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Tuesday, February 03, 2009
Global Financial Crisis - Effective Management

Effective Management Of The Global Financial Crisis

Unfortunately not a day goes by without some sort of news leaking out about the ineffective management that has existed in some investment banks. Even in the midst of the threat of failure due to lack of capital, some investment banks took public money for support and then chose to pay huge bonuses to themselves when the bank had lost substantial money. To any industrialist, the thought of paying a bonus to someone or a group who failed to realize a product launch, caused diminished service quality, or fell short of production targets is totally absurd.

In the past, the investment banks had been 100% real capital building banking institutions and valid entities for the financing of corporate debt, where the management and delivery of financial products to support the capitalization of real equity companies was their 'bread and butter'. But in the end, in effect, they created their own leveraged margin accounts and traded electronic capital at ever increasing prices and gearing without a solid real equity base to fall back on in difficult times.

The huge mistake being made today is to think that investment banks are the core engine of the success and growth of an economy. The real facts are that economic prosperity is driven instead from the collection of companies and industrious people who create the ideas and methods that deliver goods and services a society demands. A highly effective company with much sought after products, can stand irrespective of a bank's success, as the company becomes its own 'cash cow' generating revenue and cash flows.

If a long-term approach is taken to the global economy and one looks towards the year 2040 (30 years from now), it is absolutely essential in this time of financial crisis, that countries like China, India, the United States, and the European Union, implement economic stimulus that takes an absolute Planet saving approach as the prime objective towards economic recovery.

There is no argument for any developing economy to sacrifice their own and others environment for economic gain. You need only look at some rivers to see that the true wealth of an economy is found in the abundance of aqua marine life living within a river, lake, ocean, or sea, or in the birds who sing as they fly from treetop to treetop in the clean air. It is the environment that ensures a nation's future before any economy can even think of existence.

So who are the effective managers of the global economy for today and tomorrow? Most would now argue that it is not the same people or specific institutions whose ideas and methods contributed to the financial crisis itself. Those who made huge mistakes cannot be expected to all of a sudden become enlightened to do differently or better.

Invested public capital needs to derive a multiple of return on the initial investment by creating jobs and products for the future that are sustainable. It is only in areas of energy conservation like bicycle path construction in cities for commuting, efficient and light non-polluting automobiles, solar and wind energy, high-speed railways, water treatment plants, and all energy saving initiatives, where there is an argument that a clear future exists for economic growth that takes us to 2040 and beyond. Investments in these types of initiatives will from every unit currency spent, drive economic growth by initiating new industries or the transformation of industries to support the new direction that has been taken.

It is too easy to waste finite public money, and with such huge sums being spent throughout the world to support financial systems and economies during this crisis, it is important that invested public capital be magnified for its derived benefit and not just consumed. The effective managers of today and tomorrow throughout the world need to think 100% of the future, and with this type of effort will come the rewards that the people who instil their trust in them desire.

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