Saturday, November 15, 2008

New World Order

Uncertainty is part of life. Ok, So we have this concept
of risk that comes naturally with uncertainty. Then comes risk assessment and then risk mitigation etc. We also have all financial derivative instruments to cover these risks. As events are unfolding, I am sensing need of new order to manage this uncertainty. Lets take example of 2 events that have unfolded in last 6 months:

1. Dollar has strengthened by over 25% against Euro (and also Rupee)
2. Oil is down from $146 to now below $60

These two statistics carry unprecedented change for businesses around the world. My view is, its impossible to do business and emerge as a winner on your business strength, too much luck involved in those numbers. This is hurting. Classical economics of demand and supply is not working. We have not stopped drinking oil in half, nor we are eating more dollars...

For stable long term growth, we need to cap these swings. Yes, I am for regulation. As a society we can never sustain 10-15% growth y-o-y, and we need to cap this growth. As a society we will be more happy in long term steady growth as opposed to
erratic swings we are observing through this economy. More certainty will bring more consistent business opportunities and more capital will flow into pure business models as opposed to trading models.

My guess is post crash of wall street, our leaders will embrace new world order,
where uncertainty and volatility will be discouraged with regulation and innovation will be encouraged by sound policy making....