Nobel Peace Prize laureate Muhammad Yunus says that greed has destroyed the world's financial system. SPIEGEL ONLINE spoke with him about the profit motive, social consciousness and what should be done to end the financial crisis. SPIEGEL ONLINE: Mr. Yunus, for years you have been preaching a more socially conscious way of doing business and have denounced the narrow focus on maximizing profit as harmful. Now, the entire financial system is wobbling ... Muhammad Yunus says that profit should not be the only reason that businesses exist. Yunus: The current turn of events makes me sad. It is certainly not something I am happy about. The collapse has hurt so many people and has suddenly made the entire world unstable. We should now be concentrating on making sure that such a financial crisis does not happen again. SPIEGEL ONLINE: What should be done? Yunus: There are huge holes in the current financial system that need to be plugged. The market is clearly not able to solve these problems itself, and now people are having to run to the governments to ask for emergency assistance. That is not a good sign because it shows that trust in the markets has evaporated. At the moment, there is unfortunately no other option than for government takeovers and government support. That is currently the method being used to combat the crisis -- a method kicked off with the $700 billion bailout package passed in the US. In Germany, the government has likewise jumped into the fray.
Nobel Peace Prize laureate Muhammad Yunus says that greed has destroyed the world's financial system. SPIEGEL ONLINE spoke with him about the profit motive, social consciousness and what should be done to end the financial crisis.
SPIEGEL ONLINE: Mr. Yunus, for years you have been preaching a more socially conscious way of doing business and have denounced the narrow focus on maximizing profit as harmful. Now, the entire financial system is wobbling ...
Muhammad Yunus says that profit should not be the only reason that businesses exist. Yunus: The current turn of events makes me sad. It is certainly not something I am happy about. The collapse has hurt so many people and has suddenly made the entire world unstable. We should now be concentrating on making sure that such a financial crisis does not happen again.
SPIEGEL ONLINE: What should be done?
Yunus: There are huge holes in the current financial system that need to be plugged. The market is clearly not able to solve these problems itself, and now people are having to run to the governments to ask for emergency assistance. That is not a good sign because it shows that trust in the markets has evaporated. At the moment, there is unfortunately no other option than for government takeovers and government support. That is currently the method being used to combat the crisis -- a method kicked off with the $700 billion bailout package passed in the US. In Germany, the government has likewise jumped into the fray.
It is a steep bill. Our shrinking forests cost us up to $5 trillion a year -- far more than the current banking crisis. Environmentalists hope the sobering calculation, made by a European Union commissioned team, will focus political will on funding conservation. Deforestation costs more than the banking crisis, a study shows. How to put a price tag on nature? That conundrum is at the heart of research by a team headed by Deutsche Bank economist Pavan Sukhdev. They have found a way of calculating a figure for environmental damage and loss of biodiversity in forests. And the price is high: At between $2 trillion and $5 trillion per year it dwarfs the cost of the current financial crisis which economists gauge at about $1.5 trillion. Entitled "The Economics of Ecosystems and Biodiversity," the report was originally published in May but has returned to the spotlight at the World Conservation Congress in Barcelona this week. Conservationists gathered at the event have said it underscores the need to ramp up funding for environmental protection. And when making traditional economic calculations, it is all too easy to overlook natural reserves like food, fibers, fuel, clean water, healthy soil and protection from floods, the report said. "Though our well being is totally dependent upon these 'ecosystem services' they are predominantly public goods with no markets and no prices, so they often are not detected by our current economic compass."
It is a steep bill. Our shrinking forests cost us up to $5 trillion a year -- far more than the current banking crisis. Environmentalists hope the sobering calculation, made by a European Union commissioned team, will focus political will on funding conservation.
Deforestation costs more than the banking crisis, a study shows. How to put a price tag on nature? That conundrum is at the heart of research by a team headed by Deutsche Bank economist Pavan Sukhdev. They have found a way of calculating a figure for environmental damage and loss of biodiversity in forests. And the price is high: At between $2 trillion and $5 trillion per year it dwarfs the cost of the current financial crisis which economists gauge at about $1.5 trillion.
Entitled "The Economics of Ecosystems and Biodiversity," the report was originally published in May but has returned to the spotlight at the World Conservation Congress in Barcelona this week. Conservationists gathered at the event have said it underscores the need to ramp up funding for environmental protection.
And when making traditional economic calculations, it is all too easy to overlook natural reserves like food, fibers, fuel, clean water, healthy soil and protection from floods, the report said. "Though our well being is totally dependent upon these 'ecosystem services' they are predominantly public goods with no markets and no prices, so they often are not detected by our current economic compass."
