As I mentioned in my last post, I am now not willing to finance anything substantial for any period of time beyond a few months.
While I'm no economics professor, nor claim any great knowledge, it appears that the people who do make those claims are as befuddled as things can get. Each has scenarios and predictions that vary wildly... But every one of them acknowledges we've got a problem... or two or three... All we have to go on, is the last great depression, and it's origins are not the same as what happened now, but the effects are somewhat similar. In less than a year, the Treasury, Congress, and agencies have spent, assumed liability for, or gauranteed nearly 10 trillion dollars of additional liabilities. If this were your business, it would be the same as having spent, borrowed, or assuemd liability for debts 3 times your annual revenues in just 90 days, while you were running in the red, and already owed 3 times your annual revenues. The implications of this are obvious... Math doesn't lie. This money has to come from somewhere to cover these liabilities. In under 90 days, the federal treasury has floated a trillion dollars in bonds. One TRILLION dollars was taken out of circulation and turned into federal paper. Pundits say that they expect the new administration to likewise use anywhere from 1 to 5 more TRILLION dollars of debt to fund its spending and 'bailout' plans. Every dollar now spent is a dollar removed from economic circulation or investment. Would this matter too much? Maybe not if we had a sound financial sector. But we do not. I haunt a number of small business, business credit, and financial news forums around the country, and they all agree... Institutional credit is drying up faster than the remains of an August afternoon snowball fight in Yuma, AZ. People with excellent personal and spotless business credit are seeing their credit cards, credit lines, etc, reduced, cancelled, even closed without warning. If you have a flaw in anyhthing, it's just a matter of time before the reviewers get to you and cut you off completely. If your business relies on using short term credit in the form of a card to provide cash flow between purchase and install / income, you could find yourself suddenly without it, without warning, as your credit provider cuts you off... perhaps simply because they do not have any capital. And this is happening whether the institution is international or a local credit union. Nobody is immune. Now, let's get into the possible futures... If the Obama economic policies continue the Clinton and Bush ones, of extended borrowing and spending to keep things "moving", ie, no signficant change ( this has remained mostly unchanged since around 98), we'll eventually see the influx of cash to buy federal paper dry up, as people lose faith in the federal treasury like they did with Bear Stearns. Further, the continued consumption of all available investment cash by the federal government will deepen/worsen/prolong the business downturn, as financing anything becomes all but impossible. This scenario is likely to see an extended period of deflation followed by... unknown... Likely a massive deflation as the inevitable adjustments are allowed to arrive or inflation spike. A hugely unlikely possibility would be for Congress to decide to act as any responsible party would... Balance its books, stop spending on anything but the absolute necessities, and then to try to spur industrial growth with tax holidays and total restructuring of the tax and regulatory system... Expect a huge flurry of business failures, followed by a lot of restructuring and the disapperance of most that do not produce things of "value". Investors again will start investing in those things likely to succeed and we'll see a long period of rocky rebuilding and success/failure cycles. This is the shortest path, with the most up front pain, but the best outcome long term. Another unlikely scenario would be "Printing money". Giving up on the idea of trying to prime the economy with debt, we print currency, hoping to head off deflation, but not so bad we spark 'currency collapse inflation'. The problem is, nobody has a clue where that point is. Nobody. If the last scenario follows the first... It's a nightmare nobody wants, but is the most likely. It's the path of least resistance for politicians, who are addicted to buying votes and spending money, promising to fix stuff, if they just get "more". It is their control and attempts to control the economy and busienss that created this crisis in the first place. More of the same is guaranteed to worsen, not improve, things. How do deal with it? Don't be in debt. Don't make long term commitments that involve largish sums of money. Deflation could easily reduce your bills AND your income by 50 to 80%. But your loans, leases, etc, don't change. You will default. If inflation sparks, it will be dramatic. And you will again, be likely to find your leases and loans suddenly "adjusted" upwards dramatically, while your business is falling, and NOBODY will loan anything. Not even 30 day credit, except at harsh rates, since nobody knows how much prices may change in 30 days. Study the inflation and deflation cycles exhibited recently in Africa, and historically in the Depression, and in post WWI Germany and WWII Germany. If that inflation happens, imports become exhorbitantly expensive and rare. And we're dependent upon imports for all WISP equipment. Don't be dependent upon large entities for anything - they're the most likely to wield influence against you as a competitor, and to shut you down or face ruinous cost increases. Nor upon small volume / proprietary stuff. Your supplier could vanish faster than they can spread the word on the internet. Don't depend upon subsidy. Eventually, the day of reckoning WILL come and your subsidy will vanish. The math can't be violated for ever. By one means or another, the consumption of our wealth by the public sector will fall. It hasn't been sustainable in 4 decades. There's a lot that's going to go away. If it happens by force of events, it's going to be by collapse of the currency and government. Not somehing we're interested in seeing... Keep your overhead low. Stay liquid. Get customer loyalty. Listen, respect. Treat fairly. YOu'll stand out in their minds... Right now, confidence and goodwill matter more than almost anything else, including price. That's a 180 degree change from what everyone was preaching just 18 months ago. ++++++++++++++++++++++++++++++++ <insert witty tagline here> -------------------------------------------------------------------------------- WISPA Wants You! 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