10 Green Myths Debunked

By Pat Mertz Esswein, Associate Editor, Kiplinger’s Personal Finance

September 2009

If you’re like most consumers, you’re more than happy to buy green — as long as it also saves greenbacks. A recent study by the Shelton Group found that consumers who purchase eco-friendly products at least occasionally are more interested in spending their money wisely than in improving the environment.

To that end, here are ten oft-cited green myths and the truth behind them — plus how much money you may be burning by buying into them.

Myth: Never leave the lights on when you leave a room.

Reality: Mom had it right when it comes to incandescent bulbs, but not compact fluorescent lights. The more often you switch CFLs on and off, the shorter their operating life. In most parts of the U.S., it’s cheaper to leave fluorescents on if you’ll only be out of the room for 15 minutes or less, according to the Department of Energy www.energysavers.gov. (In areas with high electric rates or during peak demand periods, the length of time may shorten to just 5 minutes.) On average, a CFL bulb costs $2.50 more than an incandescent bulb, but it will save $5.41 annually on your electric bill compared with an incandescent, according to DOE.

If you haven’t converted to CFLs because you fear pollution from the mercury they contain, keep in mind that generating electricity is the main source of mercury emissions in the U.S. A 60-watt light bulb will use 480 kilowatt hours of electricity and contribute almost 6 milligrams of mercury to the environment over its lifetime, according to Energy Star. A CFL will use less than a fourth of the electricity and result in a third of the mercury emissions. For more information on properly disposing of CFLs, visit www.energystar.gov/cfls.

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The Economy Is A Lie, Too

By Paul Craig Roberts

September 21, 2009 — Americans cannot get any truth out of their government about anything, the economy included. Americans are being driven into the ground economically, with one million school children now homeless, while Federal Reserve chairman Ben Bernanke announces that the recession is over.

The spin that masquerades as news is becoming more delusional. Consumer spending is 70% of the US economy. It is the driving force, and it has been shut down. Except for the super rich, there has been no growth in consumer incomes in the 21st century. Statistician John Williams of shadowstats.com reports that real household income has never recovered its pre-2001 peak.

The US economy has been kept going by substituting growth in consumer debt for growth in consumer income. Federal Reserve chairman Alan Greenspan encouraged consumer debt with low interest rates. The low interest rates pushed up home prices, enabling Americans to refinance their homes and spend the equity. Credit cards were maxed out in expectations of rising real estate and equity values to pay the accumulated debt. The binge was halted when the real estate and equity bubbles burst.

As consumers no longer can expand their indebtedness and their incomes are not rising, there is no basis for a growing consumer economy. Indeed, statistics indicate that consumers are paying down debt in their efforts to survive financially. In an economy in which the consumer is the driving force, that is bad news.

The banks, now investment banks thanks to greed-driven deregulation that repealed the learned lessons of the past, were even more reckless than consumers and took speculative leverage to new heights. At the urging of Larry Summers and Goldman Sachs’ CEO Henry Paulson, the Securities and Exchange Commission and the Bush administration went along with removing restrictions on debt leverage.

When the bubble burst, the extraordinary leverage threatened the financial system with collapse. The US Treasury and the Federal Reserve stepped forward with no one knows how many trillions of dollars to “save the financial system,” which, of course, meant to save the greed-driven financial institutions that had caused the economic crisis that dispossessed ordinary Americans of half of their life savings.

The consumer has been chastened, but not the banks. Refreshed with the TARP $700 billion and the Federal Reserve’s expanded balance sheet, banks are again behaving like hedge funds. Leveraged speculation is producing another bubble with the current stock market rally, which is not a sign of economic recovery but is the final savaging of Americans’ wealth by a few investment banks and their Washington friends. Goldman Sachs, rolling in profits, announced six figure bonuses to employees.

The rest of America is suffering terribly.

The unemployment rate, as reported, is a fiction and has been since the Clinton administration. The unemployment rate does not include jobless Americans who have been unemployed for more than a year and have given up on finding work. The reported 10% unemployment rate is understated by the millions of Americans who are suffering long-term unemployment and are no longer counted as unemployed. As each month passes, unemployed Americans drop off the unemployment role due to nothing except the passing of time.

