Wondering why oil prices keep going up, why the shilling keeps depreciating against the dollar, why your loan interest rate has suddenly shot through the roof? It could be because of a lack of confidence.
Lack of confidence that you are able to pay your loan now that inflation has gone up, lack of confidence that Libya will be able to produce the oil it used to prior to its civil war, the lack of confidence that the Ugandan economy is stable with all this talk about jets, foreign reserves, oil deals, walk to work protests, rendering sceptics to out their money in dollars and thus dump the shilling. That lack of confidence in Lehmann Brothers staying afloat with all its debt leading to a free-fall of its share price.
It seems normal and ordinary in good times but once the good times ebb it becomes hard to restore in people the confidence they once had. But where does all the confidence go? Can we simply summon it in order to regain our optimism in times of economic crises?
Confidence is surely diminished when the bond market tumbles with revelations of “too much debt” to European nations and oil prices hitting $120/barrel mark simply because war is waged upon Muammar (RIP). Could we not have had these tough times in 2003 or 2005 with NATO invasions in Iraq and Afghanistan? Didn’t the hedge funds and investment banks, which are the primary owners of debt, realise they were buying too many bonds from the same companies 2 – 5 years ago.
Full blown lack of confidence leads to slow down of the real economy, when the investors reduce investments and even lay off some staff since they reckon that consumers will not be consuming owing to their thinking that prices shall increase due to increase in interest rates that went up because Moody’s was moody and rescinded the investors’ AAA rating which is perceived by the stockholders as a bad sign and thus damp the shares which spiral to rock bottom only to be salvaged by the government’s because the investor is “too big to fail” by borrowing money from hedge funds and other investment banks which have all the while been lending to it but now realise that the GDP numbers are not adding up and thus ponder whether their investment was wise and decide to dump their bonds but since no one is willing to buy the bonds the interest rates rise to make them more attractive which strains the governments more till they simply cannot pay and simply default.
At default, confidence is rock bottom and as such there is only one way but up. It is however in no one’s interest to hit the bottom first and after all the fall is not cushioned. Confidence has to be regained and the only way seems to be through dumping all the politicians and taking on a new breed of young, sassy dreamers who can make all of us take a breath of fresh of air and simply trust and hope once more that all will be good. In other words, regain our confidence in the political promises (which will definitely not all come true) but what the heck at least we shall have our happy-go-lucky lifestyles back.