What Caused The Financial Crisis Of 2008?

I can sum up the cause of our current economic crisis in one word — GREED. Over the years, mortgage lenders were happy to lend money to people who couldn’t afford their mortgages. But they did it anyway because there was nothing to lose. These lenders were able to charge higher interest rates and make more money on sub-prime loans. If the borrowers default, they simply seized the house and put it back on the market. On top of that, they were able to pass the risk off to mortgage insurer or package these mortgages as mortgage-backed securities. Easy money!

My Greedy Real Estate Agent

My own experience with these greedy lenders and real estate agents happened about two years ago. My wife and I were thinking about upgrading our home to something slightly bigger, and in a better neighborhood. As we go through the process, we resolved not to do it because it would double our monthly mortgage payment and add another 20 years to our mortgage term.
When I told the real estate agent I couldn’t afford the monthly payment, he said I could go for a 40 years mortgage with 5% down payment, and apply for more than what I needed so that I’ll have an emergency fund. Basically, he advised me to decimate my cash flow and savings so that I can pay mortgage into my 70s. And while I am at it, I should pay private mortgage insurance (PMI) for a couple of years. Now, that’s irresponsible and greedy.
The sad thing about the scenario above is that I am certain there are borrowers who didn’t know any better and went along with a similar plan.

What Went Wrong With Our Financial System?

The whole thing was one big scheme. Everything was great when houses were selling like hot cakes and their values go up every month. Lenders made it easier to borrow money, and the higher demand drove up house values. Higher house values means that lenders could lend out even bigger mortgages, and it also gave lenders some protection against foreclosures. All of this translates into more money for the lenders, insurers, and investors.
Unfortunately, many borrowers got slammed when their adjustable mortgage finally adjusted. When too many of them couldn’t afford to make their payments, it causes these lenders to suffer from liquidity issue and to sit on more foreclosures than they could sell. Mortgage-backed securities became more risky and worth less causing investment firms like Lehman Brothers to suffer. Moreover, insurers like AIG who insured these bad mortgages also got in trouble.
The scheme worked well, but it reverses course and is now coming back to hurt everyone with a vengeance.

The Bailout And Who Should Pay

I don’t like the idea of government bailout, because the government is using my money to help out greedy bankers. Unfortunately, it may be the only option we have right now, but I hope these greedy lenders won’t get away scot-free. Somebody made a lot of money leading up to this crisis and they should pay for it — at least the government should make them.
In my opinion, the government should force conversion of bad mortgages into 30 years fixed rate mortgages. The interest rate on these converted mortgages could be higher than normal. This way it’s more affordable to more borrowers resulting in a lower default rate. Yes the lenders will make less money, but in my opinion, they already made too much. By the way, the borrowers aren’t completely innocent either, that’s why they should pay a little more as well.
Since it was fine from them to play with our economy and our lives, I think this is the least that they could do to take part in the recovery effort. Why should my tax dollars go toward helping these greedy bankers who already made billions out of the scheme? I am sure no one will come to my rescue if I my greed got me in trouble.

Managing a fast changing IT environment in the Economic crisis

2009 will be a challenge for many enterprises and their IT organizations. The world iscurrently going though major financial changes and we are all in one way or anothereffected by this, some industries more then others. There are alot that can be done within the IT department to cut costs, streamline and make sure that the IT department supply the best possible services for the enterprise to handle the crisis. Here are 5 trends that most likely will take of in the dire times ahead:
1. Cutting back on external consultants2. Adding more virtualization3. Outsourcing4. Cloud computing i.e. software as a service (SAS)
First thing first
Making the correct priorities, solving the right problem in the right order is a fundamental understanding when making changes in the IT environment. To be able to prioritize you must have access to correct information and knowledge about the current state in the network. Tee most effective way to know where you are is to have a functioning monitoring system giving you the current status. It can also provide summery reports of IT operations as part of the decision process for making the correct prioritizations. You need to know where you are to know where you are going and to be able to measure the effects of the implemented changes. Did they really take you closer to the target?
A very common mistake is to ignore implementing the monitoring until after a change project, making the monitoring a separate project to deal with later… this way there is no good way of really knowing the effects the changes have had one the whole IT environment.
1 Cutting back external consultants
Many IT departments rely heavily in external competencies and resources to deliver the nessesary services, today many of these resources are being cut back – but the systems are still in operation. A proactive monitoring system will automate problem detection both on detailed technical problems but also on the complete service/application layer. This way the damage of cutting back on external resources can be somewhat mitigated.
2 Adding more virtualization
Virtualizing the server farm is a trend that is accelerating now with the potential savings in hardware. Many of the early adopters of virtualization are reporting new challenges and on top of the list is operationmanagement of the virtualized systems. All the benefits of virtualization; the easiness to add a new server, move it and kill it is also the biggest control challenge. A professional monitoring system can monitor also the virtual environment, error detection can automatically be linked into service groups that makes complex virtual environments easy to understand and manage.
3 Outsourcing
When the need for cutbacks in IT comes fast, outsourcing are many times an “easy” solution to keep the systems running. When outsoursing a service the Service Level Agreement or SLA Agreement becomes very important to ensure the quality. A monitoring system can automatically check, notify and report breaches inthe SLA’s. Having an automated process that includes email notifications, scheduled summery reports, helps assuring quality in the delivered outsourced service. Having access to the own measuring data can also be very useful in the event of a dispute over SLA breaches.
4 Cloud computing i.e. software as a service (SAS)
This is very similar to the argument of outsourcing as the main task is to manage and monitor that you get whatyou are paying for. And in the event of an error or that the service is down you will need two things:
A notification that the service no longer is available (so that you can take action and inform users).
A report that shows the breach so that you can get what you really pay for from the serviceprovider. (SLA)
All the above are important factors to consider when managing a fast changing IT environment, aspecially in times like these with thightening budgets. Make sure to choose a monitoring system that is cheap to obtain, fast to implement, having access to support (if key project members leave etc) and can deliver services like above.

