Who is winning in the current environment ?

Call me a recession-skeptic, consider me blind or oblivious to the bleeding obvious… but just as long as so many parties are clearly benefiting from the current economic situation, I refuse to believe that things are as bad as those same parties tell. Especially since those are often the thought leaders of the general opinion.

However, let me begin with the obvious: those are difficult times for a lot of people. Many people are laid off, many people (including myself) have lost considerable portions of their wealth on the stock markets, many companies will disappear and many fresh and promising initiatives are born dead because of lack of funding.

Despite all this, let us not be blind to the fact that those are very promising, even joyful times for many as well.

1. The International Monetary Fund (IMF)

The IMF is clearly winning from the current crisis. Since the vanished glory of the ‘90s, the IMF was undergoing a fundamental identity crisis. Its reputation was seriously damaged by the deep and long-lasting misery its prescriptions engendered, to a point even where developing countries looked at each-other to fund their development plans.














As shown by the amount of outstanding loans coming from the IMF’s Annual Report, the IMF didn’t have much new activities at hand in recent times, in fact it was mostly chewing on the loans it has granted in the 90’s.

How different the world is now for the IMF! A 75.6 M$ ‘exogenous shock facility’ grant to Senegal, 100 M$ to the Kyrgyz Republic, 77.1 M$ to Malawi, a 1.7 B$ ‘stand-by’ arrangement with Latvia… this is just an excerpt of the IMF activities in December !

Not to forget the 2.1 B$ loan to save Iceland in October. The least one could conclude is that the IMF is back in action, which probably explains its rosy projections on future income and funding:














2. European Governments

Those are joyful times for government leaders, at least for those that show to be good crisis managers. Where did Sarkozy , Brown, Merkel stand last year in the opinion polls ? where do they stand now ?

- Sarkozy: up 6% in October vs September, 43% approval rate;
- Brown: up 5% in November, 52% of the surveyed people think he’s the right man for the job;
- Merkel: 70% approval rate in September…

Clearly, some country leaders have all the incentives to keep the sphere of crisis running for a bit longer than needed…

Furthermore, some of them will be glad to be untightened from the stringent Euro-criteria (Maastricht norms), especially France and Italy will feel relieved for not being summoned any longer about their lack of compliance with the budget deficit restraints.

But less obviously, governments have found an easy way to find fresh money, or did you think the ‘deposit guarantees’ that governments granted their banks, came for free? This is money they don’t have to spend –most of them don’t even have such amount of money- and still they perceive up to 8% of the guaranteed amounts as compensation… ‘Free money’, reinvented…

3. Companies and industries

Many companies also have good reasons to rejoice, although summing them up might sound like I’m being cynical about it, which I’m not:

- Government money to sustain the economic activity will certainly –albeit partially- go directly in companies’ wallets… the car and finance industry being the most obvious -but not the only- examples;

- The current crisis gives a very good reason for many industries to perform a big clean-up, as it obvious that the hugely inflated market expectations won’t materialize in the short term. However, this is a ‘chicken & egg’ story: do industries have to clean up because the slowdown, or is their a slowdown because of industries rationalizing their production ? A bit of both perhaps ?















- As recent crises have shown (see one of my next blogs), the current slowdown constitutes a good opportunity for many companies to gain market shares, solidify their outlooks, increase their margins, etc. Many are still growing, some even above expectations. The financial crisis and the tighter lending criteria associated with it, will hit smaller companies most. Bigger companies will feel less urge to renew and innovate in order to compete with those smaller competitors.














In conclusion

Sure, this world is experiencing a serious crisis, and this crisis emerges in a new world with plenty of unique circumstances never experienced in the past. As those uncertainties (see previous blog) make it hard to predict anything, let us not forget that most big companies are still very healthy –even, or especially, as they prepare for difficult times ahead, and let us not forget that some parties have enough reasons to inflate the climate of crisis.

Let us look at the current problems in a rational way, solve them one-by-one, in a scope that will ensure a more stable global environment for generations to come. It has been done in the past, it is feasible in the present.