From Volume 8, Issue 4 of EIR Online, Published Jan. 27, 2009

Global Economic News

Toyota Reaches Number One, Just in Time To Disintegrate

Jan. 24 (EIRNS)—Just as Japan's Toyota takes over the coveted position of world's largest automaker, it has begun to disintegrate. With demand for cars vanishing in Japan, as well in its worldwide export markets, the company is taking (or is planning) these desperate measures:

* closing all its domestic factories for 14 days between January and March, and reducing work to a single shift at 17 assembly lines, out of 75 globally, during January and February;

* reducing April production in Japan by as much as 60%;

* laying off 1,000 full-time, regular employees in the United States and Great Britain;

* dismissing all temporary and contract workers in Japan at the end of their current commitment;

* scrapping its centralized, long-term, global "master plan" in favor of localized "catch-as-catch-can" marketing and production plans;

* replacing company president, Katsuaki Watanabe, by family member Akio Toyota, who will then replace four executive vice presidents and "many" of the 19 senior managing directors.

The company is expected to report its first operating loss at the end on the quarter on March 31.

Crisis Expected To Cut Singapore's Population by 4%

Jan 20 (EIRNS)—The small British outpost of Singapore is expected to lose as many as 200,000 jobs, as companies lay off foreign workers. The 200,000, representing approximately 4% of the city's population, are expect to leave Singapore when they no longer have an income.

A very significant portion of the city-state's economy is based on the financial services "industry," in which most jobs are filled by expatriate workers who earn more than the average Singaporean. Light industry is another important sector of the local economy, employing large numbers of foreign workers, and is hard hit by the collapse.

Economies in Southeast Asia will also see significant movements of workers as jobs disappear and the workers return to their home countries. Indonesians, for example, make up a large percentage of the Malaysian work force.

Danish Government Prepares To Lend Banks $18 Billion

COPENHAGEN, Jan. 19 (EIRNS)—The Danish government announced an agreement yesterday among all major political parties (excepting the small left-wing Red-Green Unity party) on a second Bank Package. The agreement will go into effect on June 30, when the state will provide up to 100 billion kroner ($18 billion) in loans to Danish banks and real estate institutions. The interest rate will be 9-12% for the banks' core capital, in order to boost their solvency. Banks that borrow money will have to increase their capital reserves from the 8% currently required to at least 12%. It is hoped that the move will solve the increasing liquidity crunch in the Danish economy, so the banks will not have to decrease their lending, as the loans they get from abroad run out. The banks can already borrow at 3% from the National Bank, but not as core capital that is needed for their solvency. Especially Denmark's biggest, Danske Bank, would be in trouble, as loans taken abroad run out in the coming years.

The loans will be for at least three years, with no official time that they will have be paid back, and it is hinted in the agreement that the present universal Danish deposit guarantee created with the Bank Package in October, which runs out in 2010, will probably be extended for some years.

As part of the agreement, the banks will have to publish their solvency requirements; they will be banned from creating new stock option programs for their employees; they can only resume dividend payments in October 2010 if they have profit in their operating expenses; and they are not allowed to buy up the bank's own stock or lend customers money to do so.

The government will also create a DKK20 billion ($4 billion) credit for export credit guarantees and is calling for an investigation of how the financial sector should be regulated and how this should be done in an international framework.

Observers commenting on the bill fear that several Danish banks will go under before the bill takes effect. It also neglects the urgency of cleaning up the bank sector and separating commercial banking from investment banking—a separation which discouraged speculative investment banking—as recommended by Lyndon LaRouche in calling for a re-creation in the United States of the Glass-Steagall Act. Without that, the government credit will most likely disappear into a black hole, without helping the credit needs of the Danish economy.

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