Was August When the Slowdown Finally Took Hold ?
I was just about to launch into an entirely different topic to the one that had me triggered last month , one that was requiring considerable ' loin girding ' as it would , for sure , be contentious - oh yes , very . Then an alert fell into my inbox which span me straight back to where I was a month ago . Having been exposed to dozens of worthy types and media outlets telling me how the European Central Bank ( ECB ) had reached peak interest rate hike in the fight against inflation , and about how the only conceivable direction of travel from here on would be south then , yes , you ' ve guessed it . In comes an advisory that , in fact , the ECB has raised its interest rates ( again ) on main refinancing operations , the marginal lending facility , and the deposit facility being increased to 4.50 %, 4.75 % and 4.00 % respectively . This equates to a base rate of 4.75 % in ' old-speak '. So much for the ' talking heads ', so much for the illustrious Christine Lagarde ' s experience and her own prior remarks ( she is the former French Finance Minister who was Managing Director of the IMF for a long time and is now President of ECB ). An impressive resume , yes , and she ' s an impressive operator who has proven to be genuinely very good at her jobs . But if even she can get it wrong in the present economic climate , then the rest of us have no chance . What ' s this got to do with us ? Everything and nothing . Ultimately , thank goodness , our livelihoods are dependant on the number of people who want to ride motorcycles and the number of miles they do . Simple . On the other hand , the economies we are dependent on are not that simple . And if they really are being steered by people who have no better handle on what to do and how to do it than the rest of us , then the past 15 years of fiscal caution have got us nowhere . As it happens , I am writing this on the 15th anniversary of the September 12 , 2008 ' Lehman Apocalypse .' These days people think the quick ' In and Out ' burger that was the March 2020 pandemic recession was the biggest economic deal in their lifetimes . That the 2020 to 2022 supply chain inflation farrago was the biggest challenge to businesses . That impacts of the war in Ukraine is to blame for all of our present travails . All negative and all bad , for sure , and still casting a long shadow , but how the memory fades . What price institutional memory ? The present difficulties are as nothing compared to the ' edge of oblivion ' the world teetered on in the fall of 2008 and then , just as now , very few siren voices knew how to respond , what to do or how to do it . The answer then proved to be so-called ' quantitative easing ' - aka ' printing money '. If only life was that simple . The ( absolutely necessary ) measure did its job , it provided a platform for recovery and though way more palatable than the alternative , it did two things that now , 15 years on , are lurking in the back-office of our present malaise . It loaded the primary economies of Earth Inc ., with a horrendous debt burden that is now utterly shaping the ever-diminishing wriggle room that governments , central banks and treasury departments have to be able to regulate for a stable fiscal environment and pull levers to finesse the response to the present inflation-berg . Second , as sure as any addictive substance , it got bankers hooked on the assumption that it wasn ' t their job to manage the economy responsibly anymore because finance
' horrendous debt burden '
ministers would appear on the horizon and ride to their rescue . The whole financial sector has gotten itself hooked on the crack cocaine of cheap money and easy solutions . Guess what - having got so used to the bottomless pit of public money that governments had invited them to bury their snouts into again proved to be the first bag of hallucinogenic that they reached for when the pandemic arrived . It then got raided again when inflation started to get out of hand . Only now have the primary financial administrations of the free market world drawn a line under it as a policy of first resort , and stated their determination to let it gather dust on the top shelf as what it is supposed to be - a policy of last resort . So why am I discussing all this ? Why should anyone care ? Because , quite simply put , what goes round has always , eventually , has come back around and , quite clearly , is continuing to do so . First , having , in 2008 and 2009 , drilled down way beyond sustainable long-term debt levels into the permafrost of debt dependancy , 15 years on the increases in interest rates are having a disproportionate effect on the affordability of government , business and consumer debt - just when it was needed , just at the moment when ( although always unethical as far as I am concerned ), it would have been having its moment of cost-effective usefulness . The selection of financial factoids sprinkled through the ' Briefs ' in this month ' s news pages are just the tip of an iceberg of debt issues that threaten to engulf global capitalism and plunge us into a Japanese style economic nuclear winter of stagflation , collapsed capital markets , low yields and low investment that could haunt us for a couple of decades . In the past few years , I have been particularly concerned at the lack of new product R & D taking place in our own industry . Yes , of course , there are some new products coming to market - some , a steady trickle . But the motorcycle P & A and G & A sectors are not managing to afford the scale of innovation that is their primary pathway to growth . This has been apparent at all the shows I have managed to visit since travel and shows became available again . As I start to eye the upcoming EICMA ' Milan ' Show in seven weeks ( at the time of writing ) I am fearful of seeing that paucity replicated there , of all shows , because , in business terms , Milan really is a window into the current state of the motorcycle accessories industry . Secondly , we are now closing in on the tenth anniversary of that ill-fated so-called " merger " between Ticker Rocky ( as was ) and MAG - happening , as it did , just as the industry was traversing what we all thought then was the bottom of the cycle . We all knew then that it wouldn ' t , couldn ' t end well ( thank you for nothing Mr Private Equity sector ). The continuing fallout from that fiasco will be impacting the prospects for dozens if not hundreds of vendors , and dozens if not hundreds of industry professionals this winter .
Robin Bradley
Co-owner / Editor-in-Chief robin @ dealer-world . com