Blog #12: BP finally pays up

This weeks article found in the New York Times and written by Julia Werdigier, discusses British Petroleum's recent guilty plea. The British oil company plead guilty to fourteen criminal charges today as a result of the oil spill in the Gulf of Mexico two years ago. Along with these fourteen charges, another two charges of manslaughter are to be pressed on two BP employees for the deaths of eleven workers on the Deepwater Horizon oil rig. The criminal charges include mainly negligence and misconduct charges, all summing up to a settlement of $4.5 billion. A majority of which, $4 billion to be exact, is going towards government environmental agencies and is to be paid in the course of five years. However, under the Clean Water act, a company is liable to be charged at most a $4,300 fine per barrel spilled. If BP were to be charged at such rates, the total possible outcome would be around $21 billion. Regardless of the settled criminal claims, the remaining federal civil claims and claims made from damaged natural resources are still unsettled. Though back in March, claims from local seafood and medical expenses were settled in regards to economic losses. The companies trust fund is still expected to cover that settlement of $7.8 billion. In order to raise funds, the company sold large amounts of assets to afford the costs related to the oil rig explosion. British Petroleum just recently started exhibiting profit and dividend increases in the third quarter back in October, which is a milestone for their worldwide tarnished image. Perhaps once all the settlements are paid for and forgotten about, society, more importantly Americans, will begin to forgive the oil company for its crimes against nature.

http://www.nytimes.com/2012/11/16/business/global/16iht-bp16.html?ref=business&_r=0

Blog #11: Greece receives more time to pay off debt

In James Neuger's article this week, is focused on the heated topic of Greece's debt crisis. It appears that German creditors have agreed to extend the due date to lower the Greek Gross Domestic Product (GDP) for another two years. By that time, the GDP should be at a "sustainable" level of 120 per cent. Until that time is reached, the decision has been made to continue flowing money through the struggling country instead of chancing a national default. If such a default were to occur, Greece would be dropped from the euro and the little amount of stability among the people would quickly become turmoil. The global market has been keeping an eye on the International Monetary Fund (IMF), especially after its objection to hold a meeting with creditors on the 20th of this month. The Managing Director, Christine Legarde, seems to disagree with the recent call to allow more time for the Greeks, saying that the aid program is not likely to promise such a safe end for the creditors. It is also questionable as to whether or not the IMF will continue to funnel money into Greece. If they choose to discontinue funding, then countries like Germany, Finland, and the Netherlands would be stuck with paying higher rates by 2016. In this case, there is a positive feel that the IMF will stick with the crisis. Germany is currently backing four countries altogether, and recent publications have insisted that the German government favours a quickened loan payout in the future for all four countries. Greece is taking steps in the right direction to trim its budget deficits, and as long as the creditors don't increase the rates on bailout loans, then they should be in the clear by 2020. This is no time for the IMF to back out now, especially in light of the promising developments of the Germans and Greeks.The fate of the euro's stability and the society's stability all rest in the hands of creditors and more importantly Christine Legarde.

http://washpost.bloomberg.com/Story?docId=1376-MDEDIN6JIJUO01-0SEME79H41VAFOTLCG9MN29OAK

Blog #10: Foreign Automakers Lie About Gas Mileage

The Environmental Protection Agency has recently discovered that Hyundai and Kia have overstated the gas mileage on over 900,000 vehicles covering the span of thirteen separate models from 2011 to 2013. The two automakers are ran by the same company in South Korea, although they market their products differently. The EPA began looking into the car makers after a rash of consumer started complaining about the gas mileage not living up to it's sticker number. When it came time for the annual audit, the Hyundai Elantra was added to the list. Since automakers run their own tests, the EPA audits fifteen per cent of all vehicles every year to keep an eye out for any shenanigans. The audit ultimately revealed that the fuel efficiency was overstated on nearly one-third of all sales in the last three years. The EPA has only had two similar cases since 2000, but none were as extensive as this. The Kia Soul was found to be the most overstated, now the 34 mpg SUV will be dropped down to 28 mpg. There hasn't been any word on whether legal action is going to be taken or not, but it's still a crime to internationally boost gas mileages. The executives of the company have promised to re-compensate consumers for the extra money they've been putting towards gas. While this turn of events probably won't be enough to ruin the automakers, it will still slow down their sales and profits. The reimbursements could accumulate well over $80 million, which is a substantial amount of money. Regardless of whether it was a procedural mistake or intentionally done, the two companies are still among the leading companies in fuel efficiency. This is also opening the eyes of other car makers, letting them know that the EPA isn't a joke and that they will take any action unnecessary.
http://www.washingtonpost.com/business/us-environmental-protection-agency-audit-finds-inflated-gas-mileage-in-hyundai-kia-models/2012/11/02/e922c1d4-24c3-11e2-92f8-7f9c4daf276a_story.html