Avoiding and Managing Financial Crisis: Budgeting and Planning to Save Your Franchise Business

Do you sometimes feel like the captain of the Titanic, with your business taking on water and no aid in sight? It is a familiar nightmare, shared by all executives at one time or another. Only it seems more personal to the franchise executive who is often the founder or the major influence in the franchise concept, with whom the employees, franchisees, and the public associate the business. The high visibility of franchisors renders the management of the financial crisis more difficult, and calls for more creativity than for other businesses.
Why is your business hurting, and are you sure you know why? Do others know your secret, and if the secret leaks out, will the walls come tumbling down? Why do competitors in the same industry seem to be doing so well, or at least seem in a better position? How can they handle the pressure when you seem to be ready to crack? How can you cope when doom is knocking on the door?
The test of the executive is to overcome the challenges, confront the risks, and deal with the issues with clinical detachment and surgical precision. Now is the time to get optimistic, but realistic.
Are these signs of growth or trouble?
Growth and financial distress are often partners. Like children, businesses demonstrate growing pains. Your business is growing when you can measure its impact: If your business has "build," when it has momentum, when it is on the lips of everyone in your industry, when you are a "player," a "force," a "happening," then you have reason to believe that your finances will improve. You are not the only manager of a business that has trouble making payroll, using tax payments to fund more important operations, floating vendor payments and having difficulty keeping inventory at the most efficient level. In the current economic environment, such financial pressures can be caused by the unusual phenomenon that wage pressures are increasing faster than inflation, causing profit margins to be squeezed.
You should be more concerned, however, if you cannot support the sales force when you need to allocate funds for developing new franchisees and markets. Trading quality for growth and reputation for market share are fundamental decisions with long-term consequences that, unfortunately, may have been decided during a temporary period of tight cash flow. Try not to let short-term events influence the long-term growth of your business.
Your business plan and financial discipline guide long-term growth. When times get tough, the tough test their business plan and measure its effectiveness. Did revenues meet expectations? Did your business increase its revenues by executing an improved marketing strategy, or did it simply benefit from a rising tide in a strong economy? The distinction is critical because you want to know if you are increasing your market share and converting potential customers into actual purchasers of your goods and services
cuting the business plan and then being able to measure its execution are the keys to evaluating your business and avoiding financial crisis. Through budgeting, planning and meaningfully (as well as honestly) measuring the results, you can methodically evaluate the direction of your business. It is up to you to adjust your business strategy once you interpret the data and draw your own conclusions.
Managing the crisis
You have to put together a crisis business plan, based on a ruthless evaluation of your assumptions, where they failed, and what you must do over a specific time to turn the business around. Then you can talk about money. Moving forward requires more money, and you must collect and analyze the data now before you can determine your minimum cash requirements to implement your crisis business plan. Your crisis business plan has a "burn rate," i.e. the amount of money your business will burn to implement the plan. Your crisis business plan also shows increasing profits when the plan is implemented. You now have the tools you need to hunt for the working capital.
Internal sources of capital in a crisis
If your business solution suggests opening more franchised outlets to increase profits and market share, your company's financial strength may be better allocated toward subsidized financing to start-up and expanding franchisees. Equipment leasing arrangements with limited guarantees by the franchisor may allow existing franchisees to expand to new markets, to try unconventional sites, and to allow some potential franchisees to enter your system.
Subsidizing franchisee growth may be the long-term answer to your problem, but your business may not survive long enough for the new outlets to become profit centers. Subsidizing franchisees trades immediate cash flow for long-term growth. If your business needs money to keep the lights on, subsidizing franchisees through preferred financing arrangements, or even through royalty deferments, should be avoided. A better solution to royalty deferment is to have a lender in place to fund repayment of past due royalties of the franchisee so that the lender, and not the franchisor, is acting as the franchisor's bank.
In order to conserve capital, you may wish to revisit your litigation strategy. Would your company benefit from aggressively pursuing slow paying franchisees, or would it merely stir up a hornet's nest of litigation? Should your franchise agreements contain arbitration clauses to help you manage counterclaims, or do you need the litigation option more than risk management?
Can you generate the cash internally necessary to implement your crisis business plan? Cutting costs through layoffs is the tried and true method for survival. It does little to build your business and is costly to morale. Right-sizing your business is best if it is implemented before cash flow reaches a crisis. The same could be said of other expense reductions because they increase margins, but at the cost of losing momentum and morale. If the problems are obvious to the employees, vendors and franchisees, then preserving human capital may be as important as finding new capital, and it may be necessary to attempt new approaches to generate cash flow.
External sources of capital in a crisis
Different lenders look at different attributes of a franchise system in order to assess credit risk. Find the lender that treats your business as having more collateral than merely your office equipment, receivables and company stores. Your goodwill is valuable, as are your franchise agreements and royalty stream. Your trademarks may have the opportunity to be exploited in a different manner, if only you had the plan and the funding for your new plan. If your lender doesn't understand the potential of your business, find another lender.
