE AND PROFESIONALS.


WEALTH (CONTD.)

WEALTH CAN BE MULTIPLIED, AND THIS LARGELY DEPENDS ON YOUR CHOICES.

WEALTH HAS TO BE MANAGED, OTHERWISE IT WILL DISAPPEAR.THIS DEPENDS ON CHOICES MADE

DELIBERATELY, WITH THE FUTURE IN SIGHT.


PROFESSIONAL A PROFESSION IS A TRADE OR VOCATION,

UNIQUELY IDENTIFIED FOR THE SERVICES/PRODUCTS IT DELIVERS TO SOLVE PROBLEMS FOR THE SOCIETY.

A PROFESSIONAL THEN IS HIGHLY KNOWLEDGEABLE AND SKILLED, AND USES THESE TO DELIVER SOLUTIONS TO PEOPLE’S PROBLEMS.


ABOUT THIS CRISIS THERE ARE SWINGS TO LIFE, MOVING FROM

ONE EXTREME TO THE OTHER, AS MADE VERY PLAIN IN THE BIBLE IN GENESIS 8:22 AND ECCLESIASTES 3:1-8.

THE PROBLEM WITH MAN IS THAT HE LIKES HARVEST, BUT DOES NOT LIKE THE TOIL AND LABOUR OF SEEDTIME. HE ALSO WANTS HEAT WHEN NATURE BRINGS

COLD, AND HE FERVENTLY DESIRES COLD WHENEVER IT IS HOT!


ABOUT THIS CRISIS (CONTD.)

YET, WITH SOME KNOWLEDGE, MAN WILL UNDERSTAND THAT TROUBLE (WHAT YOU DON’T LIKE) WILL DEFINITELY COME. JOB 5:6-7. IT IS NOT THE ‘TROUBLE’ LIFE BRINGS

THAT IS THE ISSUE, BUT WHAT WE DO ABOUT THE TROUBLE.



IN ECONOMICS, WE SAY THAT THE BUSINESS CYCLE IS INEVITABLE IN THIS LIFE.

THIS MEANS THAT THERE ARE FOUR PHASES TO HUMAN ACTIVITIES, WHICH APPLIES TO ANY SOCIETY, ORGANIZATION OR INDIVIDUAL.

FACT IS, RECESSION WILL INEVITABLY FOLLOW A BOOM, AND WHEN NOT ‘ATTACKED’ CAN PROGRESS TO A BURST BEFORE THERE CAN BE HOPE FOR RECOVERY!



TIME

BOOM

RECESSIONRECOVERY

BUST



SINCE THE GREAT DEPRESSION OF THE LATE 1920’s AND EARLY 1930’s, THERE HAS NOT BEEN A CRISIS OF THE KIND OF MAGNITUDE, COMPLEXITY AND SPREAD AS THE CURRENT ONE THE WORLD IS EXPERIENCING.

BETWEEN THEN AND NOW, EPISODES OF FINANCIAL CRISIS WERE LIMITED IN SPREAD AND EASILY CONTAINED. INDEED, THE CURRENT CRISIS IS UNIQUE IN SIX WAYS.



THE WORLD HAS BECOME TRULY ONE BIG GLOBAL VILLAGE, WHERE DEEP INTERDEPENDENCE MAKES EVERYONE FEEL SO SAFE AND YET SO VULNERABLE.

THE ADVANCES IN FINANCIAL INNOVATION IN THE LAST THREE TO FOUR DECADES CREATED AN ILLUSION OF INCREASING ‘CAPACITY’ TO PREDICT AND THUS FORESTALL UPHEAVALS IN FINANCIAL MARKETS.



MARKET EFFICIENCY THROUGH INFORMATION COMMUNICATION TECHNOLOGY HAS HUGELY SHORTENED THE TIME FOR POLICY/ACTION TRANSFERENCE.

INNOVATIONS AND WIDELY ACKNOWLEDGED CREATIVITY IN FINANCIAL MATTERS CREATED A CLASS OF ARROGANT ‘EXPERTS’ IN THE ACADEMIA AND AMONG PRACTITIONERS THAT ARE TREATED LIKE ‘ORACLES’ AND THEREFORE, CANNOT BE WRONG.



