Uncertain Outlook

The world is busy blaming the US for financial crisis of 2008.
Basically, most of the people in emerging economies would not have imagined such luxurious lifestyle if it were not USA. It is still not luxurious in emerging economies, but lot better than 20 years before. Fiat currency has helped everyone on the planet.
Much has been said about inflation in the USA due to QE. There is a debate going on both sides. One side is claiming deflation and the other is claiming inflation. QE money is still in the banking system and not in the hands of general public. Efforts are made by policy makers that this money goes as a trickle. If this trickle is not controlled then we may have higher inflation. Argument put forth by the chief that there is underutilization of capacity and so we will not have inflation does not hold. Hyper inflation can happen in the USA only if the world loses faith in the dollar. For hyperinflation, the necessary condition is “loss of faith in the dollar”. I am not dwelling anymore on inflation in this article but will keep updated in future articles.
Let us see now why Lehman Brothers went under. At that time there were at least 12 candidates waiting for bankruptcy. Let us see why Lehman only went under (along with Bear and sterns). The plug was pulled by one of the banker. I suspect the biggest reason was Public Relations. I have strongest doubt that PR machinery of Lehman failed. If they had maintained good relations with the bankers then we would have seen some other company going under.
Let us see why I am saying this.
Relationships (I am talking of relationships based on model not personal relationship) in finance are not deterministic as in engineering. No one is right all the time. But, it does not happen in engineering. If you know basics relationship in engineering (basic theorems that governs relations), for example; e = mc2, then you can do job well. Even if you have not exactly good relations with boss, you can remain in the job because boss knows that if XYZ goes on the job, he is sure to complete it.
But in finance you are not likely to be right all the time, so it makes sense to be in good relationship with boss.
Very rarely you will see engineers on top position. The reason is, engineers least bother about personal relationships. Those who care reach on top.
It makes sense for XYZ to introspect and change.
-Shrihas Pandharkar,

DYOR.

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