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Long-term liquidity crisis?

The crisis keeps setting new lows, and governments and central banks are desperately fighting back with everything they’ve got. But what are the long-term effects of US government interventions?

There have been a lot of different opinions about how the US government have handled the financial crisis, and how they should handle it moving forward – both among economic experts, but also, as we saw with the rescue package bill, among themselves. Many believe the government has done the right thing by interfering in the financial markets, providing liquidity, helping packages, etc. etc. And of course it seems as a satisfactory solution when the market bounce right up in the minutes following the announcements, but what will the medium or long-term effects of this be? Spitting too much money out in the banks and in the financial system will obviously have consequences on a long-term basis, and will probably cause the end of a number of planned government projects and goals. On the environment side, take for example the Renewable Portfolio Standard (RPS), a project which the US government set in motion with a goal of achieving a 15% rate of alternative energy by the year of 2020. Not only is it unsure how they will finance the project after pumping liquidity into the markets and potentially raising taxes, but the financial crisis have also set it’s marks on the alternative energy providers that the US would be working with in order to achieve this goal, such as Siemens and Danish company Vestas, both of which have previously (even before the crisis) had trouble with meeting clients’ demands. Long-term finacial liquidity crisis and the Liquidity Solutions

The upside of the financial crisis

In the cooling water of the financial crisis the oil prices has been falling. Personally I find this absolutely great, as the gas prices has been going down the past weeks. My boyfriend and I do not really drive that much, but somehow the psychological effect of seeing the price tags on gas stations showing lower numbers than they have for a long time just makes me smile. read more about the effect of the falling oil prices here

What is this?

Consolidation is where organisations focus defensively on their current markets with current products. Formally, this strategy occupies the same box in the Ansoff matrix as market penetration, but is not orientated to growth. Consolidation can take two forms:

Defending market share

When faxing aggressive competitores bent on increasing their market share, organisations have to work hard and often creatively  to protect what they already have. Although market share should rarely be an end in itself, it is important to ensure that it is sufficient to subtain that business in the long term. read more about consolidation here

Product development

Product development is where organisations deliver modified og new products to existing markets. This is a limmited extention of organisational scope. In practice, even markets penetration will probably require some product development, but here product development implies greater degrees of innovation. However, product decelopment can be an expensive and high-risk activity for at least two reasons.

New strategic capabilities

Product development typically involves mastering new technologies that may be unfamiliar to the organisation. For example, many banks entered online banking, at the beginning of this century, but suffered many setbacks with technologies so radically different to their traditionally high street branch means of delivering bank services. Thus project development typically involves heavy investments and high risk of project faliur. read more about product develop

Ethical norms in business

At first sight ethical norms do not seem logical in combination with business, but these norms do indeed play a great role on this area of financial life. Some banks have denied investing in companies, that have money placed in the gun industry. Many companies will not co-orperate with partners using child labour or partners who do not respecting animal welfare in transportation. read more about ethical norms in economy here

Who is Bigbrother?

The US has since World War 2 been regarded as the Bigbrother in the Western world. One very important factor in this association is the fact that the US has been financially superior and being the first to invent things and create progress.

Is the world order changing?

The past years since the financial crisis in Asia in the 80’ties, where the US among other nations send financial cauncelling to Asia to help rebuild the economy, asian economy has grown very strong. The countries in Asia learned by their first mistake and have since then had a very wary financial strategy. read more about how Asia is taking over the financial supremecy

The great plan og rescue

Today the american politicians have argeed on at plan to rescue the american economy from capsizing. It is a plan that means that the american state will buy up bad morgage loans for a amount of 700 billion dollars. This is a staggering amount of taxpayers money to throw into the private sector if you ask me

Will the plan solve the problem then?

The great question is if this plan will solves the financial troubles of the american economy. Experts are sceptic, as they belive that the financial support wont be enough to solve the problem. They belive that the money needs to be follow up by weighty legislation, that sets up boarder for the private sector. read more about the great rescue plan for american economy here

read more aboute the senate passing the plan

Rumors

The past dayes rumors have been saying that the very effecient executive of Apple Steve Job should be seriously ill with a heart condition. Apple has denied that this could be the case.

Stocks droped

The rumor has caused the stocks to drop to the lowest level in a year. Steve Job has earlier been ill with canser, a fact that has aded fuel to the flames. I truely do not find it very nice to start at rumor about a persons health conditions without knowing weather there is a grain of truth in it. You just should not do something like that. read more about the rumor about the health condition of Steve Job here

Finally

Finally the great rescue plan put forward by the American President has been passed, though this has been taking the american politiciens a bit too long time in my oppinon. The great question is however: Will this act pull the americans out of their financial cricis?

Stocks…

The Stock market did not react with the positive tones as many had hoped it would. This talking for the fact that this plan might not be as effective as many had hoped it would be. I do however belive that we must possess ourselves in patience and let the plan work for more than a couple of days before we make our judgement. read comments on the political process of the american rescue plan here