THIS CRISIS CAUGHT MOST PEOPLE (‘EXPERTS’ INCLUSIVE) UNAWARES, BECAUSE THE WORLD IGNORED THE ‘GREED FACTOR’ IN HUMAN DECISIONS.

ITS DEPTH WAS DIFFICULT TO MEASURE, NEITHER IS IT EASY TO FORECAST ITS FUTURE EXTENT.



ACCORDING TO THE LONDON ECONOMIST IN FEBRUARY 2009: “MANAGING A CRISIS AS COMPLEX AS THIS ONE HAS

SO FAR CALLED FOR NUANCE AND PRAGMATISM RATHER THAN STRIDENCY AND PRINCIPLE…ONLY THE FOOLISH AND THE PARTISAN HAVE REJECTED (OR EMBRACED) ANY SOLUTIONS CATEGORICALLY.”

OBVIOUSLY, THESE ARE UNUSUAL TIMES THAT POSE THE DEEPEST CHALLENGES TO ALL AND SUNDRY.


CAUSES SO, HOW AND WHERE DID THIS FINANCIAL

CRISIS BEGIN? THE CURRENT GLOBAL FINANCIAL CRISIS HAD

BEEN BREWING PRIOR TO 2007, BUT ITS EFFECT STARTED TO BE SEEN IN AUGUST 2007 AND BECAME A GLOBAL PHENOMENON BY JUNE 2008. LARGE FINANCIAL INSTITUTIONS THAT WERE DEEMED TO

BE VERY STRONG AND FAILURE-PROOF EITHER FAILED (LEHMAN BROTHERS) OR HAD TO BE BOUGHT OVER CHEAPLY BY THEIR COMPETITORS (MERRILL LYNCH).


CAUSES (CONTD.)

THE BENEFIT OF HINDSIGHT NOW MAKES AMERICAN FINANCIAL EXPERTS TO BELIEF THAT IT WAS A MISTAKE TO ALLOW LEHMAN BROTHERS TO FAIL. IT WAS ITS IMPLOSION THAT CATALYZED THE CRISIS INTO A

GLOBAL SCALE. ITS BANKRUPTCY WAS 10X THAT OF ENRON! AT THE HEART OF THE CRISIS WERE CREDIT DERIVATIVES,

WHICH ARE A FORM OF INSURANCE IN WHICH THE INVESTOR UNDERWRITES THE DEFAULT EVENTS IN CORPORATE DEBTS.

BY ENABLING THE SHARING OF CREDIT RISKS BY BREAKING THEM DOWN INTO SMALLER, DIGESTIBLE CHUNKS, DERIVATIVES CREATED AN ILLUSION OF SAFETY FOR ALL THEIR STAKEHOLDERS.


CAUSES (CONTD.)

INDEED AND ORDINARILY, DERIVATIVES ARE GOOD FOR RISK HEDGING.

HOWEVER, PROBLEMS AROSE FROM TWO PREMISES:

WHAT THEY WERE USED FOR – SPECULATION!

WHAT IT LED MARKET PARTICIPANTS TO BEGIN TO DO – BANKERS BECAME CARELESS IN LENDING.


CAUSES (CONTD.)

BRITISH COMEDIANS, JOHN BIRD AND JOHN FORTUNE, PUT IT SUCCINCTLY AS:

“A COLLAPSE OF THE US SUB-PRIME MORTGAGE MARKET AND THE REVERSAL OF THE HOUSING BOOM IN OTHER INDUSTRIALIZED ECONOMIES HAVE HAD A RIPPLE EFFECT AROUND THE WORLD. FURTHERMORE, OTHER WEAKNESSES IN THE GLOBAL FINANCIAL SYSTEM HAVE SURFACED. SOME FINANCIAL PRODUCTS AND INSTRUMENTS HAVE BECOME SO COMPLEX AND TWISTED, THAT AS THINGS START TO UNRAVEL, TRUST IN THE WHOLE SYSTEM STARTED TO FAIL.”


CAUSES (CONTD.)

