The global meltdown has started and surprisingly it isn’t the environment that was at the centre of this – this meltdown is financial in nature, brought about because of a couple of the most basic urges in human beings. Urges? You may ask and we will clarify.
At the heart of this crisis is the first urge – our need for shelter and the amount of importance that we (or rather the American homebuyer) puts in buying a house. This bit is very understandable and almost universal in scope. It is the next bit that caused all the problem and is linked to the second urge – that of making money. In the process some of the biggest names in the financial sector had put aside good sense to jump on the bandwagon of burgeoning profits generated from low interest loans to homebuyers with questionable credit lines. It isn’t as if the homes are sub-standard, it’s just that the value of the mortgage has now become as flexible as a rubber band.
Does the crisis mean more to us than falling stock markets and eroding long-term investments?
The immediate issue is of course the impact that it has on credit market – will you be able to get that loan to buy a car, will your company have the working capital to make its monthly obligations and what impact it will have on the spend patterns in the economy? One shouldn’t worry about the short-term impact because of all the money that has already flowed in to our region, but definitely we think that some expenditure that is seen as frivolous will be pared and there will be a shift in the way people assess and manage financial risk.
There are valuable lessons to be learnt even if we aren’t directly affected by the events shaking the US and Europe. For instance, should we let the greed of increased sales allow us to colour the process of vetting a buyer’s credit-worthiness? Is there really such a thing as cheap credit? And to the common man, the proverbial guidance to not keep all your eggs in one basket now means a lot more.
Of course car makers will be impacted by the turmoil in the credit market, just as they are being hit on a lot of other fronts and we hope that they are able to weather the storm. We would expect the latest onslaught to do its bit to increase the cost of doing business and are sure that in the mid-term car prices will reflect that increased cost. It isn’t only the American or European taxpayer who will be paying more for the greed of a few. To paraphrase Winston Churchill, “Never in the field of human greed was so much owed by so many because of so few.”