HOPE, FEAR, ANXIETY, GREED all are the same – Emotions. The world is driven by human emotions. Any crisis, from the French Revolution during 1789 to Sub prime crisis and Euro crisis recently is driven by emotions. The problems caused in this world are due to human emotions and the solution is again the human emotions. It all matters is who will drive the right emotion for getting out of the problem when there is a crisis around the world.
My economics professor told us an interesting story.
There was a village X which was in great recession, people had no business to do due to hoarding of money. This made the village stagnant. One day a man (Mr Hope) came to a furniture shop and told he wants to buy some furniture for his house but since he has no money he will not be able to buy it right then, but will come and take after a week. As soon as Mr A (the owner of the furniture shop) got the order, he immediately called his wife to buy the gold chain which she has been asking him from past 3 months. When A’s wife went to buy the chain the gold shop owner Mr B bought a small land from the real estate agent C. And this way the chain continued and thus the economy was revived through multiplier effect. Mr A waited for his customer on the day he was supposed to come but he never came. After having a tiring day one day Mr A went to a police station and asked about the whereabouts of Mr Hope. Then the police answered that this guy was a mad guy who ran away from mental asylum and later was caught by the hospital staff.
It is a short story which shows that hope can revive the economy.
This hope of making money, being powerful has turned to greediness when the time span was short. I always wanted to make money, but the way was unknown to me. I still don’t know the way and that is why I guess I have come to an MBA college to get to the path of making money. But even after a year I see that I am still not sure of how to make more money in less time.
Lot of financial instruments have been made in this world for the above said purpose – to make money faster, but the basic rule is forgotten “Money cannot be created or destroyed it can be transferred from one to another”. And since there is always balance in the economy the more powerful we are the more we can get from the rest of us – Survival of the Fittest. All of these are fundamentals taught in school and need not be limited to science. It can be extended to general principles of life and especially human emotions.
Since I have made a statement I will prove it. It is the trust which made stocks rise when P Chidambaram, Finance Minister of India has just made a statement positively. It is the trust which made Euro to rise when Mario Draghi said that he would do anything for the Euro to not break. It is the fear which caused run on banks during the crisis of 2008. It is the fear that caused Lehman Brothers existence. Lehman Brothers was founded on 1850, it survived the Great Depression of 1929, 9/11 attacks but it couldn’t survive financial crisis of 2008, as the stocks were sold by the major shareholders which made everyone to sell, and before filing bankruptcy its stock was $2. Libyans through frustration ousted the former official ruler Muammar Gaddafi who served for almost 32 years. It is a known concept to everyone, but no one realizes the impact of these emotions.
Only emotions whether directly or indirectly are the cause of any boom or bust happening in the economy since money was introduced. 9/11 attack in US and Enron scandal during almost the same time has caused the investors to park their funds somewhere else due to lack of trust or fear of losing money. Banks checked the creditworthiness of the customer to offer any loan for the surety of payment. By giving home loans for people who will for sure default (as they don’t have any money or jobless) and causing a subprime crisis is nothing but Greed, Greed for being the best and powerful bank in the world.
We were taught both in economics and finance that the firm runs to maximize shareholder wealth. Even in some subjects like strategy, business policy we devise and learn few models or strategies to maximize the wealth. But it is the emotions which drive the firm are forgotten by all. It is the positive emotions we need for the firm to drop. India has a slow growth and high inflation. This fear of losing money by investors has caused capital flight and the credit ratings by agencies have worsened it.
When you are in danger or critical situation you strive for people who will believe in you and motivate you, but not who will criticize you. Criticizing you at that point may cause fear in you and worsen the situation. This is what the economy needs – Hope
Hope has made a small village work up to its full potential; this hope can make the economy better. I attended a guest lecture on Risk Management and how important it is in the current scenario. Risk management is nothing but safeguarding you from future problems. It is derived out of emotions. Instead of telling Greece to implement austerity measures by telling you are disaster, provide the bail out money for boosting the economy. Scandals, corruption, slowdown, crisis all happen due to the short term insight of the future. This may give short term gains but will give long term losses more than the gains. Since life is balanced the excess loss is due to lack of long term future insight and this would teach a lesson.
I am not a scholar, nor even a post graduate (will be one in less than a year), but I am just a student trying to learn the politics of the world. The more experienced or scholar you become the more chances are there for you to ignore the small and basic facts learnt in primary school. Since I am on the middle of the bridge where I am closer to primary school than major scholars of the world and also closer to become one of the scholars (I have hope I will become one) I am able to relate it very closely.
So everyone should fight against negativity. It is hope which can make anyone go to any extent. It is the emotions which drives all of us in this world. It is not financial crisis, euro crisis, or India to be in stagflation but it can be best termed as “Emotion Crisis”
