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Where Did This Financial Crisis Come From?
By Sanford | October 3, 2008
Greed and deregulation played a big part in the financial debacle we have been witnessing over the last year or so. But, don’t think this debacle began with the subprime mortgage crisis. You could see the it coming with previous financial scandals of Enron, Worldcom, and the Dotcom implosion. There was all this talk of the ‘new economy.’ You didn’t have to be profitable; it was market share that was important. Buy a house with little down and low interest rate, you get a the mortage interest tax deduction. Before the interest rates goes up you will have sold your house at a profit due to all the appreciation. Everything is fine until the music stops. Then all falls down. It did in 1929. This has been a dangerous game of musical chairs that keeps getting played out in the American economy.
If something sounds too good to be true, it probably is. While businesses need to run on credit to help with cashflow, meet payroll, they still need to be run with a sense of fiscal responsibility. What is frightening is that many small businesses do not have a business plan, business owners don’t really understand basic budgeting, cashflow, and don’t focus enough on the mechanics of running their businesses. It is more important that businesses of 100 employees and under pay more attention to business management in both bad and good times. The Wall Street mogels didn’t understand the derivatives that they were investing in. Are you doing a similar thing in your business?
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