The Ford Motor Company on Monday posted a surprise third-quarter profit of $997 million and said it had had its first profitable quarter in North America in more than four years. The carmaker also said that, at least temporarily, it had stopped rapidly burning through its much-needed cash reserves. It reported positive cash flow of $2.8 billion during the quarter, ending September with $23.8 billion. Through the first nine months of 2009, Ford, the only Detroit automaker to avoid bankruptcy this year, has had a profit of more than $1.8 billion. Still, it has lost about $1.3 billion when one-time items, like a major debt restructuring, are excluded.
The carmaker also said that, at least temporarily, it had stopped rapidly burning through its much-needed cash reserves. It reported positive cash flow of $2.8 billion during the quarter, ending September with $23.8 billion.
Through the first nine months of 2009, Ford, the only Detroit automaker to avoid bankruptcy this year, has had a profit of more than $1.8 billion. Still, it has lost about $1.3 billion when one-time items, like a major debt restructuring, are excluded.
So this is not unexpected :P En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Royal Bank of Scotland on Monday said it was considering further asset sales "not initially contemplated", as part of the talks with the government aimed at breaking free from a state-backed asset insurance scheme. But the bankworkers union Unite condemned what it said were plans to cut up to 3,700 jobs across the bank's branches. "For RBS to announce the cut of 3,700 frontline bank staff from their high street branches across the UK is absolute madness," said Rob MacGregor, Unite national officer.
But the bankworkers union Unite condemned what it said were plans to cut up to 3,700 jobs across the bank's branches.
"For RBS to announce the cut of 3,700 frontline bank staff from their high street branches across the UK is absolute madness," said Rob MacGregor, Unite national officer.
Just over a year ago we thought that the £37bn injection of equity by the government into Lloyds and RBS was the landmark, never-to-be-repeated event. Bailout 1.0 literally saved the banking system from collapse, and was copied around the world. Then, in January, came Bailout 2.0, which we were told would be a bailout not of the banks, but of the economy. That bailout was to enable the banks to continue lending to prospective homeowners and to businesses. And now we have Bailout 3.0.* Incredibly, the extent of actual taxpayer funding into these two banking giants will be larger than the first bailout, which rescued them from collapse. £40bn more. This will be spent on banking shares that have fallen in price since the last tranche was bought. RBS, two years ago the sixth biggest bank in the world on some measures, will now be 84 per cent owned by the state.
Just over a year ago we thought that the £37bn injection of equity by the government into Lloyds and RBS was the landmark, never-to-be-repeated event. Bailout 1.0 literally saved the banking system from collapse, and was copied around the world.
Then, in January, came Bailout 2.0, which we were told would be a bailout not of the banks, but of the economy. That bailout was to enable the banks to continue lending to prospective homeowners and to businesses.
And now we have Bailout 3.0.* Incredibly, the extent of actual taxpayer funding into these two banking giants will be larger than the first bailout, which rescued them from collapse. £40bn more. This will be spent on banking shares that have fallen in price since the last tranche was bought. RBS, two years ago the sixth biggest bank in the world on some measures, will now be 84 per cent owned by the state.
Dutch banks worked for years to penetrate markets abroad. Now that ABN Amro has been split in three and ING is withdrawing to Europe, little remains of their efforts.or a long time the Dutch banks were among the world's best, but now they are withdrawing to Europe and primarily their home market, involuntarily or otherwise. In 2005 ING had a balance sheet total of 1,159 billion euros, just 100 billion less than French BNP Paribas. And ABN Amro was almost as large as Deutsche Bank. The two could measure up to the top banks in Europe. Last year Deutsche Bank and BNP grew to over 2,000 billion euros, but ABN Amro fell to 666 billion. Once ING has split itself up, the financial group will be only a shadow of its former self. ING and ABN Amro have fallen to the level of the 1990s, the period in which both major banks were created from mergers. It is a development that will affect the strategy for the coming years and which will also have consequences within the national borders. The competition will most likely become even tougher and the slimmed down institutions can become prey to takeovers once the recession is over.
or a long time the Dutch banks were among the world's best, but now they are withdrawing to Europe and primarily their home market, involuntarily or otherwise.
In 2005 ING had a balance sheet total of 1,159 billion euros, just 100 billion less than French BNP Paribas. And ABN Amro was almost as large as Deutsche Bank. The two could measure up to the top banks in Europe. Last year Deutsche Bank and BNP grew to over 2,000 billion euros, but ABN Amro fell to 666 billion. Once ING has split itself up, the financial group will be only a shadow of its former self. ING and ABN Amro have fallen to the level of the 1990s, the period in which both major banks were created from mergers. It is a development that will affect the strategy for the coming years and which will also have consequences within the national borders. The competition will most likely become even tougher and the slimmed down institutions can become prey to takeovers once the recession is over.
