Management By Perception

In the 1970’s, Peter Drucker, “The Father of Business”, promoted Management By Objective (MBO).  Current global leadership is attempting to manage by perception (MBP).

Government statistics are no longer accurate and properly accounting for money growth, unemployment numbers, and gross domestic product.  Later this year, we may see a temporary bounce in the economy which will be touted as a recovery.  This will probably be a sucker’s rally which will draw money into the market and place the returning money into higher risk.

There is a lot of cash sitting on the sideline waiting for the market to recover and that money is becoming impatient.  Equities look pretty cheap versus historical price/earnings ratios.  The market pundits expect low interest rates through 2010 but the bond vigilantes may surface and push the rates up.

The government needs the value of the dollar to decline but other countries like China want that value to remain high and stable.  The decline of the U.S. Dollar is the only solution that will be palatable for domestic voters.  This higher inflation rate will be friendly to debtors but will penalize creditors with repayment of loans using cheaper dollars.  It will be a tightrope walk by the current administration.

China is a master at patient negotiations when dealing with adversaries who consistently underestimate the opposition.

All warfare is based on deception.” Quote from Art of War by Sun Tzu

The Chinese understand strategy when dealing with The West.  Don’t underestimate the Kings of the East.

Central Banks are printing money and are attempting to hide the growth of the money by reclassifying demand deposits by sweeping transaction deposits into overnight time deposits thus misstating monetary growth of demand deposits.

Globalization of manufacturing has distorted the manufacturing capacity utilization of the U.S.  When you have less manufacturing capacity, improvements are easier to achieve.  Manufacturing employment has dropped notably over the last two decades in the U.S. and China has been glad to take over the manufacturing duties.  Most of the goods in Walmart and Best Buy are made in China, India, Vietnam or Mexico.

Americans have come to believe they are entitled to consume 25% of the world’s goods and services while third world countries have starving masses.  The character of the American has changed in the last three decades and it is not a pretty sight.  There will be a ground swell of intolerance once the average citizen realizes what his indifference has caused.  The following video is a sample of what will become the rallying cry once the sleeping giant has awaken.  Indifference will be replaced with anger.  Leaders will be forced to rediscover what public servants are.  Will this anger surface in a perfect storm with the financial crisis?

Our biggest problem in the U.S. is found in the mirror:

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