1 Ghosts of deflation back to haunt us (Lim Say Boon in Straits Times) The ghosts of deflation past have returned to haunt global stock markets. The casualties have spread from other emerging markets to China and, now, the developed markets are affected as well. Since the global financial crisis, the world has found itself six years older but none the wiser on how to fix the economy, for all the money printed around the world.
The US, euro area, Japan and even China- fell into deflation as a result of the global financial crisis in 2008. At one stage, it looked as if quantitative easing had overcome inflation in the US, and economic recovery would also lift Europe and Japan out of deflation. Not so. US inflation has been declining relentlessly since 2012. Prices in Europe and Japan are borderline deflationary again. The ghosts from 2008 were never exorcised.
Inflation has been on a downtrend since 2011. Beyond an initial rebound in consumer prices from 2009, the global economy never overcame the structural tendency towards deflation. The collapse in commodity prices over recent years is troubling on a number of fronts. Quantitative easing was supposed to lift commodity prices by debasing paper currencies. But it didn’t work. Note that this was one of the strategies that lifted the US out of the Great Depression.
Ageing demographics and low productivity growth have also been structural drags on growth. Older people who continue working but spend less than in the prime of their lives add to deflationary pressures. Meanwhile, productivity growth in the developed market economies has also shifted down.
This is a world of inadequate demand and excess supply. There had been a series of competitive devaluations around the world, starting with quantitative easing in the US and a weaker dollar immediately after the global financial crisis. But since then, rates have been cut all around the world. They are all doing the same thing – that is, exporting their deflation or attempting to stop somebody else doing that to them in a world of inadequate demand.
In such a world, the suppliers – the emerging markets, for everything from commodities to manufactured goods – are at a disadvantage. Economies with demand are likely to enjoy a bit more insulation from the shocks. But mind you, they are not immune from a slower world. And this will show in the coming days and weeks in the equities markets.
2 One in 65 UK adults a millionaire (Patrick Collinson in The Guardian) The number of millionaires in the UK has shot up by 41% over the past five years, with one in 65 adults now classed as having a seven-figure fortune thanks to booming house prices and stock market gains.
There are now 715,000 millionaires living in Britain compared with 508,000 in 2010, with London having the highest concentration of wealthy individuals. But wealth does not correlate with kindness. The region of the UK with the lowest average annual pay – Northern Ireland – is by far the country’s most charitable, with 45% of households giving to charity, Barclays found. The figure for London was just 28%.
The figures are likely to reignite concerns about the north/south divide and income inequality in Britain. Median household incomes have gone up just 2% since 2011, according to the Institute of Fiscal Studies, yet the number of millionaires continues to surge.
It was revealed this week that more than £42bn was paid out in bonuses in the last tax year, much of it to bankers in the City, where payouts have returned to within a whisker of their 2007-08 peak. Rampant house price inflation in the capital is behind much of the surge in London millionaire numbers. .The research showed that every UK region is now more affluent than it was five years ago.
3 Chaos to confidence through strategic planning (Clate Mask in San Francisco Chronicle) The day-to-day hustle of business lends itself to a world of chaos and confusion. You feel like you’re failing as an entrepreneur and as the leader of your company. High performing people, well-paid athletes and successful business owners have one thing in common: confidence. Confidence drives success, but it takes preparedness and daily execution excellence. Strategic planning provides confidence and clarity.
Strategic planning isn’t a one-time event. It’s not a set-it-and-forget-it activity. Once you’ve developed your mission, you need to break it down into annual and quarterly priorities. At Infusionsoft, a small business sales and marketing software company, we hold quarterly planning sessions with team leaders to provide context for the upcoming quarter. This context provides clarity and focuses on the 20 percent of the activities we do as a collective company that contribute 80 percent of the strategic progress that we’re trying to make towards our mission.
You can have a vision for the future, but you need to focus on the work you have today. Plans are great, but you won’t see progress unless they’re translated into daily activities. Employees need to be able to tie their projects and job functions to your current mission.
With a strategy in place and daily focus made clear for each of your employees, you’ve laid the groundwork for high performance. Now, it’s time to make sure that your people are working together like a well-oiled machine. There’s nothing more frustrating than individual parts that don’t add up to a whole. Stepping back to look at the business holistically is key.
Entrepreneurs who aren’t intentional about planning are in a constant state of chaos and confusion. Ultimately, they leave the fate of their business to chance. The strategic planning process is about creating the future that you desire. It’s intended to transform chaos and confusion into clarity and confidence. If you want to improve the likelihood of success for your business, you must be intentional. Plan strategically, strive for daily execution excellence and work as a team. The future of your business depends on it.