Posted by Neal Lipschutz
on January 21, 2011
, United States
A quote from Jeffrey R. Immelt, the chairman and chief executive of General Electric who was just tabbed by President Obama to lead a government council on job creation, sums up quite well a key aspect of the American economic dilemma.
“The assumption made by many that the United States could transition from a technology based, export-oriented economic powerhouse to a services-led, consumption-based economy without any serious loss of jobs, prosperity or prestige was fundamentally wrong,” Immelt wrote in an “op-ed” piece in today’s Washington Post.
I’ll take issue with one aspect of the quote: the implication that someone planned it that way, that someone thought this was a good idea. The transition, which threatens the long-standard American advantage of a broad and robust midlle class, was the result of market forces. Globalization works all sorts of ways.
Posted by Chaz Repak
on January 28, 2010
President Obama announced $8 billion in high-speed rail grants today. (As a quick aside, that $8 billion is part of the $787 billion stimulus package that simply HAD to be passed immediately last year to help improve the economy in 2009. The $8 billion is part of the majority of the $787 billion that wasn’t spent in 2009. But I digress.)
Who can be against high-speed rail? It brings distant cities closer together, making for more mobile populations, and presumably, easier access to high-job-growth areas from population centers; it’s greener than driving or flying; and of course, the point of the stimulus, it creates jobs.
The first point is true, the second not as true as it first appears, and the third true mainly in the short term. But as the states continue to fight their way through a persistent economic slowdown, let’s focus on the cost of these projects, which is enormous.
Robert Kelly, CEO of Bank of New York Mellon, was the front-runner to take over Bank of America, with Ken Lewis leaving the job at year’s end.
The Wall Street Journal reported earlier this evening that Kelly has pulled out of the running. On Sunday, The Journal had reported that “the gap between him and the bank’s board ‘is down to compensation now,’ said one person familiar with the situation. ‘If they can reach some level of comfort around compensation, he will take it.’” Apparently, they couldn’t.
Posted by Neal Lipschutz
on December 02, 2009
, Labor Unions
, United States
The jobs summit in Washington, DC., gathering people to meet with President Barack Obama in the nation’s capital to fret about the significant joblessness plaguing the U.S. economy won’t produce much.
Maybe a good idea or two will emerge, but, really, the choices if you want to do something about the significant unemployment problem are basically two. They occupy either ends of the economic ideological divide.
Choice one: you stay the course. The economy is starting to improve, albeit slowly. Jobs will follow some day. Perhaps you tweak the tax code to encourage hiring.
Various Chinese VIPs have been dealing the U.S. a prolonged public scolding in recent days, as if to say to visiting President Obama and his constituents back home: you may be running the Free World but we’re big and getting bigger – and besides, you are utterly dependent on us for economic growth. Among the rhetorical gems: The U.S. is engaging in unfair trade protectionism. The U.S.’s monetary policy is excessively loose. American corporate giant Microsoft is stealing intellectual property from a Chinese firm. The U.S. is a filthy polluter spewing toxic emissions. All of which Americans could and often do say about China. Continue reading…
Posted by Gabriella Stern
on October 02, 2009
What were they thinking? “They” being the Obamas and the Chicago business and political establishment. The 2016 Olympics would have turned Chicago into a cost-overrun construction site. Instead, it’ll be Rio, that gorgeous crime-ridden city, which will go through Olympics anguish. The taxpayers will foot the bill for excess costs long after the short-term economic boost from sports-tourism fades from memory . Boa sorte, Rio! I enjoy the Olympics – from the comfort of my couch – and feel sorry for the residents of Olympic cities. “Try telling that to 180 million Brazilians,” says my DJN colleague Claudia Assis, who was born and raised in Rio. “All Brazilians are fierce nationalists in sports and oil, in that order.” Claudia cites a University of Sao Paulo study commissioned by Brazil’s Ministry of Sports saying the $14.4 billion Rio will spend to host the Olympics will – between 2009 and 2027 – have a $51.1 billion ripple-effect on the Brazilian economy. Specifically, each dollar invested in the Olympics will inject $3.26 dollars into supply chains associated with the event. We shall see.
