The bright side of an economic crisis

 The downside and excesses of a downturn are always well documented but for a change let us think of the silver lining silhouetted against this dark cloud called economic crisis.

1. Allocation of Resources:

Nature has its own way of correcting the course of this planet  and we humans can be mere spectators if not survivors. Similarly, economic cycles correct the course of resource allocation in an economy from time to time. Unproductive, loss-making and uneconomic businesses are forced to shutdown and new resources are allocated to new sectors and opportunities. This is like the law of the nature, the law of economic cycles to ensure optimum allocation and utilization of resources - a progressive growth oriented economy needs to take these cycles into stride.

2. Over-leveraged Promoters and Companies:

 Every economic crisis is almost accompanied always by a correction in financial asset prices which in turn pressurizes over leveraged promoters and companies. Many of the fall outs of financial crimes in the last couple of decades such as Enron, Madoff or Satyam etc are in the backdrop of a financial asset price correction caused by an economic crisis. When the tide recedes, you get to know who's swimming naked!

3. Regulatory Purge:

Regulators are almost always sure to follow and react to an economic crisis by increasing equity capital buffers, liquidity reserves, reporting requirements, new laws restricting tail risk behavior etc. An economic crisis helps in assessing the strength of the institutional set up of your economy. How resilient is your economy to domestic and external shocks?

Every crisis is an opportunity in disguise!