Great variability and discretion exists among banks, and even banking officers, and smaller banks often will be very competitive and aggressive in catering to new business. Find a bank that offers higher risk loans, if you are in that category, but negotiate as if it is only a temporary loan you need as a bridge to the long-term relationship.
Have you gone to your vendors for help? They have grown with you, and their fortune is tied to yours. Your vendors may agree to extend repayment terms which could give you the additional months of forbearance you require to execute your plan. Vendors are also sensitive to seasonal attributes of your business, and may be willing to extend payment terms in your weak season as long as you agree to remain current in the strong season. Your vendors should remain loyal to you as long as you remain loyal to them.
Altering the system to generate capital
Is it time to sacrifice assets? This can occur in two ways. You can share a part of your system, or you can divest a part of your system. When you share a part of your system, you are partnering. When you sell a part of your system, you are spinning off assets. Both are excellent ways to generate cash and to provide for long-term growth. Both should not be considered without exploring the long-term consequences. In strategic partnering, you are lending your system or trademark to others to create synergy. Your strategic partners may be willing to compensate you for such a license as profits are earned, or in the form of royalties. It is sometimes possible to negotiate for advance royalties, or a signing fee, to compensate your company for lost opportunity costs in partnering with someone else. Even without cash advances, partnering can be used to convince your lender that you are more bankable. If a strong concept is willing to partner with you, then the bank might be more willing to jump on the bandwagon.
Spinning off assets usually requires that you sell something valuable, an operating asset which you are sacrificing for short-term gain. In franchise companies, this is not always true because it may require more effort to service franchisees than the royalties produce. Unlike most businesses, however, the franchisor has territory or term to sell. Franchise agreements can be extended for one-time fees, in exchange for immediate payment of past due fees, or in exchange for fees that in the future will be paid on time.
Franchisees may want territory that the franchisor cannot exploit, for expansion or protection against encroachment. The franchisor may also sell the franchise agreement back to the franchisee, and license the franchisor's name on an annual basis. Franchisors have successfully collected future royalty fees, with a discount, by tearing up the franchise agreement and replacing it with a trademark license. This not only accelerates the cash that would have been generated over the future term of the franchise agreement, but also eliminates the cost of the services that the franchisor would render in the future. For companies desiring to withdraw from distant markets, the option of converting franchisees to licensees becomes a "win-win" for everyone.
Flourishing in bankruptcy
Bankruptcy is considered the last resort not because of its risk, but because it is so effective. When used as an offensive business strategy, rather than as merely a shield against creditors, it provides a fresh start and authorizes the use of legal mechanisms available under no other circumstances. Upon filing a Chapter 11 bankruptcy, the company remains in possession of its assets and is granted a moratorium on most payments.
Filing bankruptcy stops the lenders from foreclosing, landlords from evicting and litigation from proceeding. It is intended to give breathing room for 120 days while a plan to reorganize is formulated, and then additional time in which to obtain creditor approval for the reorganization. It is the most efficient method resolving creditor disputes, and the bankruptcy laws are intended to strongly favor the entity filing bankruptcy.
Franchisors have a fairly good record of surviving bankruptcy and reorganizing to become stronger companies. The best example is probably The Southland Corporation, franchisor of the 7-Eleven convenience stores, which is now a highly touted stock on Wall Street. The Southland Corporation filed a "prepackaged plan" which accelerated the bankruptcy procedure and minimized most of the risks of filing bankruptcy. The prepackaged plan consisted of vendors agreeing to particular treatment in advance of filing bankruptcy, and forcing disagreeable creditors to accept the will of the majority as required under bankruptcy law. Prepackaged plans are now fairly commonplace and are easily formulated before filing bankruptcy.
Franchisors filing bankruptcy often can obtain financing during the bankruptcy that they could not obtain before because the debtor-in-possession lender can obtain bankruptcy court permission to subordinate other creditors. Bankruptcy also permits the rejection of burdensome contracts, allowing the lawful breach of these contracts with limited consequences. For example, the franchisor can threaten to reject some franchise agreements and retain others, which might cause the burdensome franchisees to come to the bargaining table. Leases and subleases can be assumed or rejected based on the business judgment of the debtor.
Imagine the power of these options in cases where a master franchisee or developer exists. The debtor is able to reject the rights of the master or developer, and exploit the rights of the master or developer to collect the royalties from the sublicensees. Although the master or developer may have a damage claim for the rejection of that contract, the damage claim is part of the reorganization and may be spread over a period of years, without interest.
Although it is true that many companies do not survive Chapter 11, this is rarely true for companies with prepackaged plans or companies with sound business prospects. Without a firm direction when filing, the debtor will flounder, rather than flourish. Filing bankruptcy also exposes the company to public scrutiny and may result in the wrestling of managerial control or ownership from management. Bankruptcy is a powerful tool, and works best for management that is committed to a turnaround plan to preserve the viable franchise concept.