The inflation rate, especially “core inflation,” is another fiction. “Core inflation” does not include food and energy, two of Americans’ biggest budget items. The Consumer Price Index (CPI) assumes, ever since the Boskin Commission during the Clinton administration, that if prices of items go up consumers substitute cheaper items. This is certainly the case, but this way of measuring inflation means that the CPI is no longer comparable to past years, because the basket of goods in the index is variable.

The Boskin Commission’s CPI, by lowering the measured rate of inflation, raises the real GDP growth rate. The result of the statistical manipulation is an understated inflation rate, thus eroding the real value of Social Security income, and an overstated growth rate. Statistical manipulation cloaks a declining standard of living.

In bygone days of American prosperity, American incomes rose with productivity. It was the real growth in American incomes that propelled the US economy.

In today’s America, the only incomes that rise are in the financial sector that risks the country’s future on excessive leverage and in the corporate world that substitutes foreign for American labor. Under the compensation rules and emphasis on shareholder earnings that hold sway in the US today, corporate executives maximize earnings and their compensation by minimizing the employment of Americans.

Try to find some acknowledgement of this in the “mainstream media,” or among economists, who suck up to the offshoring corporations for grants.

The worst part of the decline is yet to come. Bank failures and home foreclosures are yet to peak. The commercial real estate bust is yet to hit. The dollar crisis is building.
When it hits, interest rates will rise dramatically as the US struggles to finance its massive budget and trade deficits while the rest of the world tries to escape a depreciating dollar.

Since the spring of this year, the value of the US dollar has collapsed against every currency except those pegged to it. The Swiss franc has risen 14% against the dollar. Every hard currency from the Canadian dollar to the Euro and UK pound has risen at least 13 % against the US dollar since April 2009. The Japanese yen is not far behind, and the Brazilian real has risen 25% against the almighty US dollar. Even the Russian ruble has risen 13% against the US dollar.

What sort of recovery is it when the safest investment is to bet against the US dollar?

The American household of my day, in which the husband worked and the wife provided household services and raised the children, scarcely exists today. Most, if not all, members of a household have to work in order to pay the bills. However, the jobs are disappearing, even the part-time ones.

If measured according to the methodology used when I was Assistant Secretary of the Treasury, the unemployment rate today in the US is above 20%. Moreover, there is no obvious way of reducing it. There are no factories, with work forces temporarily laid off by high interest rates, waiting for a lower interest rate policy to call their workforces back into production.

The work has been moved abroad. In the bygone days of American prosperity, CEOs were inculcated with the view that they had equal responsibilities to customers, employees, and shareholders. This view has been exterminated. Pushed by Wall Street and the threat of takeovers promising “enhanced shareholder value,” and incentivized by “performance pay,” CEOs use every means to substitute cheaper foreign employees for Americans .
Despite 20% unemployment and cum laude engineering graduates who cannot find jobs or even job interviews, Congress continues to support 65,000 annual H-1B work visas for foreigners.

In the midst of the highest unemployment since the Great Depression what kind of a fool do you need to be to think that there is a shortage of qualified US workers?

Washington on the Economy: The Big Con

By Al Walsh

Obama, Geithner, Bernanke and the rest of the Washington cast of characters are basking in the afterglow of the G-20 summit and parading around the country:  patting themselves on the back for “saving civilization” and pronouncing that “the Recession is over”.

Yeah?  Really?      Let’s reconsider that.

The derivatives mess that was key to bringing the whole house-of-cards down is still with us.   One recent article valued it at over one quadrillion dollars.  We can’t know for sure, because it’s unregulated and no one’s talking.

The banks are still insolvent.  Creative accounting, with the government’s blessing, hides the extent of the rot.  Many experts say that more bank bailouts are coming.

The bank bailout created a whole new debt element that Main Street is expected to pick up the tab for.  One article predicted that the interest alone on the debt could amount to more than our total Gross Domestic Product.

Unemployment is awful and getting worse.  The true figures are much worse than the intentionally deceptive government data says.  The last estimate I saw was 16%+ nationally.  While Obama beats his chest and crows, fresh layoffs are being announced; such as Eli Lilly’s announcement of 5,500 more layoffs over the next two years.  I suppose that when we’ve finally all lost our jobs, the statistics will look great because there won’t be anyone left to get laid off.

The housing market has stabilized a bit, but there are more mortgage resets coming that will drag it down further.  Commercial real estate just continues to decline.

