U.S. Economic/Financial News

Fed Report: 'U.S. Economy Is Bankrupt'

In a report prepared for the St. Louis Federal Reserve Bank, Prof. Laurence Kotlikoff of Boston University concluded that "the U.S. government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds," according to the Daily Telegraph July 14.

Kotlikoff shows that there is a long-term, $65.9-trillion "fiscal gap," noting the rising medical/pension costs and the Bush tax cuts as determining features. He warns that without changes, it will require drastic measures, such as doubling taxes, or cutting Social Security and Medicare by two-thirds.

Kotlikoff also notes that the U.S. "appears to be running the same type of fiscal policies that engendered hyperinflation in 20 countries over the past century."

Is Toyota Courting GM, in Counter to Renault/Nissan Bid?

"Top executives at Toyota Motor are mulling their own overture to GM to head off rival Nissan from forging an alliance that could help the Japanese-French car company, according to people with knowledge of the Japanese auto maker's plans," Business Week magazine reported July 15.

GM CEO Rick Wagoner and Nissan/Renault CEO Carlos Ghosn said July 14 they will undertake a 90-day exploratory review of a potential alliance that would give Ghosn, known in the industry as "Le Cost-Cutter," a 20% stake in GM.

"Toyota has no interest in seeing an alliance like this take place," said an unnamed Toyota executive.

Toyota is looking at different opportunities that it could propose to GM; the automaker has even conducted "wargame" scenarios to assist GM, one Toyota source said. One such offer could be to expand current joint ventures.

GM spokeswoman Toni Simonetti said the automaker has not been approached by Toyota to consider a linkup.

Both Ghosn and Toyota management are looking for the same thing: the U.S. auto sector as a new "low-wage platform" for producing their cars, à la Nissan's slave-labor facility in Canton, Miss.

Ohio Dem Candidate Slams Sell-Off of State Turnpike

A proposal to privatize the Ohio Turnpike was slammed by Democratic gubernatorial candidate Rep. Tom Strickland. He is running against Ohio Secretary of State Kenneth Blackwell—who, acting in line with the Rohatyn/Lazard PPP crowd, is calling for making $6 billion for Ohio by selling out its toll highway system. Public-Private Partnerships (PPPs) is the new name for privatized looting of public-sector projects.

Strickland's July 17 press release quoted Strickland's Lieutenant Governor candidate Lee Fisher: "Selling off one of our state's most valuable assets that was built by Ohioans and has been run by Ohioans to a foreign company and tying our hands for the next 99 years is incredibly shortsighted. It's just one more of Mr. Blackwell's quick-fix, short-sighted political gimmicks." Strickland himself recently denounced Blackwell by paraphrasing the Biblical quote about Esau, saying that Blackwell would sell Ohio's birthright for a bowl of cereal.

Top Privatizer Macquarie Grabs U.S. Toll Roads

The Rohatyn/PPP grab for toll roads in North America is moving forward at warp speed. Most active in this Synarchist pack is Australia-based Macquarie Infrastructure Group, associated with Lazard. A few Macquarie assets:

* Detroit-Windsor Tunnel: Built in 1928, is now a Macquarie toll concession. Over 20,000 vehicles use this tunnel each day between Ontario and Michigan. In January 2001, the owners of the Detroit & Canada Tunnel Corporation (DCTC), which had the concessions to operate and collect tolls for the U.S. side, and for the Canadian town of Windsor, sold their shares to Macquarie North American Infrastructure Inc., a subsidiary of the Global Infrastructure Fund, one of the Macquarie management funds.

* Toll Road North of Toronto: 108-kilometer express toll road.

* Chicago Skyway, Indiana Toll Road: Across northern Indiana; owned by Macquarie consortia, which in 2005 also bought the Dulles Greenway in Virginia.

* Alabama and Mississippi: State officials conferred with Macquarie this spring, about possible future sales of parts of their highways.

Ford Losses Accelerate; Vultures Press for Deeper Cuts

Automaker Ford had a net loss of $123 million in April-June, compared to a $946 million profit in that quarter last year, the Detroit Free Press reported July 21. Chairman Bill Ford said the "Way Forward" plan introduced last January will now be changed—its 14-plant, 36,000-job cutbacks over six years, are now seen as too timid.

A JP Morgan auto analyst demanded a bigger attrition program for Ford employees. Chairman Ford said his company would consider an "alliance" such as the proposed Renault-Nissan-GM deal. In response to the question of whether to expect more plant closings than have already been announced, more benefit cuts, etc., Ford replied, "Everything is on the table."

Michigan Deeper into 'New Economy' Death Spiral

Michigan officials announced July 19 that the state had 18,000 fewer manufacturing jobs in June 2006 than in June 2005, and 13,000 fewer retail jobs, AP reported July 21.

But not to worry! Both employment and unemployment are growing! Since 11,000 jobs have been added in "professional and business services" and about 10,000 more in "education and health services," compared with last year, officials figure that there were about 10,000 more "employed" people in June than in May, and also 13,000 more "unemployed."