Managing a financial crisis

It is widely recognised that in high stress situations people find it difficult to make to make good decisions as their IQ is reduced by this distress.
When a business is under pressure financially for whatever reason, emotional stress is experienced. It is then important to effectively manage this stress in order to have the emotional energy to address the problems at hand and solve them to bring the business back in line.
To minimise these stresses it is also important to act early while there is still a level of control rather than being controlled by the situation.
Seek assistance from others in solving the problems, consult with service providers, professionals, Farm Financial Counsellors and the like and by sharing the stress it will lighten the load and make the problems easier to solve. Remember the saying "Many hands make light work" and this really applies in this situation.
I believe that there is a good recipe that can be used with ten (10) identifiable steps for managing a financial crisis.
1. Know your financial position
Prepare a Statement of Position, which lists all your assets and liabilities and where these are. As part of doing this look at the real current values of both assets and liabilities and the timing of when debts were incurred as well as the repayment arrangements. This will help to identify what level of equity you have, whether you have some assets which are unproductive or surplus to your requirements, which assets are encumbered and therefore your future borrowing capacity.
Prepare cash flows, Both historical and projections should be done to help with the analysis of what has happened to put you in this position and if/how you are able to trade out. At this stage it is also a good idea to do some "what if" scenarios for the projections to enable you to identify and analyse some of the future risks that might be encountered.
Compile the past Financial Statements/Profit and loss/Tax returns, By compiling these figures you or your consultant/Financial Counsellor can then analyse them to plot trends in what has brought you to the current crisis. It also helps with preparation of the cash flow projections and in identifying where income could be increased or expenditure could be shaved.
2. Prepare a strategic audit
Doing a SWOT analysis can identify the Strengths, Weaknesses, Opportunities and Threats to which the business is subject. Once you have identified what these are, you can start to use your identified strengths and opportunities to progress your enterprise. By also recognising your weaknesses and threats you can work around them or attempt minimise their effect on the business.
3. Revise your long and short term goals
You will never get "There" if you don't know where "There" is. Goals clarify what you are doing it all for and why you are going without now in hope for the gold are the end of the rainbow. It is extremely difficult for most people to identify and set their goals but is extremely rewarding when they are made and planned for and they then are achieved. Write the goals down as this has the effect of giving them credibility and substance. Identifying them also helps in the future planning of the business direction.
4. Decide if the deficit is a continuing problem
Some examples of short-term problems may be a short drought, short-term price collapse/fluctuations, disease outbreak or short-term grain price increases. If you identify that the problem is short term, a solution might be to seek carry-on finance from your lenders. It may also be possible to forward sell some of your product, sell a piece of surplus machinery or redeem an off farm investment with the view to reimbursement at a later date.
If you identify that the problem is a longer term one such as a prolonged price collapse, high price structure for the farm or a long term drought, then you may not be able to get further carry-on finance or it may not be an appropriate solution to the problem. If this is the case then you may need to look at other measures of addressing the problem.
5. Look at increasing income
Review your whole farm business and see if there are ways of increasing the income which have not been looked at in the past because there has not been a need. There may be an opportunity to improve the technology used in the enterprise, which will give gains in income. Such examples as weighing stock rather than relying upon purely visual assessment, or mechanised feeding systems which deliver more precise rations than being done by hand to maximise the weight gains through having fresh food on demand.
Increases in income may be achieved through better timing when your product is available. This could be done by timing the maximum number of stock to be ready at the time when higher prices are paid on a cyclical basis throughout the year, for example in the lead up to Christmas each year.
Most farm enterprises are multi-enterprised. This means that there is several separate small businesses within the farm business. By doing a gross margin analysis on each of these businesses you may be able to identify which business is the most profitable. From this you could then concentrate on the most profitable parts of the business and leave the least profitable alone to maximise the income.
An alternative may be to seek off farm income for one partner. This may be an opportunity to inject cash flow into the business and maximise the effectiveness of each partner involved in the case where all are not fully occupied.
6. Look at ways to reduce costs
A short-term solution may be to defer some expenditure or costs, which are not essential until the income improves. It may involve making arrangements with a creditor with whom you have a good relationship to "put it on the slate" in the short term.
One hidden cost blow-out is often personal expenditure, as it does not generally appear on the taxation profit and loss statement. It may be time to review the living expenses as a way of increasing the businesses bottom line.
Capital expenditure tends to be in large slices and will put the cash flow under pressure in times of difficulty. It may be appropriate to review if the capital expenditure is really crucial or whether it can be deferred till a later date when the cash flow is more positive.
Overhead costs are those which tick away no matter how productive the enterprise is at the time. Review what is being spent on items such as labour (can you do without that extra worker?), machinery, insurance, phone, repairs and maintenance and principal and interest debt servicing costs. There may be ways of reducing these costs through timing or revision of the operation.
"Beware of false economies" in reviewing the reduction of costs as there is real trap in minimising costs to the detriment of production. Cost and return is a delicate balance when it comes to the bottom line of the business.
7. Look at restructuring loans
As identified in the previous step there may be a more appropriate structure for your debt that may suit the current situation. It may have been totally appropriate when the loan was entered into but due to the changing environment it may now be the enterprise's Achilles heel.
Look at going interest-only in the short term if you believe the problem is only short term. The debt will not be reducing but at least the debt servicing will be brought back to a bare minimum.
Better timing of repayments is also an option. By timing repayments to the period when income is anticipated to be at its greatest, then there will then be lesser reliance upon the overdraft or cash reserves. Rather than half yearly repayments of two large amounts it may be more appropriate to time the repayments monthly if cash flows are regularly monthly.
Term loans quite often repaid over a short term if the cash flow enables this when the loan is implemented. It may be appropriate to term this over a longer term if cash flow difficulties are experienced, to free up funds in the short term. A down side of doing this however is that more interest is paid over the longer term but this negative may be offset by the affordability factor. A common fault of businesses is to purchase long-term assets with short-term finance and visa versa. In other words, an asset that will have a long-term value might be purchased out of the overdraft or cash flow rather than on a long-term loan facility. This tightens up cash flow. In good times this may not cause a problem but when the pressure is on it can be overwhelming. The alternative is also a cause of problems where a quickly depreciating asset, which has to be replaced often, is funded on a long-term loan. You may still be paying for the first item when you need to raise further funds for its replacement. Again cash flow suffers.
8. Consider financial reserves at your disposal
Farm Management Deposits were designed to smooth out the highs and lows of cash flow between years rather than have tax eat up any profits that may be accumulated. If the financial problem warrants, now might be a good time to redeem these deposits.
Investment in off farm assets is also a good risk mitigation strategy in the good times. When the farm is under stress financially it may be appropriate to sell the off farm real estate to protect the core asset. At this stage it may be appropriate to identify which is the core asset and which could be done without to protect that which was identified as a core asset. Things to weigh up in this instance are return on investment against potential for return as well as other non-monetary concerns.
Investments previously made in shares and managed funds may also be an avenue to bring cash back into the core business. Off farm investment is a good risk mitigation strategy with generally liquid reserves, which can be brought back into the business when needed.
Superannuation or Life policies are a source of emergency funds in time of financial crisis. Life policies can be cashed in if able to help fund deficits and superannuation funds will allow some withdrawals in times of financial hardship. Each fund has its own rules in these situations and these should be readily available upon request.
9. At this stage it may be appropriate to review how things are going and make decisions about the future
If steps 1-8 have worked, the crisis may be over and things are back on an even keel. It is now time to implement risk minimisation strategies to stop another similar crisis happening in the future
If 1-8 did not work, there is now a need for some important decisions to be made about the future.
It is now time to consider selling part or the entire farm!
Be prepared to act - failing to act is common - in a depressed state people try to escape from their problems by doing nothing but it doesn't work, it only makes the problem worse.
10. Now that the pressure has eased it is time to maintain tight financial control and to communicate with your financiers
You have revised you plans and are working towards a new future therefore it is time to manage this more realistic plan to ensure that the problem you have just come through does not resurface.
It is now also a good time to work on your relationship with your lenders to rebuild the bridges and gain their confidence back that was previously there but which may have suffered during the crisis. This will stand you in good stead in the future for the next time difficulties are experienced. Murphy's Law still prevails and therefore it is not a matter of if it will occur but when.
The Department of Primary Industries and Fisheries Farm Financial Counselling Service offers help in:
clarifying a problem or concern and working towards a solution.
understanding your financial position
identifying and assessing options for resolving financial and other problems
evaluating enterprises and assessing farm viability
finding information on rural finance
evaluating re-financing options
preparing loan applications
negotiating with your bank
preparing cash flows
finding information on Government schemes of assistance
accessing other service providers.