Consumers are expected to pick up demand and buy us out of the recession – but how?  They’re up to their necks in debt, out of work, and broke.  Adding insult to injury, the very banks who created this mess are gouging them with new banking & credit card fees.

There’s good reason why Gold & Silver are rising in value; despite government’s best covert efforts to hold them down.  The dollar’s been trashed, and is becoming a laughing-stock globally.   I just laugh when the Fed ”suits” keep talking about a “strong dollar policy”.  I’m starting to feel like a ”banana republic” citizen.

Wall Street pundits cheer whenever the stock markets show an uptick.  Keep in mind that the vast majority of market trading is institutional; by the very people who have the biggest vested interest in fooling the rest of us.  Gee, there couldn’t be any market-rigging going on, could there?  Nah, we only have free and open markets here in America (and if you believe that I’ve got the proverbial bridge to sell you).  I’m reminded of the time last year or the year before when Goldman Sachs was publicly recommending that investors sell their Gold (while secretly buying it for their own account).

I won’t even get into the growing “anti-business”, socialist tendencies of our government for decades that have done so much damage.  We voted these successive administrations in, and we deserve what we get.

Apparently Obama thinks that he can talk us out of recession by spreading rosy messages.  Mr. President, even if you could pull the wool over America’s eyes - they have few assets left to do anything with.

For decades, the Fed has been pulling our economic “butts out of the fire” of each bubble by pumping out even more money and creating new bubbles.  I think they’ve finally run their string.  Now we have a long way to go to dig ourselves out; the hard way.

I respectfully disagree with you President Obama, and consider it insulting that you think we’re so ignorant as to buy into your big con.

By the way, I sure would like to see that audit of the Fed which has been getting kicked around in Congress.  Actually, I’d like to see the Fed be audited, and then disbanded.  They’ve screwed up our economy and stolen from the pockets of the citizens long enough.  It’s time to put U.S. monetary policy into the hands of a true government agency; and out of the hands of self-serving bankers. While we’re at it, how about an audit of the Gold reserves.  Why all the secrecy?  What do you have to hide?  What have you “gentlemen” been up to for decades that you don’t want America to know?

I love America and don’t want to see the country endure any more pain, but I have to “call ‘em as I see ‘em”, and the fundamentals just don’t add up to the same story as the ‘Washington speak”.

Protect yourselves the best you can fellow citizens.  It’s going to be a long and bumpy ride.

Borrowing from the immortal words of Dennis Miller:   “It’s just my opinion.  I could be wrong.”

Of course, according to former President Carter, I’m just being a “racist” for daring to disagree with President Obama.  I actually feel sorry for the President that he has to endure this buffoon speaking in his name.  There seems to be no end to the silliness.  If only it wasn’t so expensive.

Define Your Brand and Sharpen Your Competitive Edge

Sep 8, 2009 4:45 PM, By Gregory J. Pollack

In today’s world of ongoing financial turmoil, consumers are searching for—and demanding—a level of trust. For smart marketers and senior executives, this spells opportunity.

As we all know, a “brand” by definition is a promise that you can trust. And re-building trust through your brand is the secret to success.

Today, customers want and demand more. They want to know not only what they are getting, but why they should want or need it. They want to know how a product is different from the competition, and why they should trust that a brand will bring about their desired results. Brands need to stay current, and be more than simply just a product.

One strategic response to help companies and brands move forward is to dust off and refine their positioning statements and see if they really represent what the organization stands for today.

The original intent of a brand positioning statement is essentially to highlight a clear overarching message. It should include what your company stands for and your brand’s point of differentiation, as well as positioning in the marketplace and overall industry. The statement needs to be simple, clear, concise, understandable and all-encompassing. It should be something everyone—management, employees, customers, manufacturing and vendors—can rally around.

To get to the core of your brand’s positioning, you need to consider your brand’s platforms, the three to five key pillars that represent the cornerstones of the brand’s products and services. Identifying these can allow marketers and senior management to look at new channels of distribution, new products, and new ways of conducting business – all with the end goal of attracting and retaining new customers.

Identifying these platforms can help companies develop specific marketing program ideas; solve a current problem or challenge; respond directly to competitive growth and expansion; invigorate the existing brands and products; search for new channels of distribution; identify new growth opportunities; and respond to realistic market, industry and customer demands including both trade, retail and consumer.

