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BizCloud® Network | August 2, 2014

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“It's NOT the Economy!" by Ian Blei

“It's NOT the Economy!"  by Ian Blei

www.Optimized-Results.com

How many times have you heard, “it’s the economy” or “it’s a bad economy,” or even “the economy is crumbling” over the last year or two? What was an absolute line of nonsense has actually become a self-fulfilling prophecy due to its repetition and lack of challenge. When things started blowing up in the banking sector, everyone started playing “Chicken Little,” running around crying that the sky was falling. This illogical exaggeration has created an environment of panic and fear, and this is what is killing a once robust economy. We can absolutely turn this around, but I’m getting ahead of myself.
Let’s back up a for a moment and look logically at a close corollary. When a given sector of the economy inflates a non-sustainable bubble, it inevitably pops. We saw this with the “Tech Bubble.” When the Tech Bubble popped in March of 2000, people lost jobs and money, and everyone appropriately pinned it on the “pump and dump,” IPO Lottery mentality of the Tech Sector. The downturn was appropriately compartmentalized, and effectively “quarantined.” Nobody called it a recession or The Economy.

When the banking/credit/lending bubble popped in 2008, rather than appropriately pinning it on the irresponsible practices of ONE Sector of the economy, the banks and the media painted this sector as The Economy, and everyone’s problem. That was actually a lie. (BTW, can you imagine being able to claim bankruptcy because you only made few billion dollars, or a 45% increased profit over the year before?) Of course not; you’re not a bank. At least Standard Oil didn’t file when they broke the Guinness Book of Records for profits in a single quarter.

Do yourself a favor and re-familiarize yourself with Adam Smith’s “Wealth of Nations,” to connect with the beauty of our Economic System. The Economy (a system wherein products and services are produced and exchanged for money) is intact. However, the system wherein products and services may or may not actually be produced and are exchanged for pieces of paper representing possibilities of numbers made up by people paid to manipulate numbers, is NOT The Economy. This is nonsense propagated by thieves, crooks, and a media built on fear-mongering, and is not synonymous with The Economy.

We don’t even need to go into the details of the erosion of banking laws from the 1980’s to now. Suffice it to say that if I had $2, and I was a bank, I could lend you about $75, and then write it down in my books as a $140 profit. As long as nobody asked any questions, everyone went along with it. Yes, from a Main Street perspective this might be considered “nutty.”

The problem was one of widespread addiction. The banks played “drug pusher,” using credit as drugs, and whispered “hey, the first one’s free…” People stopped using common sense when running businesses. Rather than using a loan as start-up cash, they used it as their pretend income. Rather than paying their bills using last month’s receipts, they started paying their bills using pretend credit that would maybe be real someday, or not. The banks kept pushing this “free money,” until the population began accepting the promises of the future as real money now.

When someone decided to actually look in the “wallet” to see the money, and found nothing but I.O.U.s, the “margin calls” started rolling in, and just like 1929, there was no actual money behind all the I.O.U.s. Panic started.

When people are afraid, they often make bad decisions or let “authorities” have unrestricted power, so just as the media had been keeping people in fear for almost a decade, they went to work fanning the flames. The subsequent reactions to the doom and gloom stories became a Domino Chain effect.
Our Fear resulting in the usual non-thinking, reactive environment, truly began destroying the Economy, creating a self-fulfilling prophecy. Believing that the actual system of The Economy was crumbling, people began to freeze like deer caught in headlights. When everyone stops participating in the Economy, (see above definition) it will come to a grinding halt.

The good news is that we CAN turn this around, and we don’t need that one sector to do it. We do need to start participating in the Economy, however. The trick is, we need to re-learn how to do it with money, products, and services, rather than fake-outs and scams.

The Number One Problem that controls our Economy is Jobs. This is the first domino in the domino chain. When businesses react to a lack of credit by downsizing their staff, they do not create revenue, they create non-purchasing, service-using, miserable people.

