The reason I am writing this post is the images I watched on tv from the first day of the Christmas sales. It looks like consumers in the US, UK and Australia went crazy after they got a good portion of consumerism. They barged into the shops screaming, running and grabbing after a long night of waiting in the cold.
My first reaction was, Are You Serious? Which person in his right mind would put up with the cold, the waiting, the noise and the insanity in order to buy a few pairs of shoes or a couple of discounted carpets?
And then it hit me! The behaviour was not triggered by the sales but by the widespread euphoria in the markets. The stock market is rising in unprecedented levels, the consumer indexes are also reaching a peak, unemployment is decreasing (albeit marginally). Everything is hinting towards an impending boom.
It is widely known that capitalist economies are going through predictable cycles of booms and busts, which last a few years at a time. In 2008 we experienced one of the longest and deepest busts in the western world after the Great Depression in 1930s. It was about time to get a glimpse of the recovery.
Although I am obviously happy to receive such exciting news, I am still skeptical about the length of the new boom. It looks like after the 1980s the middle class has shrunk significantly, while the inequality between the rich and the poor deepened. Such conditions resulted to longer busts and shorter booms. In fact, the busts are increasingly becoming the norm.
The moralising attitude of the UK government is not helping the situation. Instead of stimulating the economy, they imposed severe austerity measures. It is a known fact among economists that no austerity ever helped an economy flourish. Quite the opposite! For this reason, the miracle of the new boom will be nothing but short-lived.
The only hope I have is that the governmental officials in the UK will share the euphoria of the population and will loosen up the monetary policy. We can see signs of such policies in relation to businesses.
For example, several organisations (mostly locally) provide substantial quantities of matched fundingfor B to Bs. Also, the government decided to increase the matched funding for exports from 1000 pounds to 3000 pounds. In effect, there will be more liquidity in the economy and more wealth to be distributed among businesses.
The high unemployment rates, the reduction of the salaries and the increasing funding for new businesses will have a positive overall effect on startups. Over the next five years (or less) we will experience a Renaissance in Startups that will become more evident than it already is. New niche businesses will spring from the unemployed who wish to become their own boss. You will see this trend developing globally.
And then, another bust will come. The western governments will not be able to sustain the economy at peak rates for a multitude of reasons, e.g. globalisation, rise of developing economies, requests for an even distribution of the wealth globally, further implementation of austerity measures that will impede growth and will increase public debt etc.
I am not pessimistic. In fact, I intend to take full advantage of the economic euphoria and expand my own business. However, I will keep my ears and eyes open in order to recognise signs of adverse change. The moment I see depression sinking in, I will know. And I intend to be fully prepared for the next bust, so that I can take advantage of these sad times too!