To create brand platforms, you should look at the history of the company and its business units, as well as the industry and the competition.
Using this information will be critical in focusing in on key words and phrases that make up the business in which your company and brands compete. Some relevant and appropriate platforms could include quality, precision, durability, taste, performance and customer service.

Under each brand platform, there should be a series of phrases that support and describe each area. For instance, if your brand platform is “trust,” this could include safety, quality, customer service, ease of use, ease of access, long-term brand equity, etc.

If your brand platform is “achievable,” then some key expressions could include now-you-can, reaching all target audiences, price/value, competitive, etc. “Friendly” could perhaps be appropriate for a more service-oriented company and brand which could include supporting descriptors such as reachable, convenient, ease of use, approachable, family, engaging, etc.

However, the magic is that when all of these words and phrases are used in the right combination they unlock an ownable, sustainable, leverageable and extendable series of ideas unique only to your company and brand groups. And these platforms can then be used to ensure that the company and brand groups remain on track in business, can develop new products and services for new and emerging markets, identify new usage occasions for existing brands and products, as well as open new channels of distribution.

The rationale for creating brand platforms should include:
· Reaching varied target audiences
· Defining usage occasions
· Broadening category
· Building the customer base
· Providing relevancy for management, affiliates and agencies
· Delivering strategic outline for integrated marketing efforts
· Ensuring consistency to brand positioning
·
Ideally, all of this would allow each platform to focus on different target audiences, with different messaging and marketing programs. In the earlier examples, clearly “trust” as a platform would reach a specific target audience and user group for your company and brand, while “achievable” would set up a different set of criteria in how to reach a more “price/value-driven” target audience and user group.

As an example, our company, PBM Marketing Solutions, has been involved with Virgin Charter, a division of the Virgin Companies and an online marketplace for private jet charter travel.

While the “Virgin” name is recognized as a worldwide brand and innovator in a number of businesses globally, Virgin Charter specifically still needed not only to create an ownable position within the marketplace, but also to differentiate itself from the competition. A plan was developed to focus on the brand platforms of simple, trust, empowered, fresh and attainable, targeting specific audiences and user groups with clear goals.

As one example, “empowered” equated to control, individualized, personalized, in-charge, choice, ownable, transparent, and on-demand; while “fresh” showcased fun, innovative, cool, new, refreshing, friendly, familiar and rewrite-the-rules.

In today’s constantly fluctuating and changing economic climate, companies, brands, and businesses have a tremendous opportunity to stand up, take a leadership role in their industries and marketplace and clearly explain to customers “Why Buy Me.” A transparent and clearly defined answer is what will breed success and long-term sustainability in the marketplace.

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The Chieftains: When Will Consumers Start Spending?

This month, Chief Marketer polled c-suite execs to get their take on when they think consumers will spend more confidently. Will the holidays be merry and bright, or will scrimping continue in to 2010. Read what they think.

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Cash for Clunkers -and- Bernanke “Saving the World”

More economic wisdom from Chris Gaffney and Chuck Butler…

Should be a busy week ahead, and I would expect for most of the data out of the US to continue to confirm a government led recovery is underway here in the US.  In particular, the consumer spending and durable goods orders should show a nice uptick on the back of the cash for clunker program.  But Chuck sent me a note over the weekend which questions the ‘success’ of this program.  Is it really what the US economy needed?  Here are Chuck’s thoughts from San Francisco:
 

“I was sitting here thinking about something that had flashed across the TV screen here in my room, and that is the “Cash for Clunkers” program… I blasted this program two weeks ago, and now that it’s finally done with and $3 Billion was spent to artificially boost auto sales, I will put my final thought on this… Of course I already talked about the obvious things wrong with this program. But here’s my final thought, and that is… I believe the program is going to end up hurting the most vulnerable consumers in the U.S. Middle Class buyers, traded in their “paid for” cars, and leveraged up to buy a new car, when they probably shouldn’t have done so, given the rot on the economy’s vine.

So… Once again, I’m reminded of the words that President Reagan said were the scariest words that could be spoken… “I’m from the government, and I’m here to help”…

The reason I’m all over this program today like a cheap suit, is that this weekend, I heard that Big Ben Bernanke made a claim at the Jackson Hole boondoggle, that “we saved the world”… Oh, Come on Big Ben, isn’t that just a bit dramatic? Does this statement have anything to do with the fact that you are up for re-appointment in January, and you would love to have that thought of you “saving the world” on the minds of the administration?