ALL THESE HAVE BEEN SUMMARIZED IN THE TRADE AND DEVELOPMENT REPORT FOR 2008 AS: THE GLOBAL FALLOUT FROM THE FINANCIAL CRISIS IN THE

UNITED STATES. THE BURSTING OF THE HOUSING BUBBLES IN THE US AND

IN OTHER LARGE ECONOMIES. THE BENEFIT OF HINDSIGHT WAS ARGUED BY BERNANKE AND GERTNER (2001)

THAT THIS WAS A MAJOR FACTOR IN THE ECONOMIC DEPRESSION OF THE LATE 1920s.

SOARING COMMODITY PRICES. INCREASINGLY RESTRICTIVE MONETARY POLICIES IN A

NUMBER OF COUNTRIES. STOCK MARKET VOLATILITY.


IMPLICATIONS

FINANCIAL SYSTEMS WENT INTO TURMOIL AND ESPECIALLY BANKS SUSTAINED HUGE LOSSES THAT THREATENED THEIR EXISTENCE, AND MADE RECAPITALIZATION INEVITABLE.

TO ENSURE THAT BANKS DO NOT FAIL IN LARGE NUMBERS, GOVERNMENTS INTRODUCED FISCAL STIMULUS PACKAGES AROUND THE WORLD, ESTIMATED BY IMF AT US$4.1 TRILLION!


IMPLICATIONS (CONTD.)

THE ENSUING CREDIT CRUNCH AFFECTED ADVERSELY COMMODITY CONSUMPTION, INCLUDING A SHARP DROP IN THE DEMAND FOR CRUDE OIL (BY CHINA AND INDIA ESPECIALLY) AND CAUSED THE PRICE OF CRUDE TO DROP FROM ITS PEAK OF $147/BBL IN JULY 2008 TO SUB-$40/BBL BY END-2008. RECOVERY HAS PUSHED IT UP TO ABOUT $70/BBL.



COUPLED WITH REDUCTION IN CRUDE OUTPUT DUE TO THE UNREST IN THE NIGER DELTA REGION, THE NIGERIAN GOVERNMENT REVENUE HAS REDUCED SIGNIFICANTLY. THUS, BUSINESS WITH THE GOVERNMENTS WILL NOT BE AS USUAL.

JOB LOSSES, ESPECIALLY IN THE BANKING INDUSTRY. THIS ALSO HAS MEANT STOPPAGE OF NEW RECRUITMENTS IN FINANCIAL SERVICES.



TYPICAL OF HUMAN BEINGS IN CRISIS, COMMON SENSE HAS COME INTO PLAY, AS DISCRETIONARY INCOME SHRINKS.

SECURITY CHALLENGES AND SUICIDAL TENDENCIES HAVE ESCALATED, AS MORE PEOPLE HAVE BECOME DESPERATE AND DESPODENT.



THE EXCHANGE VALUE OF THE NAIRA WEAKENED AGAINST NIGERIA’S MAJOR TRADING CURRENCIES (ABOUT 20% AGAINST THE US DOLLAR), MAKING INVESTING IN NIGERIA ATTRACTIVE TO FOREIGNERS.

NIGERIA BEING A NET IMPORTER OF BOTH OIL AND NON-OIL GOODS, THE WEAKENED NAIRA AND SHRINKING REVENUE BASE IMPLY MORE EXPENSIVE IMPORTS, AFFECTING THE GENERAL PRICE LEVEL.


WHAT’S THE NEXT STEP?

THE STARTING POINT IN ANY SITUATION IN LIFE, INCLUDING AT A TIME OF CRISIS LIKE THIS, IS THE WORD OF GOD.

WHAT DOES THE WORD SAY ABOUT HOW WE SHOULD HANDLE ECONOMIC CRISIS, WHICH IS REFERRED TO IN THE BIBLE AS FAMINE?

IT IS NOT THE FAMINE THAT MATTERS, BUT WHO YOU LISTEN TO.


NEXT STEP (CONTD.)

ALSO, DIFFERENT TIMES AND SEASONS BRING FAMINES OF DIFFERING NATURE, AND IT IS THE ALMIGHTY GOD THAT WILL INSTRUCT YOU WHERE TO GO AND WHAT TO DO.

ABRAHAM IN GENESIS 12 WENT TO EGYPT AND CAME OUT OF IT WEALTHY, WHILE ISAAC WAS INSTRUCTED IN GENESIS 26:1-2 NOT TO GO DOWN TO EGYPT. ISAAC REMAINED IN GERAR AND PROSPERED

TREMENDOUSLY, AS WE SEE IN GENESIS 26:12-13.