MANAGING ECONOMIC CRISIS

In every economic crisis, it is the poor that suffer the most. Whether it is individuals or countries, they are the most vulnerable and lack the savings and the institutions to support them during difficult times. In past crises, we have focused too late on adverse effects on poor people. Can we do it differently this time?
The current economic downturn, unlike the East Asia crisis, started in the richest countries and has now affected the major emerging markets. The effects on low income countries are being felt, not mainly through financial markets, but through the volatility of commodity prices, the decline in export volumes and remittances. Reporting from DFID’s offices (Ethiopia, Bangladesh, India, Pakistan) indicate that in some cases poor households are taking children out of school to save money, and families, especially women and girls, are eating less or lower quality food, leading to concerns about malnutrition. Estimates are that the economic crisis has already put 100 million people back into poverty.
It is interesting to recall the lessons from previous shocks. During the recession of the 1980s, many developing countries embarked on structural adjustment programmes. While the economic reforms were often necessary, the awareness of the negative effects quickly became apparent and caused political problems in many countries and for the international financial institutions. The appeals for “adjustment with a human face” ensued and instruments such as Social Funds were established in many countries to cushion the effects through community development, skills training, and microfinance. While these Social Funds were often quite effective, they often took too long to establish and failed to play a truly countercyclical role in helping the poorest cope with economic adjustment.
For developing countries, this crisis started with the spike in food prices in early 2008. Interestingly, there was once again an appeal to create new institutions. The international response focused on a set of short term measures (food aid, social protection, input subsidies, etc.) and longer term measures (investment in research, infrastructure). But within months of agreement on this, food prices had started to fall and energy prices skyrocketed. Once again, there was a search for ways to alleviate the adverse effects. And once momentum on an international response coalesced, oil prices fell by two-thirds.
What lessons can we draw from these experiences? First, it is the nature of globalisation that there will be shocks. Those shocks may be food or fuel prices or credit squeezes or flights to quality, but they will come. Second, attempts to orchestrate a tailored response to protect the most vulnerable will almost always lag behind the need. This is inevitable given the long lead times required when new institutions are desired. Third, the best mechanisms are those that provide protection from any shock and use existing institutions and programmes to keep the most vulnerable above a minimum threshold.
Some countries have formal systems of social protection which can vary from reasonably good (Brazil, Ghana, India, Bangladesh, Indonesia, Vietnam), to limited (Uganda, Zambia, Ethiopia, Pakistan, Central Asia, Caribbean, Iraq) to still under preparation (Kenya, Sierra Leone, Cambodia). But in many countries there is no formal system and poor households rely on informal mechanisms such as remittances (Pakistan, China) or digging into modest savings (China), borrowing from moneylenders (Bangladesh), or drawing down on assets such as livestock (Tanzania) in order to cope. A good example of a well designed social protection scheme is Ethiopia’s Productive Safety Net Programme, which provides cash and food transfers for over 7 million people. £13 ($18) per month pays for cash transfers to support an entire family. The overwhelming majority (84%) of households spend some or all of this cash on buying staple food, ensuring improved health and nutrition outcomes and protecting families from having to sell productive assets to pay for food. Over a quarter of recipients (28%) also use some of the funds to keep children in school. Cash is also used to settle health bills and to facilitate asset accumulation by many families, especially livestock purchases. The programme proved its value last year, protecting many families from high food prices and drought and enabling the government and donors to use the existing programme to extend the duration of assistance.
DFID does not see the money we have committed to social protection as a welfare programme, although clearly for some households it will provide this function. The real pay off from social protection is in protecting other investments we are making in development (Ravallion, 2008). There is strong evidence that economic shocks in poor countries cause rising infant mortality, falling school enrollment, and falls in nutrition levels (Ferreira and Schady, 2008). Severe malnutrition in early childhood often leads to stunted physical development and deficits in cognitive development - all of which reduce life chances and result in significant losses in life-time earnings (Alderman et al, 2006; Behrman et al, 2004). The costs of preventing such malnutrition can be very low because of recent technological advances - as noted in Josette Sheeran’s January 8 contribution to Ideas4development.
In the months ahead, more poor countries need to be instituting social protection schemes to ensure that this economic crisis does not cause persistent poverty across generations and undermine recent progress, especially on education. When the Tequila crisis hit Mexico in 1994, it triggered the design of the famous PROGRESA programme which resulted in the establishment for the first time of an effective safety net for the country’s poor. More countries should do the same and more donors should be allocating funding to social protection. Robert Zoellick has called on the US to pledge 0.7 per cent of its stimulus package to a vulnerability fund for developing countries, who cannot afford a fiscal stimulus, to help them manage the consequences of the crisis (“A Stimulus Package for the World”, New York Times, 22 January 2009). Ideally we would create a shared funding mechanism that would send a strong signal that, alongside international policy coordination to protect the world’s financial systems, we will work together to protect the poorest from the inevitable shocks that globalisation brings. Without that, we risk losing the international consensus around globalisation and the value of past and future investments in development.