So… In the end, we’ll see if “he saved the world”…”

I’m with Chuck on this one.  It seems the US government is intent on getting consumers to go back to their borrow and spend habits.  This is what created the bubbles, and the administration seems intent on creating another bubble economy.  US consumers have made some historic cut backs on the amount of debt they are amassing (whether or not these cutbacks are by choice).  The US government should not be encouraging these consumers to go back to their previous ways, but should instead be trying to use the funds to educate and train consumers and to encourage new and innovative companies.  Use this downturn to correct some of the bad habits which we had gotten into.  Yes, it will be painful, but breaking an addiction is always hard and painful.  US consumers need to break our addiction to easy credit and massive debt.  This recession/depression has given consumers a much needed wake up call, hopefully the administration won’t be able to push consumers back into their old habits.

I went running with my wife and her friends over the weekend (trying to take it easy on the back) and got into a discussion about the US economy.  One of my wife’s friends had heard an interview on MSNBC in which an economist stated we were in a classic V shaped recovery.  I let her know that I think the economist was one letter off, and that instead we will see the recovery shaped more like a W.  The green shoots and recovery we are seeing right now will die out as government stimulus slows.  High unemployment, a long slow housing recovery, commercial real estate woes, and rising personal bankruptcies will force the economy into another dramatic downturn.  Central banks who have ‘juiced’ their economies with unlimited credit will have to decide whether to continue juicing, or pull back from the table.

Nouriel Roubini wrote a commentary in today’s Financial Times which agrees with my thoughts.  Roubini said the chance of a double dip recession is increasing because of risks related to ending global monetary and fiscal stimulus.  He believes the global economy still has further to fall, and will bottom out sometime during the second half of 2009.  While some economies such as China, Germany, Australia, and France will likely recover; others such as the US and UK will double dip with another leg down.  “There are risks associated with exit strategies from the massive monetary and fiscal easing,” Roubini wrote.  “Policy makers are damned if they do and damned if they don’t.”

New FTC Mandate Likely to Catch Many by Surprise

By Dave Lindorff

Barring further delays, beginning Nov. 1 all financial institutions and any company that extends credit to customers, even in the form of multiple-month payment plans, will be required to establish centralized anti-fraud procedures and systems under the Federal Trade Commission’s new Red Flags Rule.

Facing a growing wave of identity theft, the FTC wants companies to pay more attention to establishing the identity of customers and credit recipients, and to put in place a system to flag theft attempts early. “Identity theft has been the No. 1 consumer complaint at the FTC for years now,” says Manas Mohapatra, an attorney with the agency’s division of privacy and identity protection.

But attorneys specializing in business law warn that the new regulations could surprise many companies that have never viewed themselves as creditors. Mohapatra notes that even sending customers bills for payment in 30 days for a product or service could be construed as extending credit.

The FTC has postponed the rule’s effective date several times as businesses objected that it was not clear who would be included. Even though its Web site (http://ftc.gov/redflagsrule) offers answers to frequently asked questions, the agency has promised further clarification.

“The Red Flags Rule has fines and penalties for noncompliance,” says Greg Bee, an attorney with the law firm of Taft Stettinius & Hollister, “but if it establishes a new ‘standard of care’ to be taken regarding extension of credit, it could also give rise to customer lawsuits.” That is, if a company’s customers become victims of ID theft because of a transaction with the firm, they could file suit based upon any perceived failure by the company to meet the FTC’s requirements.

The FTC expects a company’s identity theft prevention program to be “appropriate to the size and complexity” of the business, according to the law firm’s report on the rule, which concludes that “reasonable commonsense safeguards are likely to be enough for most businesses.” These might include requiring adequate identification of all customers and, in the event of suspected ID theft, alerting the customer, changing passwords, and possibly foregoing collection on an account or notifying law enforcement.

Most large companies already have systems in place to protect both themselves and their customers from ID theft and fraud, Mohapatra says. “For them, it’s not a matter of adding a new layer on top of everything else,” he says. “It’s just a matter of exercising common sense and of centralizing controls as a matter of policy.” Compliance could be something as simple as requiring two forms of ID to establish customer identity instead of just one.”

