by Stephen McPhie, CA
Partner, RSD Solutions Inc.
“Events dear boy, events” is a quote attributed to former British Prime Minister Harold MacMillan when a journalist asked him what politicians fear. Doing a Google search I find that all sorts of bloggers have recently used this quote in talking about the current crisis. I did think of it myself before searching, but the fact that it is coming to mind so commonly suggests a lot of people share my view that events often tend to run away in the opposite direction from the best (and sometimes most expensive) plans.
While politicians desperately try to save the Euro and limit the crisis to Greece, events seem to by pushing in the opposite direction: an angry German electorate, angry Greek citizens, worried bankers, rating agencies trying to prove their mettle. Moody’s recently cut Portugal’s debt rating to junk status opining that a second bail out will be required. Along with background chatter about Spain and Italy, containment seems more hope than reality.
How many times have we heard politicians (and some economists) use the term “soft landing” in the late stages of an economic boom? How many times has it actually happened? Never in my experience. Psychology and herd instinct take over and recessions generally come fast and hard. (Usually the climb back out of recession comes strongly too although this time it doesn’t seem like it – more like bumping along the bottom hoping that it’s not a false bottom.)
So do you as an individual or company executive place your hopes and confidence in the politicians or do you prepare, and hedge for, the possibility of a deepening Euro crisis with the attendant currency, commodity price and economic disruptions?
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