GOOD LEADERS CHALLENGE THE PROCESS

In their classic book, “The Leadership Challenge,” James Kouzes and Barry Posner set forth the five fundamental practices of exemplary leaders.
When they are at their best, successful leaders:
Challenge the process.
Inspire a shared vision.
Enable others to act.
Model the way.
Encourage the heart.
This piece of work briefly examines each of these five practices.
1. Leaders challenge the process.
Good leaders are pioneers. They continually search for new opportunities to do what has never before been done. They are not content merely to maintain the status quo. Peter Drucker said, “Results are obtained by exploiting opportunities, not by solving problems. All one can hope to get by solving problems is to restore normalcy.” Neither do they wait for circumstances to lead them in change, but they are initiators of change.
Furthermore, they desire significant change. They want to turn around a failing business or dying church, or start up some new radical entrepreneurial venture, or develop an original product line or service, or revolutionize an existing process. They want to mobilize others in the face of strong inertia or resistance. They may not change the world, but they passionately pursue making a significant difference. Leaders want to transform; they are not content merely to maintain.
This is one of the primary differences between leaders and managers. Leaders lead. They go first. They begin the quest for a new order. They plunge into new, sometimes dangerous, and always unpredictable territory. They take us to places we’ve never been before, and probably could never find on our own. Managers, on the other hand, maintain the existing order. They organize, and establish necessary processes and controls.
As agents of change, leaders will:
a. Treat every job as an adventure in an unexplored wilderness. If leaders want to inspire the best in others, they must find or create opportunities for people to outdo themselves in exploring new ground and reaching difficult goals. Furthermore, they must make work responsibilities enjoyable and exciting. Researchers have found that “appropriate” humor can lead to cohesion and bonding between team members.
b. Treat every new assignment as a start-over, even if it Is not. There is always some new way to improve any organization. Moreover, the talent and resources for excellence are already present; they need merely to be unlocked. Leaders see opportunity everywhere – especially in their own people.
c. Question the status quo, and kill the sacred cows. Obviously, some standard practices and policies are critical to the organization’s success. But many are simply traditions. Leaders ruthlessly examine everything in their organizations. “The way we’ve always done it” is insufficient. Is there a better way to do it? Is there even a better thing to do in the first place?
d. Harvest new ideas – both inside and outside their organization. Many times the people who have been doing something for years have conceived of new and better processes. But no one has ever asked them for their opinion! Moreover, there is a great harvest-field of innovative ideas outside the doors of every organization. Leaders continually explore – even in unrelated and entirely dissimilar fields.
e. Find something that needs fixing. “If it ain’t broke, don’t fix it” often doesn’t cut it for a true leader. It may work well, but can it work better? Naivete can be a leader’s best friend in a new assignment. His dumb questions are tolerated as he uncovers needed improvements; and his fresh, uninstitutionalized approach can yield the conceptual breakthrough necessary for quantum leaps in organizational effectiveness.
f. Assign their people wisely. Organizations frequently commit the error of assigning their best people to deal with problems. Leaders, on the other hand, assign their people to opportunities. Naturally, problems must be dealt with, but opportunities are the life-blood of our organizations. Solving a problem contains and prevents damage, but seizing an opportunity produces growth and new life.
g. Renew their teams. Even the best teams get stale and need to be revived. Bringing new people on board adds fresh perspective and energy. Leaders also force their people to interact with others and to listen for new ideas.
h. Lead their people in continual learning. We all need to keep adding to our resource and skill bases – through reading a book, taking a course, attending a seminar, subscribing to a journal. Good leaders, and those who follow them, are lifetime learners.
i. Look for opportunities to glorify God. Christian leaders, above all, should seek opportunities to glorify God and accomplish His purposes with excellence.