The rule could also help businesses, he added, citing a participant at an April hearing who said that the process of developing a red flag system helped get different offices in the company talking that hadn’t talked before about what they were doing about identity theft.

Kevin Kalinich, national managing director of insurance broker Aon’s financial services group, agrees that the new rule is probably a good thing for most businesses. “We found that among our clients and prospects, as of August, fully half of them did not have a good system for guarding against ID theft,” Kalinich says. “If this rule makes them become more compliant, they will save a lot of money, both in terms of fewer lawsuits by customers and lower insurance costs.”

The Economy – Political Dreamland

On to Moscow!
By Bill Bonner

Last week, the European Central Bank squared its shoulders and joined ranks of the damned. The Times of London reported that in joining up with the US Federal Reserve Bank and the Bank of England, the European Central Bank “pulled out all the stops” in their drive to revive their economies. The ECB announced that it will cut its key lending rate to its lowest level ever and begin a form of “quantitative easing,” in which it will buy corporate debt in order to reduce commercial interest rates. Details to follow, it said. “Stops” are to central bankers what safety fuses are to electricians. You may take them out when you really want to get the juice flowing; but your house might burn down.

But thus did the European troops pull out the stops and get under- way. Reluctant allies, they set off to join the battle against capitalism…with no reliable maps…with insufficient supplies and a strategy elaborated by incompetents. Of course, the gods must have laughed at Napoleon too. His armies had been cut off and destroyed in Egypt. Then, his Peninsular Campaign was a disaster. But the plan to attack Russia topped them all; even the draft horses must have snickered.

It doesn’t seem to bother the Europeans that their American commander is the same fellow who failed to spot the biggest bubble in history until it blew up in his face. Nor that their field marshal has no idea of the lay of the land; nor that anyone on either side of the Atlantic seems to know where they are going; nor that, wherever it is, it will cost more to get there than they’ve got.

This week the Obama government revealed its new budget deficit. If nothing goes wrong, it will reach $1.84 trillion this year – nearly 400% of the record set last year. In 2009, the US government will borrow 50 cents for every dollar it spends. Accumulated deficits to 2019 will reach $7.1 trillion, says the forecast. Moody’s was so alarmed it warned that the US may lose its Triple-A bond rating, which it has had since 1917.

But even as bad as it looks, Obama’s budget map is still fanciful – its mountains are made of whipped cream and its rivers run with Scotch. It imagines a loss of only 1.2% of GDP in the current downturn…and a quick return to growth, with a 3% increase in 2010. Yet, the last report showed the US economy contracting at a 6% annual rate. As for growth in 2010…where would it come from? Consumer credit is falling at its fastest pace in 18 years. Consumer incomes are falling too – down 1.2% in the last 12 months. If there were any lasting consequences of this downturn, opines the New York Times, it is likely to be the “shift to savings” by the US consumer.

Meanwhile, businesses aren’t exactly hankering to spend either. Even if they had the money, businesses wouldn’t expand; they don’t have to. Spiders build their webs on America’s remaining assembly lines with little risk of being disturbed; one out of every three factories is quiet. Until existing capacity is put to work, businesses will have no power to raise prices and no need to add to their facilities.

And yet, Napoleon Bernanke is upbeat. The troops will be home “before Christmas,” he says. But the central banks’ calendars are no better than their maps. In 2004, Mr. Bernanke credited improved monetary policy with having created what he called “the Great Moderation” – the period of strong growth and low-inflation since the mid-’80s. Specifically, he was referring to the Fed’s policy of ‘inflation targeting,’ which presumes that the inflation numbers carry all the information the Fed needs to guide an economy.

This was the map the Fed was using seven years ago. Then, a tiny recession took GDP down to all of 0.2% over an 8-month period. The Fed panicked. Its emergency policy pushed the fed funds rate well below the rate of consumer price inflation and left it there for two years. This was not merely a slight miscalculation. It was a fatal strategic error, say professors Carr and Beese of the University of Akron. Not only did the Fed’s map fail to warn them; it actually sent the economy over a cliff:

The low interest rates signaled…that credit was inexpensive and readily available…[then] the Federal Reserve moved from a low accommodative interest rate policy to one of a steady and consistent increasing of interest rates between 2004 and 2007…and became a prime cause of the financial services mortgage crisis of 2008.

