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The   Global Crisis Never Ends – Here’s Why

By Shlomo Maital   

mimic octopus the mimic octopus

   In Nature, there is an incredible ‘mimic’ octopus that can change its shape and its color, to imitate its surroundings.  (See above).   It does this, with only a pea-size tiny brain. 

     If you’re paying attention, dear reader, you may have noticed:   The global financial and economic crisis has not ended.  It simply keeps changing its shape – just like the mimic octopus.                                                 global crisis

    It started in 2007-8 as a subprime mortgage crisis, with banks and financial services companies requiring massive bailouts.    Next, it became a government budget deficit crisis – when governments assumed the bad debts of the banks. 

  Then it metamorphosed into a ‘euro’ crisis, because weak southern European countries (Greece, Portugal, Spain, even Italy)  skated close to defaulting, thus endangering the euro, because of the debts they subsumed.

    Now?  It’s become an emerging markets crisis.  Ironic, because last time, the Asian contagion was a financial crisis that began in Thailand (1997) and migrated quickly to the rest of the world.  Now it is an American crisis that has infected Asia.

     According to Landon Thomas Jr., in a front page Global New York Times article (Aug. 21),  “Fed policy poses risks to emerging economies.”  Why?  The American Fed printed enormous, massive amounts of dollars (quantitative easing) to stimulate the US economy. Because US interest rates were so low, a huge part of that money fled abroad, to emerging markets, fueling property bubbles in Turkey, China, India and elsewhere.  

   Now, with Fed chief Ben Bernanke hinting that it may soon be time to raise interest rates and end ‘quantitative easing’,  much of that money is fleeing emerging markets and returning home, in anticipation of higher rates.  The result:  deep drop in the exchange rate of the rupee, and the threat of disastrous bursting property bubbles in Turkey, Brazil, and South Korea.  China, too, is quietly struggling with enormous bad loans given by state-owned banks.

    U.S. Treasury Secretary John Connolly said, in March 1973, “the dollar is our currency – and your (rest of the world’s) problem.”      By focusing its monetary policy solely on American  GDP, employment and growth, America is causing collateral damage to other nations.  This is inevitable – it is the fatal flaw of the current global financial system.    

     The current global crisis will not be terminated, until the conflicted dual role of the dollar (it is the American currency and also the world currency) is resolved.   The crisis will continue – it will simply keep changing its form and center of gravity.   The world will continue to oscillate between “far too many dollars” (bubble) and “far too few dollars, or dollar flight” (bubble bursts).    

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 Entrepreneurial Energy: It’s Everywhere

Sizwe (S. Africa) and Atef (Jordan/Syria)

By Shlomo Maital      

Sizwe Nzima 

Sizwe and his ‘capital’

   My friend Prof. Dan Shechtman, Nobel Laureate for Chemistry (2011), has for over two years been trekking tirelessly across the globe, using his Nobel pulpit to deliver a message:  Entrepreneurship can change the world.  His infinite passion and energy, despite his age (72), reflects the infinite inexhaustible energy of entrepreneurs who seek to create value and build businesses, even in difficult circumstances.  Here are two examples, both from the BBC World Service  (I am a huge fan). 

   1.  Sizwe Nzima:   “Collecting medicine from a hospital or dispensary in some of South Africa’s townships can be a challenge- with the cost of transport and queuing times a problem for many people.    Now one young man from Cape Town, Sizwe Nzima, has come up with a novel solution, which is not only helping patients in the community but has also seen him build a successful business.”

 Nzima identified a need:   People in South African townships spent hours in queues, losing valuable work time, to get medicines from hospital dispensaries.  Why not get the medicine for them, and deliver it, with squads of bike riders?  How did he get the idea?  He had to get medicine for his grandmother.  Like many great startups, his began when he identified a very personal need, and realized others had the same unsatisfied need as well.

Now, the 21-year-old has a successful business.  Like all great ideas,  you have to ask:  Why didn’t we think of that before?   

                                                                  Atef

Atef and his inventory

    2.  Atef, wedding dress magnate:    “The door of a metal cargo container creaks open to reveal a row of embroidered and bejewelled dresses in red, pink and white.  I had stepped into Atef’s wedding dress hire shop, a business that serves as a reminder that romance blossoms in the bleakest of environments.  Atef’s business in is the Zaatari refugee camp in Jordan, home to about 120,000 people who have fled the conflict in Syria. His container is located on a street that aid workers have nicknamed the Champs Elysees, due to the hundreds of shops and businesses. Atef has been in the camp for over a year now. He fled the fighting in Daraa, about 30km (20 miles) away in Syria. It is a city rich with businessmen thanks to a long history of cross-border trade with Jordan. “We started this as an abaya (robe for women) shop,” says Atef. “Women used to come here and say they had weddings but they couldn’t find dresses. So we bought two dresses for rent and it worked out well. “We have two weddings a day and there are people who come from outside the camp to rent dresses because it is cheaper here. “The profit is not that much but we are doing ok. We rent the dress for 10 dinars (around $14) whether it’s people inside or outside the camp. “Sometimes we even take 5 dinars from people who can’t afford to pay much.”

    Over a million refugees have fled Syria’s brutal bloody civil war.  They now know it will be a very long time before they can return home.  Entrepreneurs like Atef are trying to make the best of it.  His shop now serves not only the Zaatari camp but nearby residents as well.  And he even has a Corporate Social Responsibility program, giving half-price discounts to those who lack the money. 

    The lesson here is so obvious.  Governments everywhere:  Stand back, get out of the way, turn loose the entrepreneurial energy – and let Atef, Sizwe and other dynamic men and women create value, for others and for themselves.  If you can, governments, give them a bit of help, perhaps a few dollars.  But at least, don’t interfere with them. (The Arab Spring began, it will recall, when a corrupt bureaucrat tried to extort a bribe from Mohamed Bouazizi  in Sidi  Bouzid, Tunisia, on Dec. 18, 2010, who scraped out a living with a vegetable cart).      

   Entrepreneurship is like flowers in the arid desert – they sprout and flourish even in the toughest of conditions.   Why not give it a chance?

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
August 2013
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