Blog # 9: Random House and Penguin Merger

Eric Pfanner's article this week was about the Pearson and Bertelsmann companies combining their media publishing divisions. The two companies, both based in Europe, are of the biggest English-language publishers around today, and the merging of these companies would give them over a quarter of the shares in the global market. Random House, ran by Bertelsmann, will receive fifty-three percent of the profits, while Penguin, owned by Pearson, will get the remaining forty-seven. The combined companies are expected to receive an estimated $3.8 billion in annual revenues. The two have agreed to share executive supervision and oversight of the company; John Makinson (from Penguin) will become the chairman, and Markus Dohle (from Random House) will be the chief executive. Bertelsmann's chief executive explained in an interview some of the benefits and reasons behind the merger. First, the merger allows more time and money to be invested in digital matter and also new and upcoming markets. Secondly, the resulting back-office job cuts will greatly benefit the authors financial gain. He also goes on to mention that the respective identities of the publications will not be affected by the merge. John Makinson, Penguin's chief executive added the following, "consolidation was inevitable as the industry adapts to the imperatives of the digital revolution." The main flaw concerning the merge is that the shareholders have no say or approval in the matter, and since Bertelsmann is privately owned, there's nothing the competition can do to stop it. Another factor is the literary agents who are worrying about the number of author outlets diminishing from all the consolidations. Overall, the merge can't mean too much harm to global welfare, the smaller publication groups won't have to print as many best-sellers which means more focus on up and coming writers. As an added bonus, the new combined company will offer an even larger, immense list of selections to choose from.

http://www.nytimes.com/2012/10/30/business/global/random-house-and-penguin-to-be-combined.html?ref=business

Blog #8: Germany's Banks Weakening

Jack Ewing's article in the New York Times was about the Germany's main weakness in its economy. According to the debt ratings agency, Moody's Investors Service, the countries major weakness is its banking system. The banks appear to be suffering from lacking profits, increase in risks, and improper reserves to account for losses. The banks have been able to benefit from the "haven" status from all the surrounding turmoil, they were able to borrow money at much lower rates than other countries in the Euro Zone. On the other hand, just before the crisis struck Germany made the decision to invest in Spain and Italy because of the better investment opportunities at the time. Even four years after the start of the crisis, Germany is still exposed to the problems. Moody's says that in relation to the size of the country, there are too many banks, this has a detrimental effect on lending rates  and profits.Marginal pressure is caused by decreasing interest rates and strong competition, this pressure weakens the banks revenues and profits even more. National regulators in the European Central Bank (ECB) are favouring their countries banks and gaining unfair advantages, so new regulations are being implemented by the ECB. These weak regulations of supervision is what landed Spain in the situations its in now. German leaders are holding out on releasing control of small banks and mid-sized banks. Over forty lenders were examined in Moody's report, that accounts for 85% of loans in Germany. Moody's stated, "Many of the more retail-oriented German savings banks and local cooperative banks are less stressed, although they, too, face growth and margin pressures," Banks in Germany are often owned by local governments, which could lead to lending decisions being "skewed" by political intervention. If Germany's banks take a turn for the worse, then there goes the continents strongest economy. Without that assurance of at least one stable country in the E.U. it's hard to say what sort of panic and civil upheaval would ensue.
http://www.nytimes.com/2012/10/20/business/global/moodys-warns-of-weakness-in-german-banking-sector.html?ref=business&_r=0