Posted by Gabriella Stern
on September 14, 2009
, Ethics & Morality
What do Joe Wilson, Serena Williams and Kanye West have in common? They all acted rudely and made spectacles of themselves in the past week in front of virtual audiences in the millions. Frustrated by her own poor play, Williams lashed out at a linesman; West pouted publicly that his fave (Beyonce) didn’t win an MTV music award; Wilson was playing politics, as one does in Washington, D.C. But that’s where the similarities end. Before the inevitable public discussion gets under way about “Ugly Americans” and our appalling lack of decorum, I’d like to make a few fairly obvious points: Americans, famous or ordinary, have no monopoly on obnoxious behavior. I’ve lived the past nine years abroad – in Europe and Asia – and have seen all manner of appalling acts by Americans and non-Americans alike. Am I worried that kids watching President Obama’s speech to Congress, the U.S. Open women’s semi-final game, and the MTV show will learn bad manners from the behavior of these three public figures? Nope. Kids are surrounded by bad behavior all day long and they don’t have to stray far from home, school, the playground or the street corner to see grown-ups lacking decorum. If the adults in children’s lives teach them good from bad, right from wrong, polite from impolite – they’ll react appropriately when a famous person misbehaves. All this said, while living overseas I was acutely aware and ashamed of coming across as an “Ugly American” – if only because I was a guest, a stranger in strange lands. Moreover, I have a strong, clear voice and firm opinions, and can be oblivious to others in my vicinity (as my soft-spoken husband often reminds me.) There’s no question that we noisy, bull-in-china-shop Americans can be grating in low-key non-U.S. settings. We most definitely need to modify our behavior to avoid bothering or offending others. But let’s not look for trends in the appalling behavior of a lawmaker, tennis star and hip-hop artist where none exist.
Posted by Gabriella Stern
on May 25, 2009
The WSJ’s Joseph B. White has written a fine column about President Obama’s efforts to nudge Americans toward fuel-efficient vehicles. It’s headlined, “Kiss That Guzzler Goodbye.” This section jumped out at me. I find it shocking: “Since gas prices fell below $3 a gallon, demand for very small cars and hybrids has cratered. AutoNation Inc., the nation’s biggest dealer chain, has enough Chevrolet Aveo subcompacts on hand to last 560 days at current sales rates. In July 2008, when gas prices were peaking above $4 a gallon, AutoNation had a relatively lean 33 days’ supply of Aveos on their lots. AutoNation’s inventories of the Honda Fit, a car that meets the 2016 mileage target right now, have surged to an unhealthy 147 days’ supply, compared with just 17 days’ supply last July. Dealers who wanted premiums for hybrids and small cars a year ago now are offering discounts.”
Why anyone would buy a car that gets less than, say, 30 miles per gallon when 1) the economy is in such deep trouble and so are many jobs; 2) oil prices could very well rise again and if they do, those with gas guzzling vehicles will be stuck paying up; 3) surely the past 35 years have taught us something about the U.S.’s unhealthy foreign oil dependency; and 4) you don’t have to be a flaky environmentalist (I don’t consider myself one) to recognize how polluting bigger vehicles are. Continue reading…
Reading through fresh coverage of Bank of America’s $35 billion capitalization deficit, it seems the big dilemma/decision looming for President Obama is: does the U.S. government want to convert its preferred shares in B of A into common stock and thereby give the bank the capital cushion the stress tests have deemed it needs? The free marketeer in me says: Noooo! We don’t want the government running another bank, much less a very big one. But it’s just not clear to me that government management could be any worse than the geniuses who’ve been in charge to date. Moreover, if a preferred-to-common conversion gives Bank of America the breathing room to sort out its capital financing rather than rushing to shed assets it might actually want to keep for the long haul – an interim period of government control might not be a bad thing. And, as my colleague Mo Hadi notes, the Obama administration won’t even have to change the bank’s name. “Bank of America” has a nice ring for a nationalized financial institution.
Posted by Rick Stine
on March 30, 2009
, Credit Crisis
As President Obama detailed the stark realities of what’s needed for the survival of two of the U.S.’s largest automakers, stock markets around the world reacted. Investors were concerned about the broad economic ramifications and what this somewhat stand back approach might mean for banks – would he suggest they should/could fail as well? One market remained rather calm – the debt markets for GM’s bonds. People who own and trade bonds, especially corporate bonds, often do very deep analysis of what a company is worth. In most cases there is no question that when an investor lends a company money, that investor will get his/her principal returned with interest for having made that loan. In other words, the company is worth $1 for every $1 you lent. But that’s not the case with distressed debt trading like GM’s bonds, where investors bet on recovery valued. What do they think GM is worth in a bankruptcy scenario?