Mental health

Mental health is a term used to describe either a level of cognitive or emotional well-being or an absence of a mental disorder.] From perspectives of the discipline of positive psychology or holism mental health may include an individual's ability to enjoy life and procure a balance between life activities and efforts to achieve psychological resilience.The World Health Organization defines mental health as ""a state of well-being in which the individual realizes his or her own abilities, can cope with the normal stresses of life, can work productively and fruitfully, and is able to make a contribution to his or her community." It was previously stated that there was no one "official" definition of mental health. Cultural differences, subjective assessments, and competing professional theories all affect how "mental health" is defined.
History
The treatment of mental disorders dates back to ancient civilisations, including Ancient Egypt, India, Greece and Rome. Medieval physicians in the Muslim world from the 8th to 15th centuries were concerned with mental health.In the mid-19th century, William Sweetzer was the first to clearly define the term "mental hygiene".Isaac Ray, one of thirteen founders of the American Psychiatric Association, further defined mental hygiene as an art to preserve the mind against incidents and influences which would inhibit or destroy its energy, quality or development.At the beginning of the 20th century, Clifford Whittingham Beers founded the National Committee for Mental Hygiene and opened the first outpatient mental health clinic in the United States.Perspectives
Mental wellbeing Mental health can be seen as a continuum, where an individual's mental health may have many different possible values. Mental wellness is generally viewed as a positive attribute, such that a person can reach enhanced levels of mental health, even if they do not have any diagnosable mental health condition. This definition of mental health highlights emotional well-being, the capacity to live a full and creative life, and the flexibility to deal with life's inevitable challenges. Many therapeutic systems and self-help books offer methods and philosophies espousing strategies and techniques vaunted as effective for further improving the mental wellness of otherwise healthy people. Positive psychology is increasingly prominent in mental health. A holistic model of mental health generally includes concepts based upon anthropological, educational, psychological, religious and sociological perspectives, as well as theoretical perspectives from personality, social, clinical, health and developmental psychology.An example of a wellness model includes one developed by Myers, Sweeny and Witmer. It includes five life tasks — essence or spirituality, work and leisure, friendship, love and self-direction—and twelve sub tasks—sense of worth, sense of control, realistic beliefs, emotional awareness and coping, problem solving and creativity, sense of humor, nutrition, exercise, self care, stress management, gender identity, and cultural identity—are identified as characteristics of healthy functioning and a major component of wellness. The components provide a means of responding to the circumstances of life in a manner that promotes healthy functioning. Most of the US Population is not educated on Mental Health.
Lack of a mental disorder Mental health can also be defined as an absence of a major mental health condition though recent evidence stemming from positive psychology (see above) suggests mental health is more than the mere absence of a mental disorder or illness. Therefore the impact of social, cultural, physical and education can all affect someone's mental health. Cultural and religious considerations Mental health can be socially constructed and socially defined; that is, different professions, communities, societies and cultures have very different ways of conceptualizing its nature and causes, determining what is mentally healthy, and deciding what interventions are appropriate. Thus, different professionals will have different cultural and religious backgrounds and experiences, which may impact the methodology applied during treatment. Many mental health professionals are beginning to, or already understand, the importance of competency in religious diversity and spirituality. The American Psychological Association explicitly states that religion must be respected. Education in spiritual and religious matters is also required by the American Psychiatric Association.
Mental health profession A number of professions have developed specializing in mental disorders, including the medical speciality of psychiatry, divisions of psychology known as clinical psychology, abnormal psychology, positive psychology, applied behavior analysis, behavior therapy, clinical or mental health social work, mental health counselors, marriage and family therapists, psychotherapists, counselors and public Health professionals.Different clinical and academic professions tend to favor differing models, explanations and goals.

Church-Based Theological Education

Today, the idea of "church-based theological education" is becoming increasingly popular. While this represents a major improvement over the traditional practices of disconnected biblical teaching in remote academic institutions, yet it is still not the New Testament paradigm. The New Testament pattern is more along the lines of "church-integrated leader development."

Here are two key contrasts:
First, true leader development is not merely a class lecture or a small group session that is sponsored by the church and that occurs in a room in the church building (and is thus "church-based") on Tuesday nights or all-day Saturday. Leader development needs to be integrated into the life of the church – truly owned by the church, occurring across the life of the church, all week long.
This is a difference of process. If our purpose was merely to get the right information into the heads of our emerging leaders, then lectures followed by papers and small group sessions to discuss the information (with degrees at the end to prove the information was mastered) would be sufficient. But if our goal is the building of the whole person, then a much more complex process is necessary – we need a transformational collage of spiritual, relational and experiential as well as instructional dynamics.
An effective leader development process is not a neat series of courses but a fiery immersion in real-life, real-time experiences, reflecting the complicated and fundamentally difficult nature of Christian leadership, bringing deep heart issues to the surface to be dealt with, and compelling the emerging leader to look utterly to God for everything in his life and ministry.
We need a culture of leader development – shared beliefs, values, attitudes and actions – across the life of the church, all week long. This is the healthy church: parents building their children (Eph. 6:4; Deut. 6:4-9; 11:18-21), existing believers building the new disciples (Matt. 28:19-20), older women building the younger ones (Tit. 2:3-5), mature men teaching the younger men (2 Tim. 2:2), people building people, leaders building leaders. Thus, church-based is not enough; leader development must be truly church-integrated.
Second, "theological education" of the mind is entirely insufficient. The whole person must be built, with broad and deliberate attention given to the nurturing of spiritual life, relational capacity (including marriage, family, and relationships with others), character, vision and calling, as well as practical ministry capacities. The leader himself or herself must be built.
This is a difference of goal. The goal of New Testament leader development is not merely intellectual mastery of some biblical ideas, but rather transformation of life – the holistic building of the leader.
The Transforming Power of Church-Integrated Leader Development
These are some of the many powerful advantages of this biblical paradigm:
First, in our experience, when local churches rediscover the organic New Testament pattern of church-integrated leader development, it affects the church as much as it affects the emerging leaders. Here is a recent testimony from an Asian church network leader:
When we followed Jesus’ leader development principles, the result has been a great flourishing of vigor and life in the church. All the members are functioning, building each other and growing together, thus bringing great growth and revival to the whole church.
Second, while church-based theological education is usually accomplished in a limited time of training, church-integrated leader development is an ongoing, lifelong commitment to growing, serving and building together.
Third, church-based theological education usually revolves around the set curriculum ("one size fits all"), whereas church-integrated leader development can effectively respond to the individual needs and callings of the emerging leaders.
We recognize that church-based theological education is a sincere and significant improvement over traditional leader development approaches; however, the New Testament model is not so much church-based theological education but rather church-integrated leader development.
If we can shift away from our Greek-rooted fixation on academic curriculum and instead learn how to create and sustain organic cultures of healthy people building within the life of our local churches, then, by God’s grace, we will be able to effectively address the current leader development crisis

