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Deika Morrison

Deika Morrison: Reasoning the Reasons

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Deika Morrison: Financial Security Tips+Tools

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Thursday, October 9, 2008

If I could talk to the G7

In advance of the G7's meeting tomorrow:
  • First, no matter what - reassure your respective peoples that you are in control of the situation. Governments have real power. It's is just a matter of dealing with a never before seen global crisis quickly and constructively.
  • Second, you have started coordinated action - everyone expects action. People believe you can DO something to fix it. Don't squander the goodwill. The situation is way too tenuous. Come up with something to DO.
  • Third, as part of that DOING, protect your national financial institutions first. This is very important. When people are in fear, they cling to the familiar - they look for others to blame. You must protect your own national institutions first to add to your own credibility so that your people will trust you. This will help to build back the confidence. As much as the people complain about taxpayer funded bailouts, they do not want to be in the position of having not one single indigenous option. Throughout history, governments have rarely completely trusted each other. Everyone knows that. No one really expects it to magically change over night. Your citizens do expect you to protect them and their cultures. So reassure them that you are and that coordination is part of that process, not replacement for sovereignty.
  • Fourth, don't get bogged down with trying to solve every problem. It is not possible. Think strategy. Confidence is the only agenda item. You cannot force trust, but you can come up with mechanisms for confidence. The credit markets will continue to freeze if there is no confidence. The markets will continue to be volatile if there is no confidence. People will become seriously unproductive and paralyzed if there is no confidence. Therefore, agree on mechanisms to restore confidence with some tangible national and coordination measures. Focus on that. Focus on the fact that that means different stakeholders require different measures. Everybody needs confidence in the banks because when the systems that handle deposits and credit function, you are addressing - not solving - the paralysis problem, the unproductive problem, the real economy problem, the volatility in the stock market problem, and I could go on. The stock market itself, the regulatory reform, the ratings agencies all require much more work and none of it matters if confidence does not start to flow in the system. As an aside though, I must say that when I look at the stock markets, the rating agencies and the lax and absent regulations, I am somewhat befuddled about why this is taking so long to fix. Stock markets and ratings agencies and regulations are fairly recent inventions of man. People did live before they existed. In the face of the option of economic and financial meltdown, and given a sworn obligation of governments to serve people, if these man made inventions are making such a mess, then aren't the immediate temporary solutions fairly straightforward? Sometime we forget that most of the world has never even heard of these things - they are too busy trying to live on less than $1/day.
  • Fifth, please remember these measures do not have to last forever so no need to over analyze them. Governments can made a decision today, and change that decision tomorrow. Granted, that was part of what caused the problem. But, respectfully, back then there were so many examples of impeding crises and bailouts so things could have been done differently. What we are now facing is something we have never faced before. The landscape has changed so significantly that there is no way to know for sure if what you are doing is the absolute right thing. But you can determine if it is the best option with information available. What is certain is that you have to be flexible and be willing to exercise your power - quickly - to deal with the challenges.
  • Sixth, BUT - and here's the big BUT: You have to communicate. Make it clear that the measures are subject to developments. Outline the mechanism for review. People understand review, expect review and welcome review. You can add an element of predictability if people knew by what means and when you will review, even if you cannot say what you will review it to. So if it means something like: "We have a standing conference call at 9am every morning for the next three months, and others in between as needs arise". That is a very simple, and simplistic example, but it makes the point. Predictability has been taken out of people's lives; and people generally do not like change, let alone such radical seemingly never-ending change that we seem to be going through. So be sensitive to the need to bring back some predictability as best as you can.
So bring on the global coordination - careful, considered, constructive global coordination.

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Reasoning The Reasons by Deika Morrison is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.