Economy – Page 11

“The success of the US automakers”

Published on February 20, 2009

We proceeded to the panel discussion, during which Mossberg encouraged the Great Men to waffle with him at great length about the Apple iPhone, possibly because this was a level of discussion he felt comfortable with. Then, he turned to taking the rise out of the head of Nokia (clearly some minor provincial), apparently having no idea where he was and who the audience were. At one point he used the success of the US automakers as an example; apparently, even if the Europeans had invented the car, blah, blah. Why was Nokia so weak in the US? Kallasvuo replied to this at some length, taking in several major news announcements of the day, some technical issues, questions of design and more.

We’re dooomed — but it’s not the end of the world

Published on February 19, 2009

Dmitry Orlov lays out the realities of the coming collapse of the United States and what you can do to survive through it:

So that’s what we have now. The ship is on the rocks, water is rising, and the captain is shouting “Full steam ahead! We are sailing to Afghanistan!” Do you listen to Ahab up on the bridge, or do you desert your post in the engine room and go help deploy the lifeboats? If you thought that the previous episode of uncontrolled debt expansion, globalized Ponzi schemes, and economic hollowing-out was silly, then I predict that you will find this next episode of feckless grasping at macroeconomic straws even sillier. Except that it won’t be funny: what is crashing now is our life support system: all the systems and institutions that are keeping us alive. And so I don’t recommend passively standing around and watching the show – unless you happen to have a death wish.

Right now the Washington economic stimulus team is putting on their Scuba gear and diving down to the engine room to try to invent a way to get a diesel engine to run on seawater. They spoke of change, but in reality they are terrified of change and want to cling with all their might to the status quo. But this game will soon be over, and they don’t have any idea what to do next.

So, what is there for them to do? Forget “growth,” forget “jobs,” forget “financial stability.” What should their realistic new objectives be? Well, here they are: food, shelter, transportation, and security. Their task is to find a way to provide all of these necessities on an emergency basis, in absence of a functioning economy, with commerce at a standstill, with little or no access to imports, and to make them available to a population that is largely penniless. If successful, society will remain largely intact, and will be able to begin a slow and painful process of cultural transition, and eventually develop a new economy, a gradually de-industrializing economy, at a much lower level of resource expenditure, characterized by a quite a lot of austerity and even poverty, but in conditions that are safe, decent, and dignified. If unsuccessful, society will be gradually destroyed in a series of convulsions that will leave a defunct nation composed of many wretched little fiefdoms. Given its largely depleted resource base, a dysfunctional, collapsing infrastructure, and its history of unresolved social conflicts, the territory of the Former United States will undergo a process of steady degeneration punctuated by natural and man-made cataclysms.

There you have it, a real message of hope and cheer for everybody. Don’t blame me, blame Blood and Treasure.

PFI: the next bailout

Published on February 18, 2009

Various Private Finance Initiatives (projects in which government infrastructure is built through private capital which is then paid back with exorbitant profits) are having trouble attracting funding, hence the government should put more money in them. That’s right, the state should provide the money to private investors so that they can then rake in the profits later:

But Tim Pearson, director of private equity firm Innisfree and spokesman for the PPP Forum, said private firms might need state help for funding that should have come from commercial loans.

“Because we are having problems raising the funding, what we are now looking at is alternative funding structures,” Mr Pearson told BBC Radio 4’s World This Weekend.

We need to be very careful about the taxpayer taking all the risks and the private partners taking all the benefits

Even with possible European Investment Bank funding and increased equity investment, there could still be a funding gap of up to 40%, he said.

“This is where the problem is, because although there is debt available, there is not much of it and the terms are much too expensive,” said Mr Pearson.

“This is where we are looking to talk with the government and say we can go ahead with this business, but it is more expensive.”

He said state funding would be “to some extent against the principle” of PFI, but added it was not fundamentally a problem.

Liberal Democrat Treasury spokesman Vince Cable, a long-time sceptic about PFI, said the government should go back to more traditional public financing structures rather than use taxpayers’ money to prop up the public-private model.

Meanwhile the banks the government has already partially or whiolly nationalised own a big chunk of the PFI market; wouldn’t it make sense to take away these projects completely, as part payment for the rescue of these banks? It’s more than a bit stupid to let one arm of government keep on paying another arm of government rather than actually invest it in much needed services. the banks would only use the money to pay bonuses with anyway.

Goldman Sachs: 6.5 billion in bonuses Burger King workers: nada

Published on February 18, 2009

Here’s a Wall Street whopper for you. Goldman Sachs, where former Treasury Secretary Hank Paulson was once CEO, switched from an investment bank to a bank holding company last year so it could qualify for $10 billion in bailout funds. They then spent $6.5 billion on bonuses for their financial staff. Goldman’s recklessness is one of several scandalous stories of Wall Street giants abusing the bailout at the expense of taxpayers and the economy. But in this case, Goldman’s excessive spending has had an immediate and profound impact on the American work force.

Goldman Sachs is one of the largest owners of Burger King, which employees about 360,000 workers nationwide. The average Burger King salary is $14,000 a year–three grand less than the federal poverty line. According to the SEIU and a new campaign from Brave New Films, had Goldman used the $6.5 billion blown on bonuses to help Burger King’s woefully underpaid employees, each BK worker would have received an extra $18,000 last year

Meanwhile, in the UK the bad news of workers at the BMW mini plant losing their jobs, of Woolworths closing down is supposed to be balanced by the “good” news that KFC is expanding. As if trading in your (reasonably) highly paid job doing skilled work for frying chicken nuggets is a good thing.

Doug Henwood on the American recession

Published on January 24, 2009

Steve Perry interviews Doug Henwood about the American recession and its causes:

We’ve seen for the last 30 years or so that debt was used by a lot of people to compensate for very weak income growth. The real value of the hourly wage in the US peaked in 1973, declined into the mid-90s, picked up a bit in the late ‘90s, and now has been flat to declining ever since. In the face of stagnant incomes, people worked harder. More people from families went to work. They worked longer hours. But they also borrowed very aggressively. So one reason we saw this tremendous growth in debt over the last couple of decades was to compensate for those deficiencies in the real economy–the weakness of real wages for most people.

What are we going to do about that? We can work off all the debt we want, and the banks can do all the write-offs they want, but if we still have very weak income growth–and, as we’ve seen through the 2001-2007 expansion, very weak employment growth (the weakest labor market income growth we’ve ever seen in a post-WWII expansion)–then you still have a fundamental problem. And I don’t think going through this financial exercise of restructuring the banks is going to do anything to solve that underlying fundamental problem.

In other words, the roots of the current crisis go back decades and have their origin in the succesful push back of capital against America’s workers. Since 1973 real wages have steadily decreased for the majority of American workers, but this trend has been masked first by the increase of double income households, then by families eating into their capital by drawing credit on the value of their house. Through boom and bust this trend has hold steady, with the only real exception being during Clinton’s second term, thanks to some lingering Democratic concern for the working classes.

It’s no wonder then that Doug Henwood is pessimistic about a quick resolution of the current depression, as long as this underlying reality isn’t addressed and the chances of that aren’t great, even with Barack Obama in the White House. What we’ve seen with the crisis so far is that governments worldwide are hellbent on saving capital, but not so much in safeguarding jobs. The danger is that when the crisis will be declared over in a year or two, the economy will be picking up again but with only the stockbrokers and shareholders profiting and the working classes, which is most of us, still in the hole.