Blog #7: E.U. Awarded Nobel Peace Prize

Anthony Faiola writes about this years Nobel Peace Prize being awarded to the European Union. Many are pointing out that the award is becoming "depersonalized" from it's original meaning, especially since President Obama was awarded it only months after being elected back in 2009. The integration of 27 nations has been in the midst of a serious debt crisis, and has sparked civil uproars that haven't been seen in generations. Countries like Spain and Greece have been dragging in economic and political aspects, but have managed to stick around with the help of other member countries, mainly Germany. "The award honored the struggle in Europe to not only hold the union together in the wake of the debt crisis, but also to deepen integration across a vast swath of the region stretching from the isles of Greece to the Scottish Highlands, from the ports of Portugal to northern Finland."  However, not everyone is viewing it this way; British reformist parties are targeting the recent policies implemented by the Union and bastardizing them. This award also comes at the time where 17 nations are currently using the Euro as the common form of currency, and the other 10 use something different. This worries economic supervisors that those 10 countries will soon drift from the rest, thus resulting in a "two-tiered body". Nationalist parties in suffering countries are being rallied to ask Germany for economic assistance, which it is remaining reluctant to fall through. Some countries are even considering leaving the Union, Britain being the most likely with its "jealously guarded pound". Personally I don't believe the award should be given to large vastly spread organization or to a political leader, it just seems it should go to a single outstanding individual. However, this may bring some strength to the stability of these countries, and allow this debt crisis to pass on by.
http://www.washingtonpost.com/world/2012-nobel-peace-prize-awarded-to-european-union/2012/10/12/e8341058-1450-11e2-9a39-1f5a7f6fe945_story_1.html

Blog 6: Unemployment Rate Drops for September

Neil Irwin's article was on the recent report from the Labor Department for this past months unemployment rate. The report was issued this Friday morning stating that unemployment has dipped to 7.8%, the lowest it has been since January 2009. "Employers reported creating 114,000 jobs in September, almost identical to analysts’ forecasts, but revisions to data from July and August brought improvement of that measure of the job market as well." These revisions in the data are a result from a divergence in household surveys (which reflect unemployment rates) and employer surveys (which reflect payroll numbers.) When this happens, it either means American households are reporting higher gains than the employers, or it implies there is an increase in business start-up and self-employment. The revisions resulted in an increase of 86,000 jobs, totaling 146,000 new jobs in the last three months. After the debates on Wednesday, this improvement came just in time for the upcoming elections, and in a rally at George Mason University President Obama said, "This morning we found out the unemployment rate has fallen to the lowest level since I took office." This will surely boost the Obama campaign in a positive way, but too much remains to be done to celebrate over a 7.8% unemployment rate. Mitt Romney issued a statement on his view of the situation; "We created fewer jobs in September than in August, and fewer jobs in August than in July, and we've lost over 600,000 manufacturing jobs since President Obama took office". He also went on to say that the growth pace doesn't reflect how a real recovery looks like. However, consumer confidence indices point out that faith is being restored in the job market.

A question comes to mind when I think of the Department of Labor, who is the Secretary? The Secretary is Hilda L. Solis (D-CA), she was appointed by President Obama back in 2009. One can't help but think if its possible that maybe the recent reports were "revised" so that it could make Obama look better just before election time. September reports just before election day are always spotlighted, but one more report will be issued just in time for November 6th.