A quick look at arithmetic will make this point. The average payroll costs between 20% and 30% of a company’s budget. If you lay off 10% of your staff, that equals 10% of 30%, or a whopping 3% budget cut. Double that, and cut 20% of your staff, which will just about cripple any company, and it nets a 6% savings. Layoffs to repair revenue deficits is a myth propagated by huge corporations to pretend that they’re doing something to appease their stockholders. Smaller businesses look at these corporations for “best practice” guidance, and effectively destroy themselves.

Granted, many firms used their credit addiction rather than sales to make payroll, so a lack of lending makes payroll more difficult, but there is a clear path out of this looming Depression.

Stop hemorrhaging human beings. Sales will replace credit sustainability. Rather than laying people off, we can re-direct their efforts toward revenue generation. We can look at Process Re-Engineering to make our systems more efficient, effective, and profitable. We can review our leases, our rental agreements, our billing practices and contracts for more cash flow. Even shortening hours, or taking pay cuts is preferable to total unemployment. Unemployment starts the dominoes: when people get laid off, they can’t buy products, the businesses selling the products close, laying off more people, and we head for Depression in record time. That’s what kills the Economy.

So the next time you hear, “it’s the Economy,” remember, it’s a lack of credit, and an excess of fear. It’s NOT the Economy.
****************

About the author:

Coach and consultant Ian Blei is the Director of the Institute for Integral Enneagram Studies, President of Optimized Results, and author of Kind Ambition – Practical Steps to Achieve Success Without Losing Your Soul. Mr. Blei has helped countless companies save millions of dollars while boosting productivity for over 30 years, blending his diverse background of Design Engineering, Management, and Operations to Psychology, Coaching, and Communications.  His mixture of organic systems and practical, linguistic approach has proven itself unanimously successful.  Along with consulting, speaking and writing, Ian conducts seminars and workshops throughout the U.S.

Contact:

www.Optimized-Results.com

IBlei at Optimized-Results.com

Comments

  1. Hi Mr Blei,

    I love the passion and engagment in your article and agree with you; I would want to generalise EVEN more: "it's NOT the economy, it's all about you". I just met today the Owner and Founder of Ted Baker, and believe me, even in recession, even in Dubai which has been hit hard, their brand still continues to grow… I believe there's NOTHING to do with the economy, it's about what people WANT!

    It's too easy to leave to the responsibility of a system (not saying that the system cannot help, on the contrary) and I am of those people who take action, and you know what: there's plenty of money… and not only this, a time of chaos is the BEST time ever to do business.

    We walk the talk at Seeducation, a new born social enterprise, and if anyone wants to learn how to get to where you need, here's a simple link: http://www.seeducation.org/learn-and-go/fundraise

    TED.com is ALSO AMAZING to find videos :)

    The future is in our hands, or rather under our passion!

    Ruben, Seeducation.Org

  2. BridskNuggint

    You have to accept the fact that (popular, or aggregate) perception is reality' then ask 'how will popular perception or 'aggregate perception' change?

    For example: if popular/aggregate perception is "outsourcing is sending a lot of jobs overseas" and it's true, you won't change the perception, as most people think rationally.

    But sometimes a notably large number of people take on a widely-held perception that is not actually true. This is the kind of perception you are claiming that everyone has right now: "The perception that the entire economy is bad, that is incorrect — only one or two sectors are bad (housing and banking?)."

    Another example of a 'rationally improper' perception: the "Tulip Bubble" in Holland in the 1600s (see "Tulip Mania" at http://en.wikipedia.org/wiki/Tulip_mania).

    Your question is thus "How Can We All Change The (Rationally Improper but Popular) Perception that the whole Economy is Bad?"

    I do not know, sorry. Just wanted to frame it a bit differently.

  3. Good day. I’m actually interested on this area. Might you be composing anything in addition about this?

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