The world nutrition challenge

The global financial crisis and the high cost of food mean different things in different places. In those parts of the world where hunger is on the march, their impact can be measured in empty stomachs and blighted lives. That is why, during my recent visit to India, I traveled to a remote district called Chhatarpur in the central state of Madhya Pradesh (MP). I went there because I wanted to see for myself the plight of people in India’s hunger heartland. I particularly wanted to listen to the experiences of the local women. As always in such situations, the women are the ones in the front line of the war against hunger.
So serious is the food-security situation in MP that, when inserted into the country table of the Global Hunger Index, the state falls between Ethiopia and Chad which are among the 10 poorest-performing countries in the world. One third of the children under five in MP suffer from wasting (too thin for their height) and 60 per cent are underweight (too thin for their age), according to India’s most recent National Family Health Survey.
Chhatarpur, in the north of the state, is one of a number of MP districts in the grip of malnutrition. “Severely insecure” is how it is described in the forthcoming Report of Food Security in Rural India, a joint initiative of the World Food Programme and the MS Swaminathan Foundation. Climate change would appear to be contributing to the problem. Persistent drought during the past five years has led to crop failures and cattle losses, driving many farmers into severe debt. A woman called Krishna told me her husband is jobless, their land barren. They have four small children whom they are struggling to feed. So bad is the situation, they have even been thinking of selling off their land to raise badly-needed cash.
This year, as last year, children died from hunger-related diseases in Chhatarpur. Women whom I met told me of the crushing difficulties they face every day in feeding their children. At a Nutrition Rehabilitation Centre where severely malnourished children are nursed back to health, I learnt first-hand about the ravages of hunger. Some of the women had not just one but several malnourished children to care for. The mothers were so busy with looking after their large families and performing endless household chores that, even when they did have enough food, they often did not have the time to prepare it properly and feed it to their babies.
The point about malnutrition, though, is that it is not like cancer. It does not need some new scientific discovery for us to tackle it. We already have the tools to eradicate hunger and history will judge us if we do not use them.
India is home to more than 230 million undernourished people - the highest number of any one country in the world. But it is also at the forefront of the race to produce innovative nutrition technology. WFP’s India operation is currently developing a “smart” nutritional intervention for children of 6-24 months - exactly the age group of children at the Rehabilitation Centre in Chhatarpur.
This new ready-to-use food is made from ingredients such as chickpeas and dry skimmed milk powder with a range of added micronutrients. There is huge scope for this type of nutritional supplement in India which has the highest prevalence of underweight children in the world, higher even that sub-Saharan Africa. This latest addition to our hunger toolbox can be used not just for rehabilitating malnourished children but for preventing them becoming malnourished in the first place.
This product can be made locally and at relatively low cost - a daily ration costs just five rupees (10 cents). Being oil-based, it does not require water for its preparation, giving it a longer shelf life and making it particularly suitable for use in places with poor sanitation. Nor does it require cooking which makes it ideal for distribution in disaster zones - which is why we deployed it as part of our relief package after the recent cyclone in Myanmar.
It has already excited significant interest in the region and beyond. Afghanistan, Nepal and Bangladesh have all expressed interest in making this product part of their national food programmes. When I produced a sachet at the African Union Summit in Ethiopia not long ago, Prime Minister Meles Zenawi said he wanted to start producing locally it in his own country.
I really feel we are embarking on a new age of tackling malnutrition. For the first time, we have a range of products which can deliver the kind of nutritious ‘punch’ that is needed to hit hunger where it matters.
Another initiative that WFP has pioneered in India has been rice fortification. This has huge potential and could be particularly useful in countries like India which has the largest population suffering from vitamin and mineral deficiencies in the world.
Just one kernel of this fortified rice, added to 99 regular rice kernels, gives an undernourished child or an adult all those micronutrients they so desperately need.
Working in partnership with a Dutch company and the authorities in Orissa, WFP is starting on a pilot project to fortify 10,000 metric tones of rice in the eastern Indian state. This will be distributed over a two-year period through the Indian government’s mother-and-child feeding programme, reaching up to a quarter of a million beneficiaries. The idea is that what happens in Orissa will serve as a model for the Indian government to extend rice fortification to other parts of the country.
Micronutrient powder is another intervention we’ve been working on in India. Sprinkled on cooked food, this tasteless powder delivers meals that contain the daily recommended intake of essential vitamins and minerals. Again, this innovative idea has applications for use way beyond India and the South Asia region.
We’re looking at nothing short of a nutritional revolution here, a change in the way we target specific needs and specific communities. Another issue we have been exploring in India is how to improve the nutritional status of people with HIV and AIDS. Working closely with India’s National AIDS Control Organisation, WFP has devised a special fortified food supplement called ‘NutriPlus’, made from wheat and full-fat soya. Pilot projects in Orissa and in the southern Indian state of Tamil Nadu are now leading the way in the nutritional care of this particular sector of society in India.
Such new products and initiatives come at a crucial moment. In this time of financial crisis and high food prices, people make cut-backs where they can. What goes first is the nutritional content of a family’s diet. My experiences in Chhatarpur and elsewhere in the world have shown me that, when push comes to shove, vulnerable people either cut down on the number of meals they eat or reduce the servings of food. This is particularly hard on children and babies who need that nutrition and those minerals to grow up into healthy, fully-functioning adults.
If we can target the most vulnerable - particularly young children - with tailored nutritional interventions during the crucial early months of their lives, then we will have gone a long way towards winning our battle against malnutrition.