Americans have always believed that their country is unique in providing the opportunity to get ahead. ... But rising unemployment and financial turmoil are puncturing that self-image. The reality of this "land of opportunity" is considerably more complex than the myths would suggest. Five Myths About Our Land of Opportunity, by Isabel V. Sawhill and Ron Haskins, Brookings:
5. We can fund new programs to boost opportunity by cutting waste and abuse in the federal budget.
1. USA [Not likely, to summarize.]
2. Australia The Australian result of only one negative quarter of growth, followed by a return to positive growth is the best in the OECD. This was driven by: 1. The dramatic positive impact on household budgets from the cut in interest rates by 4%, which reduced debt service from 15.4% to 10.3% of disposable income; 2. A stimulus package that was equivalent to 2.5% of GDP, the largest such package in the OECD; 3. Australia's unusual position as a commodity producer--so that we benefited from China's huge stimulus package and recent stockpiling of commodities; and 4. The enticement to households to take on additional mortgage debt that goes by the name of the First Home Buyers Boost. The first two factors alone resulted in a 9% increase in houshold disposable income over the year from June 2008 to 2009--an unheard of development in boom times, let alone during an economic crisis. As Gerard Minack put it in his Downunder Daily on October 9th, "If that's recession, bring it on!" As a result of this policy-driven paradox--rising disposable income in a recession--Australia will not record a fall in real output on an annual basis in 2009, a result that is in stark contrast to outcomes in the rest of the OECD. So fast and massive government action--by both its Treasury and Central Bank wings--averted a recession in the face of an unprecedented financial crisis. This is a welcome outcome--and one that contradicts one of the latest fads that dominated economics prior to the GFC, "rational expectations macroeconomics", which argued that the government couldn't affect real output. As I noted in an earlier post, though neoclassically-trained economists drove the policy response, they did so as "Born Again Keynesians", and if their rescue does work, then it contradicts neoclassical economics just as much as the GFC's very existence did in the first place. Also as noted in that post, the only school of economic thought that could be vindicated by this outcome is the Post Keynesian "Chartalist" group, which argues that any macroeconomic downturn can be averted by sufficiently strong government action. The question for the future is what the economy is likely to do after the special factors that turned it into a comparative boom for Australian households and exporters are unwound.
The Australian result of only one negative quarter of growth, followed by a return to positive growth is the best in the OECD. This was driven by:
1. The dramatic positive impact on household budgets from the cut in interest rates by 4%, which reduced debt service from 15.4% to 10.3% of disposable income; 2. A stimulus package that was equivalent to 2.5% of GDP, the largest such package in the OECD; 3. Australia's unusual position as a commodity producer--so that we benefited from China's huge stimulus package and recent stockpiling of commodities; and 4. The enticement to households to take on additional mortgage debt that goes by the name of the First Home Buyers Boost.
The first two factors alone resulted in a 9% increase in houshold disposable income over the year from June 2008 to 2009--an unheard of development in boom times, let alone during an economic crisis. As Gerard Minack put it in his Downunder Daily on October 9th, "If that's recession, bring it on!"
As a result of this policy-driven paradox--rising disposable income in a recession--Australia will not record a fall in real output on an annual basis in 2009, a result that is in stark contrast to outcomes in the rest of the OECD. So fast and massive government action--by both its Treasury and Central Bank wings--averted a recession in the face of an unprecedented financial crisis. This is a welcome outcome--and one that contradicts one of the latest fads that dominated economics prior to the GFC, "rational expectations macroeconomics", which argued that the government couldn't affect real output. As I noted in an earlier post, though neoclassically-trained economists drove the policy response, they did so as "Born Again Keynesians", and if their rescue does work, then it contradicts neoclassical economics just as much as the GFC's very existence did in the first place.
Also as noted in that post, the only school of economic thought that could be vindicated by this outcome is the Post Keynesian "Chartalist" group, which argues that any macroeconomic downturn can be averted by sufficiently strong government action. The question for the future is what the economy is likely to do after the special factors that turned it into a comparative boom for Australian households and exporters are unwound.
The situation can be saved whe the government is not captured by the financial sector, even though
neoclassically-trained economists drove the policy response, they did so as "Born Again Keynesians".
Keynesians argue that we must increase fiscal stimulus to prevent a full-scale depression. .... On the other hand, those worried about the giant debt overhang point to the research of Minsky, Irving Fisher, Steve Keen and Austrian school economists to argue that massive debt, endless bailouts, government intervention in the markets, and the failure to write down worthless assets and "purge malinvestments" from the system are the main problems. .... Who is right? Initially, many Keynesian academics argue that it doesn't matter where the stimulus money is spent, just as long as it is spent on something. However, this is untrue. For example, it should be obvious that spending in some areas will have more and quicker turnover (increasing money velocity) as compared to others. And, in fact, economists have documented that some types of stimulus spending have more bang for the buck than others.