Blog 5: IMF Warns Global Fiscal Recession May Return

Christine Lagarde, the Managing Director at the International Monetary Fund, recently warned  in an address at the Peterson Institute for International Economics that there may be a looming downfall in the global economy. The debt crisis in Europe is what many economists are concerned with currently, with everyone paying close attention to Germany. Of all the euro zone nations, Germany is considered to have the biggest economy in Europe, which leads many people to wonder if they too will experience economic downturn. Germany's IFO Business Climate Index for this month was recorded at 101.4, making September the fifth consecutive month with no improvement. The numbers aren't just dropping in Germany, the IMF is planning to cut its forecast for global growth next month even after previously being cut down to 3.5% in July. The Director also explains that some countries have been showing signs of economic slowdown, especially in China and Brazil. Lagarde also mentioned the United States' upcoming budget and tax cuts, as well as the plans to reduce government spending. This article describes the U.S.'s economic path as headed for a "fiscal cliff", which means if important political decisions aren't specified and established quickly enough we might end up falling off the cliff and running ourselves into the ground. Another topic that was brought up was the use of central banking policies the Bank of Japan and the Federal Reserve have announced plans to implement rounds of quantitative easing, or simply feeding money into the economy. The European Central Bank (ECB) has managed to sufficiently keep the euro flowing throughout the region, and has approved plans that include broadening the banking oversight and financing failing nations. The president of the ECB, Mario Draghi, has offered to buy government bonds from indebted countries like Greece and Italy in an attempt to alleviate the concerns over the crisis. Lagarde's main focus point was on the political risks attributed to the recovery of the economy, she states, "political bickering and delays in decision making have made matters worse." It is up to the heads of state to heed Lagarde's warning and  prevent a worldwide failure in the economy.
http://www.washingtonpost.com/business/economy/imf-chief-lagarde-warns-of-renewed-global-downturn/2012/09/24/e266f89c-0655-11e2-a10c-fa5a255a9258_story.html

Blog 3: Former UBS Trader's trial to start soon

The trial of a 32 year old former-business trader is set to begin tomorrow, Kweku M. Adoboli has been charged with false accounting and fraud. Adoboli has plead not guilty to the charges, but with no explanations to the disappearance of over $2 billion in the UBS investment bank, the courts will likely see a different perspective. The suspicious activity, believed to have began in 2008, is not the only thing plaguing the Swiss financial services company. In order to settle a tax fraud case in 2009, the investment bank agreed to pay $780 million, and just recently this year three executives were convicted for tampering with the municipal bond market. The case is not the only of its kind, companies in France and Britain have also faced similar scandals. Sergio Ermotti recently issued a memo that stated, “As uncomfortable as the entire trial will be for UBS, it will show us what the consequences are when misconduct occurs or when individuals do not take their responsibilities seriously,” which seems to set Adoboli as an example to others in the company. The trial is estimated to last about 8 weeks and if Kweku is convicted, he could serve up to ten years in prison. This multi-billion dollar loss has only worsened things for the already sluggish European economy and greatly impacted the quarterly  profit earnings for the investment bank, dropping 39% to $1.2 billion. This was also reflected on the employees when 3,500 jobs were cut and separate divisions of the companies were terminated. British legal restrictions have hindered any comments from UBS and Adoboli's lawyers.
http://dealbook.nytimes.com/2012/09/13/trial-to-begin-for-former-ubs-trader-accused-of-hiding-huge-loss/?ref=business

Blog 2: E.U. Begins Anti-Dumping Case on China

             Keith Bradsher explains that the European Union has opened an anti-dumping case against Chinese solar panel companies. With last year’s imports worth $26.5 billion, a whole 6.5% of Europe’s imported goods from China, some are saying these products are being exported for a lot less than what it costs to make them. In light of the daring investigation, the Minister of Commerce spokesman  in China has warned that this action may have detrimental harm on the global development of clean energy. Not only that, but this is also feeding the fire to the ongoing trade battle between the U.S. and China; in March an anti-subsidy tariff was placed on China as high as 4.73%, and an anti-dumping tariff was added in May against the solar panels dipping as low as 31%. The Chinese have also accused American polysilicon producers of unfair trade techniques and are already threatening to place steep tariffs on them. Polysilicon is a key resource in the making of solar panels, and since the anti-dumping case covers everything from completely assembled solar panels to the cells and wafers that are the basic components of these panels, American producers may find themselves spending more to ship polysilicon. Alan Wolff, the leading trade lawyer in the world, is calling this the biggest anti-dumping case ever. The European case is slightly altered from that of the American case in that Europe’s is limited to anti-dumping and does not include an anti-subsidy charge, and not to mention the wide spectrum of items involved (cells, wafers, etc.). 

http://www.nytimes.com/2012/09/07/business/global/eu-investigates-chinese-solar-panels.html?ref=business