Eisuke Sakakibara, Japan’s Vice finance minister in the 1990s, said in a forum at the Manila-based Asian Development Bank (ADB) that the current global recession will last 2 to 5 years. He suggested that billions (indeed trillions) of dollars of “Stimulus” from the Governments around the world may not save the world economy from the prolonged pain. He made an interesting remark:
“What we are now experiencing in the world is a so-called balance sheet recession, which is what Japan experienced during the 1990s. Corporations need to adjust their balance sheets, they have to reduce their liabilities, they have to repay their debts, they have to save more…This takes time.”
His point is well taken. The change in the economy will lead to a “step change” in many ways… revisiting assets and liabilities of various companies but more importantly of major sectors may be crucial!
Also, somehow I am not happy with the constant pressure on the top execs of all the public companies to grow their sales/profits to increase their share price .. every month. Looking at just the monthly level or quarterly basis takes one’s eye off the long term implications of the decisions/actions. What is happening now is a direct result of the greed to grow or showing that one is growing.. AT ANY COST! We cannot make Buffetts out of all Investment Bankers…. but somewhere things need achanging. I am not sure what that change can be.. but a more long term look is critical.