Doom Loop Model for Banks and Governments

Doom Loop is considered to be a negative spiral that can be occurred, when banks hold sovereign bonds and then governments with weak public finances bail-out against such banks.

In the context of finance and economics on the large scale, a concept of Doom Loop is considered to be a negative spiral that can be occurred when banks hold sovereign bonds, and then governments with weak public finances bail-out against such banks.

Banks need more government support Banks' borrowing costs rise banks' loans go bad Governments can't finance themselves  Investors lose faith in governments Governments lean on banks to buy their bonds Governments bail out banks
#Flywheel and Doom Loop for Entrepreneurs, Governments and Banks

Pinpoints of Doom-Loop are describing in a list view below:
  • Banks need more government support
  • Banks' borrowing costs rise
  • Banks' loans go bad
  • Governments can't finance themselves
  •  Investors lose faith in governments
  • Governments lean on banks to buy their bonds
  • Governments bail out banks

European Example Forum:
European governments were growing concerned about the doom loop among some large banks and the Euro-governments. Their Governments were exposed to bank risk, as well as banks were exposed to sovereign risk by holding government bonds in their portfolios. On the contrary, other names for the doom loop include the “diabolic loop” and “vicious circle”,

All of the above reasons, Regulatory of  European bank still treat government debt as risk-free

In respect of the Euro Area Sovereign Debt Crisis of 2011-2012: Where the doom loop was primarily domestic, and banks were home-biased in all their asset allocation, simply making them exposed to domestic sovereign risk. While the sovereign debt crisis had to be coped, then home bias for banks was parallel and increased by the way. But now in 2020, Italian banks remain economically vulnerable due to their significant holdings of Italian sovereign debt. And then according to these governmental statistics, Italy’s government debt to gross domestic product (GDP) ratio is roughly 135%.
Briefing of Bailouts by Government against such Large Banks
The three main types of bank bailouts: guarantees, liquidity assistance, and recapitalization.
 The two types of international bailouts are debt forgiveness and international loans.
Snapshot of the two main organizational performance concepts :
#Graphical presentation of Doom Loop and Flywheel
What is the Doom Loop? 

No careful process- just simply doing it..

Instead of a quiet and careful process of figuring out 
what needed to be done and simply doing it...

Comparison companies:
  1. Frequently Launched New Programs.
  2. Made it a big deal to Motivate.
  3. Programs failed to produce lasting results.
  4. Fell inside the Doom Loop.
                                                                                   
Flywheel Effect:

When people begin to feel the Magic of Momentum when they begin to see tangible results when they can feel the flywheel beginning to build speed that's when the bulk of people line up to throw their shoulders against the wheel and push.
  1. Each piece of the system reinforces the other parts.
  2. An integrated whole that is much more powerful than the sum of the parts.

Are you in the Flywheel or in the Doom Loop?

(i)- Flywheel Model as a Wraparound Idea

  1. · Follow a pattern of buildup leading to a breakthrough.
  2. · Reach breakthrough by an accumulation of steps, one after the other, turn by turn of the flywheel; feels like an organic evolutionary process.
  3. · Confront the brutal fads to see clearly what steps must be taken to build momentum.
  4. · Attain consistency with clear Hedgehog Concept, resolutely staying within the three circles.
  5. · Follow the pattern of disciplined people ("first who"), disciplined thought, disciplined action.
  6. · Harness appropriate technologies to your Hedgehog Concept, to accelerate momentum.
  7. · Make major acquisitions after breakthrough (if at all)
  8. · Spend little energy trying to motivate or align people.
  9. · Let results do most of the talking.
  10. Maintain consistency over time.

(ii)- The Doom Loop Model 

  1. · Skip buildup and jump right to breakthrough.
  2. · Implement big programs, radical change efforts, dramatic revolutions; chronic restructuring-always looking for a miracle moment or new savior.
  3. · Embrace fads and engage in management hoopla, rather than confront the brutal facts.
  4. · Demonstrate chronic inconsistency-lurching back and forth and out of the three circles.
  5. · Jump right to action, without disciplined thought and without first getting the right people on the bus.
  6. · Run about like Chicken Little in reaction to technology
  7. · Make major acquisitions before breakthrough.
  8. · Spend a lot of energy trying to align and motivate people.
  9. · Sell the future.
  10. · Inconsistency over time.
Two common patterns of the Doom Loop from company to company:
a)- The misguided use of Acquisitions. 
  • Good - to -great companies used acquisitions as an accelerator of flywheel momentum, not a creator of it.
  • The comparison often tried to jump straight to a breakthrough via an acquisition or merger.
b)- Leaders who stops the Flywheel.
  • New leaders who step in, stop an already spinning flywheel, and throw it in an entirely new direction.
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Reference Articles:

That's why, in the Context of International Banking, Doom Loops have been becoming a serious problem that should be considered to a re-direct effect on Economic Health.

Flywheel and Doom Loop is also Essential for Successful Entrepreneurs when success is under the doubt and entrepreneurs have to take part in change management, muddling through the strategy, by using the Freewheeling Strategic Model.

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Beyond Narrative | Blog Where Every Single Word Matters: Doom Loop Model for Banks and Governments
Doom Loop Model for Banks and Governments
Doom Loop is considered to be a negative spiral that can be occurred, when banks hold sovereign bonds and then governments with weak public finances bail-out against such banks.
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Beyond Narrative | Blog Where Every Single Word Matters
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