Today, central banks use the same computers, same theories, and same maps they had seven years ago. With these feeble instruments, they set out to go where no central bank has ever gone before – borrowing, inflating, and intervening on a scale that would have been unimaginable a few years ago. Where will they end up?

We will take a guess: this grande armee sets off on the road to recovery with the wind at its back; it will end up in Moscow with snow on its face.

Marketers – Building Brand Passion

What Makes Consumers Passionate About Brands?

May 12, 2009 11:44 AM, By Kate Newlin

 

When the pressures mount on the bottom line, CMOs typically look to the expense side of products, both R&D and marketing. However, one should not miss the opportunity that brand passion creates to convince enthusiastic consumers to spend their financial and social currency…while exhorting friends and family to follow suit.

There are seven key ways to create passion and develop a deep relationship with consumers.

Work the Worldview, Not Age, Race or Gender
The passion brands (Apple, Sony, American Express, Starbucks, Folger’s, Target, Nordstrom, Craig’s List, Whole Foods, Toys “R” Us, Camel, Absolut, Kraft, Cadillac, BMW, Acura, Infiniti, Jeep, and Arizona Iced Tea) rarely target consumers in a traditional way. More often, they identify shared values about the world and how it works and then illustrate how the brand shares that vision.

Differentiate on Design
Consumers respond to clever, intuitive products. Great design engages. There’s a joy in a well-designed idea that trumps other performance features. We just want to get our heads around it.

Passionistas as Brand Stewards     
Nothing brings a brand down more quickly than an interchangeable parts philosophy in the recruitment, hiring, and rewarding of the line staff. Careerists who jump from one company may be building their own brand, but they will neither feel nor fuel passion. Passion isn’t static, in brands or people. Once people have become passionate about your brand, it takes true passionistas to ensure that the brand continues to grow and evolve in relevant ways. Don’t take your consumers or their passion for your brand for granted.

Know They Know You Need Them
We are in a tremendously aware marketing epoch. Our vocabulary and humor are shaped by an “insider’s” sensibility to marketing and the co-dependence of the brand/consumer liaison.

Simply, there are no un-focused group people left. Research must get beyond the “been there, done that” savvy of modern consumers. Get out and watch people in bars, malls, grocery stores, movies, sports events, regardless of the category. Talk to them. Follow them while they shop. Engage them. Notice that you are one of them.

Democratize the Brand
Brand engagement comes from mutating, by responding to the beat of the people who love you. Let them in. Easier said that done, if you’re a physical product sold in a physical store and not a web-based entity, but still.

The ability of the consumer to have it “my way” is a tremendous engine of ownership. Starbucks with its “mocha-cappuccino-double-shot-skinny” ethos is the poster child of this tactic; so is the Scion with its personalization of everything from horsepower to pin striping to stick shift knobs.

Mine the Mythos
Passion brands have a heritage and they respect it. They know what makes up the DNA of the brand and how far they can go without putting their genetic code at risk. This doesn’t mean they are stogy, just that they know how their personality can legitimately evolve.

Brand the Buzz
I don’t mean that companies should hire a bunch of twentysomethings to dress in black and ask for your product in clubs. This is about being genuinely interesting and engaging, being a brand that people want to talk ” do?

In a world jammed full of commodity products and services, passion can be a defining quality that can set your brand above the competition and provide a roadmap to help keep you out front for the long haul.

 

An Updated Take on the Economic Situation

IMF Bombshell

Neville Bennett

There is a disconnect between the real world and Wall Street. Wall Street prices surge while real economy difficulties increase daily. Exports are falling, house prices are declining, and no-one can sell cars. However, There is a perception of “green shoots” indicate that that the real economy may recover quite soon because the financial sector has recovered, and a bull market is underway.

The financial sector, however, has been singled out by the IMF for a thorough review. It emphasizes the key challenge of breaking the downward spiral between the financial system and the economy. The IMF believes that “promising efforts” are under way to redesign the global financial system to provide a more resilient platform for sustained economic growth.