NEXT STEP (CONTD.)

JACOB LEFT CANAAN FOR PADANARAM WITH ONLY A STAFF, BUT FOLLOWING GOD’S INSTRUCTIONS, TIME AFTER TIME, HE BECAME A WEALTHY MAN. GENESIS 32:10. IT WAS OBVIOUSLY THE ‘WISDOM FROM

ABOVE’ THAT JACOB RECEIVED AND APPLIED IN GENESIS 30:30-34.


NEXT STEP (CONTD.)

THERE MUST HAVE BEEN TOUGH TIMES ALSO DURING THE TIMES OF DAVID AND SOLOMON, BUT THEY WERE VERY WEALTHY!

THE APOSTLES ALSO LACKED NOTHING, OTHERWISE THE BIBLE WOULD HAVE RECORDED THAT FOR US.

THE STARTING POINT FOR BELIEVERS IS NOT TO JOIN PEOPLE TO COMPLAIN ABOUT THE CRISIS. LOOK FOR THOSE WHO ARE OPTIMISTIC AND STRIVING,

AND FOLLOW/JOIN THEM.


NEXT STEP (CONTD.)

LATE JOHN F. KENNEDY “THE CHINESE USE TWO BRUSH STROKES

TO WRITE THE WORD 'CRISIS'. ONE BRUSH STROKE STANDS FOR DANGER; THE OTHER FOR OPPORTUNITY. IN A CRISIS, BE AWARE OF THE DANGER-BUT RECOGNIZE THE OPPORTUNITY.”


NEXT STEP (CONTD.)

CHIN-NING CHU “WITHOUT THE STRENGTH TO ENDURE THE

CRISIS, ONE WILL NOT SEE THE OPPORTUNITY WITHIN. IT IS WITHIN THE PROCESS OF ENDURANCE THAT OPPORTUNITY REVEALS ITSELF.”


WHERE ARE THE OPPORTUNITIES? BUSINESS OPPORTUNITIES EXIST

EVERYWHERE AND ALL AROUND US. THEY ARE LIKE RADIO SIGNALS THAT CARRY

PICTURES (DISPLAYED IN TELEVISION SETS) AND ELECTRONIC MAILS (DELIVERED TO OUR E-MAIL ADDRESSES).

THESE CANNOT BE SEEN WITH THE PHYSICAL EYES, BUT FOR SURE THEY MOVE ALL AROUND US, AND ONLY THE RIGHT EQUIPMENT WILL ENABLE US TRAP AND RECEIVE THEM.


WHERE ARE THE OPPORTUNITIES? (CONTD.)

IT IS NOT OUR GEOGRAPHICAL LOCATION THAT IS THE ISSUE, BUT WHAT THE GOOD LORD PERMITS US TO SEE AND TO BEGIN TO DO. SOME SEE AND DON’T DO, AND SOME DO WHAT

THEY DON’T SEE. IT IS IMPORTANT ALSO TO HEAR FROM THE

LORD. DON’T FOLLOW THE CROWD.


THINGS TO DO

THE PECULIARITY OF OUR GOD IS THAT HE IS IN CHARGE, WHETHER THERE IS CRISIS WITH MAN OR EVERYTHING IS WORKING WELL. ISAIAH 35:2-4 (MSG).

SOMEBODY NEEDS TO GET UP AND BRUSH OFF THE DUST, AS THE BIBLE SAYS IN ISAIAH 52:2 (MSG).


THINGS TO DO (CONTD.)

GOD IS THE ONE THAT GIVES US THE POWER TO GET WEALTH. DEUTERONOMY 8:18. ANY WEALTH THAT MAN OBTAINS OR GETS OUTSIDE OF HIM

IS FAKE AND WILL NOT LAST. A TIME LIKE THIS (CRISIS) IS THE BEST TIME TO SOW,

WHICH IS CONTRARY TO THE WISDOM OF THE WORLD. GENESIS 26:12-13.

THE WORLD COUNTS GIVING AS LEADING TO REDUCTION, WHILE GOD COUNTS IT AS WORKING ASSUREDLY TOWARDS INCREASE. PROVERBS 11:24.



