Thursday, September 10, 2009

Great Recession Marches On

After surviving the dot com meltdown eight years ago I felt confident heading into this recession that the lessons learned from the turn of the century would serve me well. My expectation was we’d feel some pain, yet Strategic Communications Group (Strategic) would emerge well positioned for growth.

So far…so good. We have made difficult decisions related to staffing and areas of spend, however the company has maintained its stability and focus with a clearly defined plan moving forward. Plus, I have managed through new experiences, such as a client bankruptcy.

I can now unequivocally proclaim that I am so ready for market conditions to improve. The Great Recession stinks. It’s simply not as much fun to steer a company in a down economic environment.

With this in mind I arrived at the Tower Club in Tysons Corner, Virginia seeking insight from Dr. Malcolm Knight, Vice Chair of Deutsche Bank. Dr. Knight holds a PhD from the London School of Economics and Political Science and has worked in a myriad of European markets helping shape economic policy.

Here are a few highlights from Dr. Knight’s address to a group of regional business executives: (Image courtesy of Wikipedia.)

--The economy is fundamentally unpredictable.
--For the first time in nearly four decades, the global GDP will decline.
--Improved corporate earnings are the result of extensive cost cutting. While this is good for efficiency, it is not sustainable in the long-term.
--Stress tests on financial institutions have increased transparency about their health, resulting in more confidence and appetite for risk.
--Signs to watch to determine what will happen next:

1. Consumer spending and household savings
2. Changes in the volume of world trade
3. Output and export growth in China, India and Brazil
4. The US commercial real estate market

--What needs to happen to ensure we make our way out of this recession:

1. Maintain open markets (fight the call for protectionism)
2. Continue the government stimulus until there are signs of durable growth
3. Articulate a clear exit strategy from the rising level of government debt
4. Redesign the global regulatory system so it is consistent across all markets

While informative, this wasn’t the message I had hoped to hear from Dr. Knight. My take away: things have stabilized, yet in no way should we anticipate a period of robust growth.

Like all economists, Dr. Knight is an observer who then applies knowledge, theory and history to evaluate and (to the best of his ability) anticipate. There are no guarantees. And, for this entrepreneur, there is the realization that there remains a lot of recession managing to do.

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