OVERVIEW

The financial sector needs mending. Banks and corporates need refunding, balance sheets have to be bolstered, and capital needs to flow across borders, especially to the merging countries. There is on-going destruction or corruption of assets, and the latest IMF estimate of write-downs has increased from US$ 2.2 trillion in January, to a possible US$4 trillion in April. The increase arises partly because of worsening picture of economic growth and the spread to other mature market-originated assets. About a third of newly-emerging write-downs will be incurred by non-banking institutions

There have been some improvement in interbank markets but funding remains a difficult issue, especially long-term funding. In some jurisdictions banks can issue government guaranteed, longer term debt. But the funding debt is big, with the result that many corporations are unable to obtain bank-supplied longer term debt or even working capital.

Present Risks

The crisis has deleveraged asset prices causing much distress. Some Pension funds and Life Insurers are now underfunded. Some managed their risks prudently, but others undertook risks which they did not really understand. The greatest problem is, however, the decline of cross-border funding. Emerging market economies desperately need refinancing, probably to the tune of $1.8 trillion in 2009. They had relied on private capital flows but these have been reversed.

Although there have been massive fiscal stimulus packages already, further policy action is necessary to restore confidence and thereby relieve uncertainty. Uncertainties are “undermining the prospects for an economic recovery”. The cost of these packages is causing concern, especially when the debt burden combines with longer-term pressures from an aging population. There is a “home-bias” as officials encourage banks to lend locally and consumers to keep their spending domestically orientated.

These are extremely challenging times as officials try to break a downward spiral which is dragging down the financial sector and the real economy.

Recommendations

The economic recovery will be protracted. The deleveraging process is not over and will continue to be slow and painful. Credit growth will contract in the US, UK, and EU, and only recover after a number of years. But political support for more fiscal and monetary aid by the state is waning. There is a risk that governments will be reluctant to allocate sufficient funds to solve the problem.

Restoring the banking system will take several years. Governments should co-ordinate policies to ensure that the banking system has access to liquidity; the impaired assets are identified and dealt with; and weak banks and other viable institutions should be recapitalized. Lessons from previous crises suggest that very forceful measures are required to resolve financial sector weakness.

The IMF has tried to assess existing losses and possible future write-downs in Western banking systems in 2009-2010. Its lowest estimate is $275 bn for US banks, $375 for Euro and $125 for British banks, and about $100 bn for other European banks. But the banks must first increase certainty identifying their capital needs and disclosing impaired assets. Bank supervisors must be very strict in evaluating bank claims and business plans. Viable with insufficient capital could get sufficient capital injections from the state to encourage private capital to join in raising capital ratios.

While banks use public money, their operations must be closely monitored, dividends and restricted, and compensation closely examined. There will be cases to replace top management. Non-viable banks could be merged with others or undergo orderly closure.

The difficulty in attracting private capital means deep government involvement is necessary, even to the extent of taking control. But ideally, the bank will be returned to the private sector as quickly as possible. It would be helpful to convert Government holdings of preferred shares to common stock.

Funding Needs

Bank funding remains highly stressed. Some governments have guaranteed deposits and some forms of bank debt, but wholesale funding is inadequate. Central banks will continue to need to provide ample liquidity for the foreseeable future.

Emerging markets are hemorrhaging capital and this will continue over the “next few years”. Their central banks will also need to provide ample liquidity, and also perhaps foreign currency through swaps or outright sales. IMF’s enhanced resources can buffer the financial crisis. The larger problem in emerging markets is a lack of capital to roll over corporate debt. Government support seems warranted to keep trade flowing and limiting damage to the real economy. The situation warrants devising contingency plans to prepare for large-scale restructurings in case circumstances deteriorate further.

Pressure to support domestic lending may lead to financial protectionism. In several countries authorities have stated that banks receiving support should expand their domestic lending. This could crowd-out foreign lending as banks face on-going pressure to delever balance sheets, sell foreign operations and remove risky overseas assets. These policies can damage the global economy.

Fiscal issues

Credit growth is necessary to sustain economic activity. In countries with fiscal room for maneuver, fiscal stimulus will be welcomed by markets. But markets are showing concern in countries where debt is an issue, and bond yields have increased and currencies weakened.

There is a universal need for stimulus now, but this clashes often with issues of sustainability. Governments risk a loss of confidence in their solvency if there are no plans for debt reduction

Conclusion

Policymakers have to address urgently the present crisis as well as devising a more robust financial system. Improved financial regulation and supervision are key components in preventing future crises by mitigating future systemic risk. The financial system will remain under pressure for years and require massive new funds.