THE BREAD AND SEED PRINCIPLE APPLIES VERY WELL IN A CRISIS SITUATION.DON’T EAT YOUR BREAD, AND DON’T SOW

YOUR BREAD.BOTH OF THEM ARE SUPPLIED BY GOD, AND

YOU MUST BE WISE ENOUGH TO SEEK HIS FACE ON WHAT TO DO WITH WHAT HE HAS GIVEN YOU. 2 CORINTHIANS 9:10.



SCATTERING IN VERY PRACTICAL TERMS INCLUDES: LOOKING BEYOND A MAN YOU KNOW, BUT UNTO

GOD, THE SOLE SOURCE OF ALL ENDURING GOOD THINGS. ASK HIM FOR HELP.

BUILDING FURTHER ON WHAT YOU ALREADY KNOW.

ANYTHING YOU WANT TO VENTURE INTO, GET ALL THE AVAILABLE INFORMATION ON IT AND BECOME THE EXPERT IN IT.

PEOPLE ALWAYS SEEK FOR EXPERTS WHEN PROBLEMS NEED TO BE SOLVED!



SCATTERING (CONTD.): USE WHAT YOU CAN DO. THERE IS SOMEONE

SOMEWHERE THAT NEEDS THAT JOB YOU CAN DO VERY WELL.

LEARN MORE ABOUT IT AND SEEK TO BE THE BEST IN IT, AND LET PEOPLE KNOW YOU CAN.

THE MORE VALUE YOU ADD TO YOURSELF, THE MORE VALUABLE YOU BECOME.

NEVER FORGET WHOSE YOU ARE – YOU BELONG TO GOD.

KEEP YOUR FAITH IN HIM FIRM AND STRONG.


END NOTES

CRISIS IS NOT A PERMANENT PHENOMENON.

IT ONLY REQUIRES US TO CHANGE OUR MINDSET.

WE MUST UNDERSTAND THOUGH THAT ‘THE SUN WILL NOT ALWAYS SHINE’, BUT SURE THE NIGHT WILL SOON BE OVER AND THE SUN WILL RISE AGAIN. PSALMS 30:5.


END NOTES (CONTD.)

CONTINUE IN THE CONFIDENT ASSURANCE (ISAIAH 32:17) THAT CRISIS OR NO CRISIS, GOD DOES NOT CHANGE (MALACHI 3:6 AND HEBREWS 13:8)

WE DON’T PICK UP WEALTH, BUT WORK FOR IT.

THESE ARE NOT TIMES FOR THE LAZY PERSON. WE MUST WORK HARDER AND SMARTER,

DEPENDING ON GOD, TRUSTING THE LORD JESUS.


THANK YOUGOD BLESS


SELECTED REFERENCES

BERENSON ALEX, THE NUMBER, HOW AMERICA’S BALANCE SHEET LIES ROCKED THE WORLD’S FINANCIAL MARKETS (POCKET BOOK, 2004).

BERNANKE S. BEN, ASSET-PRICE “BUBBLES” AND MONETARY POLICY, REMARKS BEFORE THE NEW YORK CHAPTER OF THE NATIONAL ASSOCIATION OF BUSINESS ECONOMICS (OCTOBER 15 2002).

CONTACT GROUP ON ASSET PRICES, TURBULENCE IN ASSET MARKETS: THE ROLE OF MICRO POLICIES (SEPTEMBER 2002).


SELECTED REFERENCES (CONTD.) ECONOMIST (LONDON), ISSUE OF 19TH APRIL 2007. KANAGA RAJA, ECONOMIC OUTLOOK GLOOMY,

RISKS TO SOUTH, SAY UNCTAD, THIRD WORLD NETWORK, SEPTEMBER 4, 2008.

MILNE ALISTAIR, THE FALL OF THE HOUSE OF CREDIT (CAMBRIDGE UNIVERSITY PRESS, 2009).

SHAH ANUP, GLOBAL FINANCIAL CRISIS 2008, WWW.GLOBALISSUES.COM

TRICHET JEAN-CLAUDE, ASSET PRICE BUBBLES AND MONETARY POLICY, SPEECH AT MAS LECTURE, SINGAPORE, 8TH JUNE 2005.

rev/dr. 'biodun adedipe1 september 2009 global meltdown: challenges and opportunities for...

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