Recent failures of Silicon Valley Bank, Signature Bank and others roiled global banking. In the aftermath, swift action was taken to stave off more failures, but some businesses fear we're headed toward a crisis akin to the recession of 2008, dot-com bubble burst of 2000, stagflation in the 1970s or the stock market crash of 1929 that precipitated the Great Depression.
Rampant speculation, unsustainable growth and inadequate regulation are said to have contributed to prior economic woes. When the economy is booming, people tend to assume the good times will continue indefinitely, which leads them to take unwarranted risks. When the economy struggles, people become frightened and can overreact.
With that in mind, we queried members of our advisory board for their views on our recurring boom and bust cycles, how to learn from the past, actions business owners can take to weather difficult times, and how people can communicate effectively across today's deep divides. Following are responses we received.
While it is true that we have seen boom and bust cycles throughout history, it is also true that we can learn from our mistakes and make adjustments to limit volatility going forward. This requires a concerted effort on the part of policymakers, businesses and individuals to be more mindful of the risks and potential downsides of economic growth.
One way to limit volatility is to focus on building more sustainable economic models that are less reliant on growth at any cost. This might mean adopting more responsible business practices, promoting more equitable wealth distribution, and investing in sustainable technologies and infrastructure.
It may also mean being more mindful of the potential risks of financial speculation and taking steps to regulate the financial sector more effectively.
There are a number of steps that governments can take to protect individual freedom while also enhancing financial stability. One key approach is to ensure that regulations and policies are designed to balance the needs of individuals and the needs of the broader economy. This might mean creating stronger consumer protections, ensuring that financial institutions are adequately capitalized and regulated, and providing targeted support to those who may be most vulnerable to economic shocks.
Another important step is to promote greater transparency and accountability in the financial sector. This might mean requiring companies to disclose more information about their practices and operations, or establishing more robust oversight mechanisms to ensure that financial institutions are operating in a responsible and sustainable manner.
Governments can also work to promote financial literacy and education, providing individuals with the knowledge and skills they need to make informed decisions about their finances and investments.
Finally, governments can work to foster greater innovation and entrepreneurship, creating the conditions for sustainable economic growth while also supporting individual freedom and creativity. This might mean investing in research and development, providing tax incentives for new businesses and startups, and promoting access to capital and other resources for entrepreneurs.
Overall, there is no one-size-fits-all solution to protecting individual freedom while enhancing financial stability. However, by taking a balanced and proactive approach, governments can create policies and regulations that promote economic growth, protect consumers and safeguard the financial system for years to come.
To improve their chances of weathering difficult economic times, individuals and business owners can take several actions. One of the most important steps is to build an emergency fund to help cover unexpected expenses or to provide a cushion in the event of job loss or other income disruptions. It's also essential to diversify investments to reduce risk, maintain good credit, and develop a flexible business model that can adapt to changing market conditions.
Another important step is to strengthen community relationships and networks, which can provide support and resources during tough times. This includes building relationships with other local businesses, suppliers and customers. Networking and collaboration can also help individuals and businesses identify new opportunities for growth and development.
Finally, individuals and business owners can engage with local government officials and advocate for policies that support economic stability. This might include policies that promote small business development, workforce training or job creation.
By taking proactive steps to prepare for economic downturns and advocate for supportive policies, individuals and businesses can improve their chances of weathering difficult times and contributing to the overall health and resilience of their communities.
Effective communication and compromise require individuals to approach discussions with an open mind, a willingness to listen to opposing viewpoints, and a commitment to finding common ground. One key strategy is to focus on shared values and goals rather than specific policy positions. By starting from a position of shared values, individuals can often find more common ground than they might initially think.
It's also important to recognize that compromise does not necessarily mean sacrificing one's core beliefs or values. Instead, compromise involves finding creative solutions that meet the needs and interests of all parties involved. This might involve exploring alternative policy approaches, identifying areas of overlap between opposing viewpoints or finding ways to build on common ground.
Ultimately, effective communication and compromise require a commitment to civility, respect, and collaboration. By approaching discussions with an open mind, actively listening to opposing viewpoints, and focusing on shared values and goals, individuals with opposing views can work together to find solutions that benefit everyone.
It is my opinion this boom and bust will continue so long as humans continue to exist. Generally, there is a long period of boom before a bust, many times a generation or more, which is considered to be 20 to 30 years. Overwhelmingly, over a period this long, we get accustomed to sunny days and don’t even consider the potential for hurricanes and blizzards in the future even though many times the signs are all there.
It is only when the bust actually happens, such as the Great Depression, where we are brought back to reality. However, this only lasts until the next boom outside of the people who experienced it and felt it. Over the years, I have met many who went through the Great Depression and have accumulated great wealth since then, and I've seen just how frugal they are, which is a direct result of experiencing a bust firsthand.
Furthermore, as we all know, there are many lawmakers doing favors for companies and industries in exchange for personal enrichment and large campaign contributions, which more often than not are not in the best interest of the citizens. Look at the financial debacle in 2008 when the banks and mortgage company executives were raking in cash, hand over fist, lending to anybody with a heartbeat.
I am no financial genius, but I knew this had to come crashing down. I personally knew people who didn’t have enough income to qualify for a single home under normal conditions who suddenly had four homes. The bankers knew this and rode the riches as long as they possibly could. In the end, not a single jail sentence was imposed on the top echelon who made all that money and left the taxpayers to bail them out.
They had good friends in the government help them avoid any material consequences, where if the average citizen like you and I did 1/100th of what they did we would be thrown in jail and the key thrown away. Until a majority of lawmakers in power cannot be compromised and make decisions on a fair and equal basis without exterior influencing, this cycle will continue to repeat itself over and over.
The government is the primary problem today, which in my opinion is run by a majority of self-serving elected officials. In all fairness, elected officials have, since the beginning of government, yielded power and cashed in on this power in a variety of ways at the local, state and federal levels.
However, what I am seeing is a country that no longer resembles the foundation the United States was built on and what many in our military have died protecting. Individual freedoms are slowly being taken away, free speech is a thing of the past, and financial stability is for the ultra-wealthy individuals and large corporations. I think it should be mandated to have a full accounting for the public to see without redaction down to the penny on what, when, where and who received taxpayer funds.
Further, it should be banned for any elected public official to be employed in an industry over which that elected official wielded influence. An example would be the officials running the FDA cannot take a position as a consultant with a big pharmaceutical company when they leave the FDA. They are often heavily rewarded with consultant contracts based on their favorable treatment of these companies, which is detrimental to citizens.
I suggest watching the movie Dopesick about the opioid crisis to get an idea of what I am talking about.
Business owners and individuals must be creative and frugal so they can weather the difficult times. In my lifetime, today’s economic climate is as uncertain as it has ever been. We have been accustomed to extremely depressed interest rates, which fueled reckless spending and extraordinary risks. However, at some point the music has to stop, and you can see that happening today.
The government is very much broken today due to a great divide and, in my opinion, a complete dereliction of their duties. Democrats and Republicans seem to have no interest in doing what is best for the country and its citizens but rather pushing their own agenda. The agenda today is all about keeping and maintaining power at all costs.
The constant propaganda being fed to the American people by the media is a huge problem and creates a major divide among United States citizens, which is exactly what they want. I can only hope that everyone wakes up and starts thinking for themselves rather than accepting what the mainstream media wants you to think. If we are no longer divided, the game is over for the government, and they can no longer push their self-serving policies and laws.
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