Here we go again. Having fought three rather pointless - though at times bitter - little wars over fishing limits, Britain and Iceland have now allowed a problem over British deposits in a failed Icelandic bank to become a crisis. Instead of two North Atlantic islands who are partners in the North Atlantic Treaty Organisation and who both charged into financial danger zones quietly sorting this out, prime ministers have swapped insults. Echoes of those cod wars are heard. The British Prime Minister, Gordon Brown, has publicly declared Icelandic actions to be "effectively illegal" and "unacceptable" and the Icelandic Prime Minister, Gier Haarde, has expressed his annoyance that the UK used anti-terrorism legislation to seize assets in Britain of the one of the Icelandic banks. In a situation where people's money is at stake, one government tends to blame another and vice versa.
Here we go again.
Having fought three rather pointless - though at times bitter - little wars over fishing limits, Britain and Iceland have now allowed a problem over British deposits in a failed Icelandic bank to become a crisis.
Instead of two North Atlantic islands who are partners in the North Atlantic Treaty Organisation and who both charged into financial danger zones quietly sorting this out, prime ministers have swapped insults. Echoes of those cod wars are heard.
The British Prime Minister, Gordon Brown, has publicly declared Icelandic actions to be "effectively illegal" and "unacceptable" and the Icelandic Prime Minister, Gier Haarde, has expressed his annoyance that the UK used anti-terrorism legislation to seize assets in Britain of the one of the Icelandic banks.
In a situation where people's money is at stake, one government tends to blame another and vice versa.
He evidently doesn't realise that the legislation was actually intended to allow the government and the police to do whatever they want whenever they want. Loads of people have been prevented from demonstrating under it, all dissent,be it against government or private industry,is now covered by the legislation.
We are all terrorists now. keep to the Fen Causeway
"Paranoia strikes deep, into your life it will creep,
It starts when you're always afraid, to step out of line, the man comes, to take you away."
Thank You, Buffalo Springfield, 1960s In the end, might makes right. Nothing has changed since the caveman.
The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don't trust the financial institution named in the buyer's letter of credit, analysts said."There's all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy."So far the problem is mostly being felt in U.S. and South American ports, but observers say it is only a matter of time before it hits Canada."We've got a nightmare in front of us and a lot of people are concerned it's going to get a lot worse," said Anthony Temple, a grain marketing expert based in Vancouver.
Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don't trust the financial institution named in the buyer's letter of credit, analysts said.
"There's all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy."
So far the problem is mostly being felt in U.S. and South American ports, but observers say it is only a matter of time before it hits Canada.
"We've got a nightmare in front of us and a lot of people are concerned it's going to get a lot worse," said Anthony Temple, a grain marketing expert based in Vancouver.
Hat tip to Zandar1 on BT "Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
UK authorities insisted on Friday that action, not words, was needed from this weekend's meeting of the group of seven leading economies if there was to be any hope of saving the world financial system from collapse.As financial markets stared at the abyss, the UK delegation to the meeting sought to raise the stakes in an effort to avoid a mere agreement on a set of broad principles.Describing a world in which wholesale money markets were now refusing to lend to banks, even overnight, the UK authorities warned that the world was on the edge of a collapse of the financial system.The UK does not believe that every country should follow its specific proposals, but they are insisting that all of them must announce measures to demonstrate that they agree on the provision of unlimited liquidity; a plan to strengthen financial institutions, including a huge recapitalisation of banks; and emergency measures for wholesale money markets, which Mr Darling said would "enable banks to start lending to each other".There were indications on Friday that Germany was taking steps in this direction, after the Die Welt newspaper reported that Berlin was working on a UK-style rescue plan for its financial sector which could involve guarantees of more than €100bn ($137.2bn) and a large capital injection.
As financial markets stared at the abyss, the UK delegation to the meeting sought to raise the stakes in an effort to avoid a mere agreement on a set of broad principles.
Describing a world in which wholesale money markets were now refusing to lend to banks, even overnight, the UK authorities warned that the world was on the edge of a collapse of the financial system.
The UK does not believe that every country should follow its specific proposals, but they are insisting that all of them must announce measures to demonstrate that they agree on the provision of unlimited liquidity; a plan to strengthen financial institutions, including a huge recapitalisation of banks; and emergency measures for wholesale money markets, which Mr Darling said would "enable banks to start lending to each other".
There were indications on Friday that Germany was taking steps in this direction, after the Die Welt newspaper reported that Berlin was working on a UK-style rescue plan for its financial sector which could involve guarantees of more than €100bn ($137.2bn) and a large capital injection.
Under the equity purchase program, the Treasury would not be involved in bank management, Paulson said. Equity purchases would take place alongside Treasury's coming program of "broad" mortgage asset purchases, he [Paulson] said. ... Asked about how newly approved funds would be divided between the mortgage-asset and bank equity purchases, Paulson declined to offer specifics. "Any equity the government purchases through a broadly available equity program would be on a non-voting basis, except with respect to the market-standard terms to protect our rights as investors," Paulson said.
