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How Greedy States & Cities Were Fleeced $4 Billion By Wall Street November 10, 2010

Posted by tkcollier in Economy & Business.
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For more than a decade, banks and insurance companies convinced governments and nonprofits that financial engineering would lower interest rates on bonds sold for public projects such as roads, bridges and schools. That failed promise has cost more than $4 billion, according to data compiled by Bloomberg, as hundreds of borrowers from the Bay Area Toll Authority in Oakland, California, to Cornell University in Ithaca, New York, quietly paid Wall Street to end agreements since 2008.

The termination payments to Wall Street firms come at the worst possible time. The longest recession since the Great Depression left states facing budget gaps of $72 billion next fiscal year, according to the National Conference of State Legislatures. U.S. cities saw their general fund revenue fall the most since at least 1986 in the budget year that ended June 30, according to the National League of Cities.

Wall Street banks and insurers peddled financial derivatives known as interest-rate swaps to governments and nonprofits that bet they could lower the cost of borrowing. There were as much as $500 billion of the deals done in the $2.8 trillion municipal bond market before the credit crisis, according to a report by Randall Dodd, a senior researcher on the Financial Crisis Inquiry Commission, published by the International Monetary Fund in June.

via Wall Street Collects $4 Billion From Taxpayers as Swaps Backfire – Bloomberg.

Cuban Communism Faces the Unthinkable July 28, 2010

Posted by tkcollier in Geopolitics.
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The global financial crisis, and the $10 billion in damage inflicted by three hurricanes in 2008, have forced authorities to run a deficit of 5 percent of GDP, leaving them unable to pay back credits received from China and elsewhere. Cuba slashed spending on importing food and other basics by 34 percent to $9.6 billion in 2009, from $12.7 billion the previous year. But so far, the moves have not been enough to rein in the deficit.

President Raul Castro has startled the nation lately by saying about one in five Cuban workers may be redundant. Carmelo Mesa-Lago, a Cuba economics expert and professor emeritus at the University of Pittsburgh, said Cuban officials have spent months debating cuts in the labor force and economic reforms. He said they know what’s needed, but face “a problem of political viability.”

Various government perks like cars, gas, uniforms and office supplies have become incentives to bloat the payroll, since they are based on the size of a company’s work force.

But low pay means low productivity. On Obispo street, a state-run cafeteria sells heavily subsidized soft ice cream and pork sandwiches for the equivalent of a few American pennies — meaning wages and tips are so tiny that the staff is complete indifferent toward customers. Three waiters sit at the counter cracking jokes. A fourth is the only one working, making coffee for three tables. Nearby, a cashier stares into space, a cook flirts with a scantily clad teen and a supervisor sits idly by.

Here, nearly everyone works for the state and official unemployment is minuscule, but pay is so low that Cubans like to joke that “the state pretends to pay us and we pretend to work.” –  monthly salaries worth only $20 a month on average.

via Jobless in Cuba? Communism faces the unthinkable – Yahoo! News.

Business Jobs, Not Government Jobs, Create Wealth July 18, 2010

Posted by tkcollier in Economy & Business.
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In the two decades of the 1980s and 1990s, the United States created 73 million new private sector jobs—while simultaneously losing some 44 million jobs in the process of adjusting its economy to international competition. That was a net gain of some 29 million jobs. A stunning 55 percent of the total workforce at the end of these two decades was in a new job, some two-thirds of them in industries that paid more than the average wage. By contrast, continental Europe, with a larger economy and workforce, created an estimated 4 million jobs in the same period, most of which were in the public sector (and the cost of which they are beginning to regret).

Over the years, the transformation of American industry has been nothing short of phenomenal. U.S. companies replaced large, mass-produced consumer products with sophisticated goods derived from intellectual output and knowledge-based interests, the fastest-growing segment of the world’s economy. Management was assisted by a level of labor flexibility that is the envy of both Europe and Asia. Europe struggles with the legacy of the steam age in the form of craft, union, and management demarcations that limit management’s role. In Asia, management is often stifled by large, oligopolistic networks and government mandates.

via Obama’s Anti-Business Policies Are Our Economic Katrina – US News and World Report.

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