William Shakespeare’s famous quote from Hamlet, “When sorrows come, spies do not come individually, but in battalions,” is particularly relevant today.
All the news seems bad. Negative numbers are huge. The human devastation seems endless. Governments everywhere seem to have lost control. Debt is wicked at the personal, corporate, and government levels.
This glass seems to be almost empty. It is not!

From the depths of disaster grow the seeds of opportunity. Just as Mother Nature’s wildfires remove brush and allow fields and forests to regenerate, so does the opportunity that arises from social and financial collapse. Eliminating diseased institutions gives entrepreneurs and reformers an opportunity to fill an essential void.

Throughout history, dynasties, dictatorships, and tyrants have risen and eventually fallen. They are usually replaced with something much better.
The violence of the French Revolution allowed Napoleon Bonaparte to turn France into a warring state under his dictatorial regime. His “Waterloo” allowed the state to become a modern, democratically governed republic. The Habsburgs in Germany, the Hohenzollerns in Austria, and the Bourbons in France all enjoyed the wealth, power, and comforts of royal rule before being consigned to the dustbin of history.

Hitler in Germany, Hirohito in Japan, and the communist dictators in Russia all fell and were succeeded by democratic governments with a more open, modern style of governance. Their oppressive rule led their populations disastrously into decades of war, famine, and social despair. Something far better has acceded to his brutality.

Companies have historically expired if they didn’t evolve and regenerate as markets moved toward new technologies. Home delivery of ice in the first half of the 20th century was replaced by the mass marketing of refrigerators. Manufacturers of carts, whips, buggies, and bicycles disappeared as the automobile became an affordable means of transportation. The acceptance of Thomas Edison’s incandescent light bulb greatly diminished the need for thousands of local candle makers.

As the automobile industry developed, there were hundreds of nameplates producing niche vehicles. Names like Packard, Stutz, Essex, LaSalle, Dusenburg, Austin and Cord, and most other car brands grew, stagnated, and died because they couldn’t compete with new tastes, technologies, economies of scale, and mass manufacturing techniques. Developed by tycoons like Alfred Sloan, Henry Ford and Walter Chrysler. General Motors, Ford Motor Company, and Chrysler became giants with huge profits, international distribution, and massive marketing programs. The rest simply faded away leaving little more than remnants.

Today, “The Big Three”, Chrysler, Ford and General Motors, are all looking at the angel of death. To paraphrase Shakespeare’s Hamlet quote, “her sorrows are here, and they are here in battalions.” Every mistake that management and workers could make that would harm a business institution they have made, and often repeatedly. Incorrect model choices, lack of recognition of the fundamental problem of fuel economy, boring styling, strangling union work rules, and low-quality perceptions are just a few of the reasons “The Big Three” they are so close to being the three, the two, or the midgets. It seems highly unlikely that they will continue to exist as independent entities.

Much is made of the potential loss to the United States of any or all of these iconic automakers. And yet, car manufacturing in the country is booming. Mercedes-Benz, Subaru, Honda, BMW, Toyota, and Nissan have all built factories here in recent decades. Volkswagen has announced that they plan to do so as well. Each of these brands has specific features, style and benefits that they incorporate into their machines that “The Big Three” hadn’t identified. Furthermore, they have all built their factories in “right to work” states, where union influence is minimal. While they pay excellent wages and provide competitive benefits, these foreign companies are not bound by arcane and unproductive work rules. They don’t face the legacy costs that price national manufacturer models at such high retail prices.

We are all being affected by a global financial conflagration. The future economic well-being of citizens, industry, and governments around the world is intertwined and will be decided by how the people who got us into this mess come to get us out. I use the pronoun “we”, because almost all of us are to blame.

Foreclosures are on the rise due to stupidity and greed. People today, certainly in developed countries, crave things they don’t need and can’t afford. Some people shouldn’t be homeowners. They cannot afford the maintenance, insurance, down payment, or taxes that come with home ownership. A married couple with one child and a monthly income of $3,500 should never have attempted to purchase a $400,000, 4-bedroom home with a subprime loan with no down payment. They were fools, as were the lender, mortgage broker, and buyer of the derivative this loan was packaged into.

The banks and insurance companies that bought these esoteric, historically very profitable mortgage-derived vehicles, are dropping like flies. Northern Rock in England, ING in Holland, Indy Mac, Countrywide, Wachovia and WaMu here are just some of the powerful financial institutions that are now closed, merged or selling assets. Insurance giant AIG has been taken over by the government. Lehman Brothers, one of the most venerable and respected investment banks, was closed by the government. Merrill Lynch has been sold to Bank of America.

Fannie Mae and Freddie Mac have been criticized for their role in precipitating the credit bubble that has brought us to this precipice. Congress, which passed laws that encourage Fannie and Freddie to make bad loans to uncreditworthy borrowers, is looking for scapegoats. Several of our congressional saints want to see “criminal rides.” I agree. However, I am sure that the real “criminals” will not walk.

The problems seem endless and overwhelming. They come “in battalions”. However, we will survive this, hopefully learn from it, and thrive on the opportunity to fill the gaps opened up by systemic failure. Equity markets appear to offer a “once in a lifetime” opportunity to profit from the heavy losses incurred due to the panic-induced credit meltdown. Strong and agile financial institutions, such as Wells Fargo and State Street, will emerge to fill the void left by the demise of hundreds of companies.

People will have to make more prudent purchasing decisions. 84- and 96-month auto loans will disappear, making it harder to buy luxury cars. “Fur in the game” will be required in the form of down payments to purchase real estate, benefiting both the owner and the lender. Credit cards will be more difficult to obtain and credit limits will be lower.

Each person can use this whirlwind as an opportunity to review their real needs and wants. Living below one’s means might even come back.