Asked about how newly approved funds would be divided between the mortgage-asset and bank equity purchases, Paulson declined to offer specifics.
"Any equity the government purchases through a broadly available equity program would be on a non-voting basis, except with respect to the market-standard terms to protect our rights as investors," Paulson said.
A Prisoner's Dilemma | Kucinich | 5 Oct 2008
Instead of Democrats going back to classic New Deal economics where we prime the pump of the economy and start money circulating among the population through saving homes, creating jobs and building a new infrastructure, our leaders chose to accelerate the wealth of the nation upwards. They did so in a way that was destructive of free-market principles. They ripped away all the familiar moorings. We are in an uncharted sea where the traditional roles of the political parties are being switched. The Democrats have unfortunately become so enamored and beholden to Wall Street that we are not functioning to defend the economic interest of the broad base of the American people. It was up to the Republicans to protect not just a so-called free market but the American taxpayer and attempt to block this. This is an outrage. This was democracy's Black Friday. ... We had two take-it-or-leave-it propositions and the second one was worse than the first ...Tax cuts are antithetical to a bailout. We never solved the problem. There were never any hearings on the bill. This premise, that we could prop up the stock market with a $700-billion investment and create some liquidity, was flawed. The problem is that banks do not want to loan to each other. It is not a liquidity problem. Banks are afraid they are going to collapse in short selling. There is a war going on between security firms and banks. Banks are under assault. They are not loaning. The dynamic is driven by the Accounting Standards Board, the Securities and Exchange Commission and the Fed.
We had two take-it-or-leave-it propositions and the second one was worse than the first ...Tax cuts are antithetical to a bailout. We never solved the problem. There were never any hearings on the bill. This premise, that we could prop up the stock market with a $700-billion investment and create some liquidity, was flawed. The problem is that banks do not want to loan to each other. It is not a liquidity problem. Banks are afraid they are going to collapse in short selling. There is a war going on between security firms and banks. Banks are under assault. They are not loaning. The dynamic is driven by the Accounting Standards Board, the Securities and Exchange Commission and the Fed.
A Redemption Song to whistle while you vote. Diversity is the key to economic and political evolution.
Next, rumors of food shortages, hoarding, and food riots. Let the poor/middle class kill themselves off while the wealthy put their feet up, sip 30 year old single malt, and chuckle.
We could have changed things since Reagan and CHOSE not to. Time to reap our rewards. In the end, might makes right. Nothing has changed since the caveman.
(sorry vbo) You can't be me, I'm taken
U.S. stock markets gyrated wildly yesterday as the world's top finance ministers met in Washington to hammer out a joint set of principles aimed at containing the financial crisis and restoring badly damaged confidence. [...] Over the past five days, the Dow Jones industrial average has registered the biggest weekly percentage decline in its 112-year history, surpassing the record decline set during the Depression, in the week ending July 22, 1933. Finance ministers from the world's seven biggest industrialized economies, in Washington for a regularly scheduled meeting, issued a communique last night vowing to "take all necessary steps to unfreeze credit and money markets" and to "use all available tools" to prop up and prevent the failure of institutions critical to the financial system. U.S. Treasury Secretary Henry M. Paulson Jr. confirmed earlier reports that the United States is drawing up plans to buy equity stakes in financial firms. He said federal money would be offered on a "standardized" basis to all banks in a way that would attract new private capital, as well. The finance ministers' communique was designed to assure investors that world leaders would work in concert rather than at cross-purposes in forging measures to aid besieged financial institutions. It laid out common guidelines that endorsed the injection of capital into the banking system, the purchase of troubled assets from banks and broader guarantees of deposits. Europeans were also pressing for guarantees of interbank lending, though the Bush administration was reluctant to embrace the measure.
U.S. stock markets gyrated wildly yesterday as the world's top finance ministers met in Washington to hammer out a joint set of principles aimed at containing the financial crisis and restoring badly damaged confidence.
[...]
Over the past five days, the Dow Jones industrial average has registered the biggest weekly percentage decline in its 112-year history, surpassing the record decline set during the Depression, in the week ending July 22, 1933.
Finance ministers from the world's seven biggest industrialized economies, in Washington for a regularly scheduled meeting, issued a communique last night vowing to "take all necessary steps to unfreeze credit and money markets" and to "use all available tools" to prop up and prevent the failure of institutions critical to the financial system.
U.S. Treasury Secretary Henry M. Paulson Jr. confirmed earlier reports that the United States is drawing up plans to buy equity stakes in financial firms. He said federal money would be offered on a "standardized" basis to all banks in a way that would attract new private capital, as well.