Initially, many Keynesian academics argue that it doesn't matter where the stimulus money is spent, just as long as it is spent on something. However, this is untrue. For example, it should be obvious that spending in some areas will have more and quicker turnover (increasing money velocity) as compared to others. And, in fact, economists have documented that some types of stimulus spending have more bang for the buck than others.
Moreover, as former chief IMF economist and MIT professor Simon Johnson points out: Perhaps the best analysis regarding the impact of fiscal policy on recessions was done by the IMF. In their retrospective study of financial crises across countries, they found that nations with "aggressive fiscal stimulus" policies tended to get out of recessions 2 quarters earlier than those without aggressive policies. This is a striking conclusion - should we (or anyone) really increase our deficit further and build up more debt (domestic and foreign) in order to avoid 2 extra quarters of contraction? Indeed, many experts say that continuing to cover-up the fraud which led to the financial crisis will extend the crisis for many years. In other words, failure to investigate and prosecute those responsible for bringing about the crisis may extend the crisis longer than any failure to spend more on stimulus. (And investigations and prosecutions for fraud - unlike stimulus spending - would not increase America's debt or tax burden.) A real debate about whether we should spend more on stimulus - and if so, what types of stimulus - cannot even begin unless and until the aforementioned data is considered.
Perhaps the best analysis regarding the impact of fiscal policy on recessions was done by the IMF. In their retrospective study of financial crises across countries, they found that nations with "aggressive fiscal stimulus" policies tended to get out of recessions 2 quarters earlier than those without aggressive policies. This is a striking conclusion - should we (or anyone) really increase our deficit further and build up more debt (domestic and foreign) in order to avoid 2 extra quarters of contraction?
Indeed, many experts say that continuing to cover-up the fraud which led to the financial crisis will extend the crisis for many years. In other words, failure to investigate and prosecute those responsible for bringing about the crisis may extend the crisis longer than any failure to spend more on stimulus.
(And investigations and prosecutions for fraud - unlike stimulus spending - would not increase America's debt or tax burden.)
A real debate about whether we should spend more on stimulus - and if so, what types of stimulus - cannot even begin unless and until the aforementioned data is considered.
Unfortunately that is politically impossible, since privileged turkeys who own the establishment will not vote for Christmas. However, I optimistically believe that the same effect may well be achievable through other - consensual - means through the disintermediating effects of the internet on the financial sector. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Nobel Prize-winning economist Joseph Stiglitz said the world's biggest economy is suffering because of the U.S. government's failure to nationalize banks during the financial crisis. "If we had done the right thing, we would be able to have more influence over the banks," Stiglitz told reporters at an economic conference in Shanghai Oct 31. "They would be lending and the economy would be stronger." ... "We have this very strange situation today in America where we have given banks hundreds of billions of dollars and the president has to beg the banks to lend and they refuse," Stiglitz said. "What we did was the wrong thing. It has weakened the economy and has increased our deficit, making it more difficult for the future."
Nobel Prize-winning economist Joseph Stiglitz said the world's biggest economy is suffering because of the U.S. government's failure to nationalize banks during the financial crisis.
"If we had done the right thing, we would be able to have more influence over the banks," Stiglitz told reporters at an economic conference in Shanghai Oct 31. "They would be lending and the economy would be stronger." ...
"We have this very strange situation today in America where we have given banks hundreds of billions of dollars and the president has to beg the banks to lend and they refuse," Stiglitz said. "What we did was the wrong thing. It has weakened the economy and has increased our deficit, making it more difficult for the future."
Berkshire Hathaway Inc. agreed to buy railroad Burlington Northern Santa Fe Corp. in the company's biggest takeover under Warren Buffett. Buffett's firm will buy the 77.4 percent of the railroad it doesn't already own for $100 a share in cash and stock, valuing the transaction at about $44 billion, including $10 billion in outstanding debt, Omaha, Nebraska-based Berkshire said in a statement today distributed by Business Wire. That compares with the railroad's closing price yesterday of $76.07. "It's an all-in wager on the economic future of the United States," Buffett said in the statement....Trains stand to become more competitive against trucks with fuel prices high, he has said.
Buffett's firm will buy the 77.4 percent of the railroad it doesn't already own for $100 a share in cash and stock, valuing the transaction at about $44 billion, including $10 billion in outstanding debt, Omaha, Nebraska-based Berkshire said in a statement today distributed by Business Wire. That compares with the railroad's closing price yesterday of $76.07.
"It's an all-in wager on the economic future of the United States," Buffett said in the statement.
...Trains stand to become more competitive against trucks with fuel prices high, he has said.