The finance ministers' communique was designed to assure investors that world leaders would work in concert rather than at cross-purposes in forging measures to aid besieged financial institutions. It laid out common guidelines that endorsed the injection of capital into the banking system, the purchase of troubled assets from banks and broader guarantees of deposits. Europeans were also pressing for guarantees of interbank lending, though the Bush administration was reluctant to embrace the measure.
Call it a crash, call it a rout, but please don't describe yesterday's selling as irrational. The frightening part is that so many of the pressures on the market could be explained. If you were a shareholder in an American bank, would you want to own your stock over a long weekend? You know that $400bn or so of losses from Lehman Brothers' bonds are about to emerge, but you don't know where. Your shareholding could be worthless on Tuesday.If your bank emerges unscathed, you might pay a 10% premium to buy back your investment next week, but that can seem a reasonable price to pay for a few nights of more restful sleep.Equally, would any investor wish to put faith in a coordinated response to the crisis from leaders of Group of Seven wealthy nations? The world's major central banks managed to cut interest rates in a coordinated manner on Wednesday, but saving the global banking system in an afternoon is a bigger job.
Call it a crash, call it a rout, but please don't describe yesterday's selling as irrational. The frightening part is that so many of the pressures on the market could be explained. If you were a shareholder in an American bank, would you want to own your stock over a long weekend? You know that $400bn or so of losses from Lehman Brothers' bonds are about to emerge, but you don't know where. Your shareholding could be worthless on Tuesday.
If your bank emerges unscathed, you might pay a 10% premium to buy back your investment next week, but that can seem a reasonable price to pay for a few nights of more restful sleep.
Equally, would any investor wish to put faith in a coordinated response to the crisis from leaders of Group of Seven wealthy nations? The world's major central banks managed to cut interest rates in a coordinated manner on Wednesday, but saving the global banking system in an afternoon is a bigger job.
DETROIT -- General Motors is in preliminary talks about a possible merger with Chrysler, a deal that could drastically remake the landscape of the auto industry by reducing the Big Three of Detroit automakers to the Big Two. The talks between G.M. and Cerberus Capital Management, the private equity firm that owns Chrysler, began more than a month ago, and the negotiations are not certain to produce a deal. Two people close to the process said the chances of a merger were "50-50" as of Friday and would most likely still take weeks to work out.A merger would be a historic event, with two of the most iconic names in American industry coming together to survive in an increasingly difficult environment. Both have roots dating back decades in Detroit and, with Ford, long dominated the auto industry -- until Japanese and other foreign car makers began making inroads into the American market.The auto industry is being pummeled from all sides -- by high gas prices that have soured consumers on profitable S.U.V.'s, by a softening economy that has scared shoppers away from showrooms, and by tight credit that is making it difficult for willing buyers to obtain loans. Both G.M. and Chrysler have been struggling with product lineups that are out of sync with consumer demand for smaller, more fuel-efficient cars.General Motors' stock has fallen from more than $43 a share last year to less than $5, and it is burning through its cash hoard at a rapid rate. Chrysler, as a private company, no longer needs to report its finances.
DETROIT -- General Motors is in preliminary talks about a possible merger with Chrysler, a deal that could drastically remake the landscape of the auto industry by reducing the Big Three of Detroit automakers to the Big Two.
The talks between G.M. and Cerberus Capital Management, the private equity firm that owns Chrysler, began more than a month ago, and the negotiations are not certain to produce a deal. Two people close to the process said the chances of a merger were "50-50" as of Friday and would most likely still take weeks to work out.
A merger would be a historic event, with two of the most iconic names in American industry coming together to survive in an increasingly difficult environment. Both have roots dating back decades in Detroit and, with Ford, long dominated the auto industry -- until Japanese and other foreign car makers began making inroads into the American market.
The auto industry is being pummeled from all sides -- by high gas prices that have soured consumers on profitable S.U.V.'s, by a softening economy that has scared shoppers away from showrooms, and by tight credit that is making it difficult for willing buyers to obtain loans. Both G.M. and Chrysler have been struggling with product lineups that are out of sync with consumer demand for smaller, more fuel-efficient cars.
General Motors' stock has fallen from more than $43 a share last year to less than $5, and it is burning through its cash hoard at a rapid rate. Chrysler, as a private company, no longer needs to report its finances.
That's a double whammy for the consumer - expensive to run, impossible to buy. US dealerships are folding like marquees in a storm. I'd guess the winners in this - if there are any - would be the workshops. Maintenance will be needed, mods and tune-ups to use less fuel, etc. Maybe some Cuban mechanics could be imported ;-) You can't be me, I'm taken
