1 Downgrades for 15 big banks (The New York Times) Already grappling with weak profits and global economic turmoil, 15 major banks were hit with credit downgrades on Thursday that could do more damage to their bottom lines and further unsettle equity markets. Credit agency, Moody's Investors Service which warned banks in February that a downgrade was possible, cut the credit scores of banks to new lows to reflect new risks that the industry has encountered since the financial crisis.
Citigroup and Bank of America, which have struggled to fully recover from the financial crisis, were among the hardest hit. After the downgrades, the banks stand barely above the minimum for an investment grade rating, a level also known as junk and a sign of the difficult business conditions they face. With lower ratings, creditors could charge banks more on their loans. Big clients may also move their business to less-risky companies, further crimping earnings.
But some analysts feel that Moody’s is playing a game of catch-up. The latest actions, say critics, are backward-looking and do not consider the measures that banks have taken to strengthen themselves, including raising capital and getting out of certain risky businesses like proprietary trading.
2 Any British banks in the Premier League? (Robert Peston on BBC) Moody's main rationale for all these downgrades - of US, Swiss, French, German and British banks - is that investment banking is a riskier business than many might have thought a few years ago. Really? Some would certainly say that is a statement of the egregiously bloomin' obvious. The most interesting thing about the Moody's analysis is that it, in effect, creates three new categories of global banks, the banking equivalent of the Premier League, the Championship and League One.
Of our biggest banks, only HSBC is in this Premier League. Barclays is in the Championship and Royal Bank of Scotland is in League One. So what will be the effect of the downgrades? Well, they might push up the cost of borrowing for the banks fractionally. But it would be odd if the impact was terribly significant - largely because they have all been downgraded, and those who control vast pots of cash have to put their money somewhere.
It is worth remembering that the Bank of England and HM Treasury have announced two new schemes to provide copious amounts of cheap loans to British banks, which can be seen as insurance against the downgrades leading to any kind of renewed credit crunch. After all this, if you are worrying that British banks don't look as robust as you might like, I would direct your attention to Thursday's publication of how much capital Spanish banks may need to raise, as per the assessment of consultants hired by Spain's government.
3 Air France to cut 5,000 jobs (BBC) Air France has announced it is to cut more than 5,000 jobs by the end of 2013 in an attempt to reduce costs and return to growth. The figure represents just under 10% of the total workforce of 53,000. Air France says it is hoping to avoid compulsory redundancies through natural turnover and voluntary redundancies. Air France, one component of the French-Dutch air carrier Air France-KLM, launched a major cost-saving programme, Transform 2015, earlier this year, after posting a loss of 809m euros for 2011 and a first quarter net loss in 2012 of 368m euros.
4 Capitalism and economic madness (The Guardian) As people in the developed world wonder how their countries will return to full employment after the global recession, it might benefit us to take a look at a visionary essay that John Maynard Keynes wrote in 1930, called Economic Possibilities for our Grandchildren.
His General Theory of Employment, Interest and Money, published in 1936, equipped governments with the intellectual tools to counter the unemployment caused by slumps. In this earlier essay, however, Keynes distinguished between unemployment caused by temporary economic breakdowns and what he called "technological unemployment" – that is, "unemployment due to the discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour".
"Technological unemployment" has risen. Since the 1980s, we have never regained the full employment levels of the 1950s and 1960s. Modern capitalism inflames, through every sense and pore, the hunger for consumption. Satisfying that hunger has become the great palliative of modern society, our counterfeit reward for working irrational hours. Advertisers proclaim a single message: your soul is to be discovered in your shopping. Aristotle knew of insatiability only as a personal vice; he had no inkling of the collective, politically orchestrated insatiability that we call economic growth. The civilization of "always more" would have struck him as moral and political madness.
5 'McDonald-isation' of hotels (Khaleej Times) A boom with a view — budget hotels take off in Asia. Surrounded by fine beverages and elephant motifs in the Tusker bar of Accor’s new luxury Sofitel hotel in Mumbai, chief executive Denis Hennequin is unsurprisingly betting on Asia to make up for uncertain prospects at home. He is also convinced the real elephant-sized growth will come from looking downmarket at low-cost, high-return economy hotels — piggybacking on the rise of budget airlines that have opened up domestic travel to Asia’s emerging middle classes.
Facing economic malaise in Europe and the US, as well as heavy local competition to build hotels in China, the world’s fastest growing hospitality market, global hoteliers see a window of opportunity in India and Indonesia. "We are a French-European company, but if you look at the pipeline for the next 3-5 years and beyond, more than 70% of the inventory of new rooms is from this part of world," said Hennequin.
Hoteliers such as Accor, Europe’s largest hotel group, InterContinental Hotels Group, Marriott International and US investment group Starwood Capital’s Louvre Hotels are hoping that early-mover advantage will help them build their budget brands on a profitable scale. In India, the concept of branded mid-scale hotels, where rooms cost between $40 and $80 a night, is in its infancy, whereas in Indonesia, other international hoteliers are waking up to a sector already pioneered by local firms and Accor.
6 The great digital 'divide' (Anand Giridharadas in Khaleej Times) The technology world is divided over what to ask of you.In one camp are the wave of services that urge you to come online and stay a while, that offer numerous ways to fritter away the day. Facebook, where one can easily misplace 12 hours, is the reigning champion of this camp. In another camp are services with a very different mission: They want you to use them, then stop using them. To tell them what restaurant you’re in, peruse a friend’s tips on what to order, then put your phone away and eat (Foursquare).
"The current wave of ‘get offline’ start-ups is a reaction to our saturation with the ‘come online’ start-ups," said Hilary Mason, chief scientist of the link-shortening service Bit.ly. "I think the start-up community is starting to realize that the real value is in enriching human experience, and most of that takes place in the physical space that we inhabit."
7 A solution for Greece (Sidin Vadukut in Khaleej Times) Many people assume that anyone who writes for a newspaper must know everything about pretty much everything. And so it was earlier this week when I met family for dinner. "Tell us Sidin, how do you think the Greek economy can be saved? Tell us! Tell us!" As they were haranguing me the television was streaming the daily news. And then suddenly it struck me. I knew exactly how to save Greece.
Listen carefully. The new Samaras government in Greece, or whichever one is in power when this column goes to press, must immediately declare a civil war situation in the country. This is easy enough to do anyways. Greece is currently deeply divided. Of course there won’t be an actual war. Just fake media reports and government press releases that seems to indicate extreme rebel violence. Greece must escalate this till it becomes a United Nations issue. As usual Russia and China will vote against interfering.
Subsequently Greece must secretly approach China and Russia for military assistance. It is one of the ironies of the modern world that while countries seldom lend each other money, they are more than happy to ship container loads of guns and bombs. Both countries will ship mountains of weapons over. Which the Greek government will then sell to Egypt or Syria for billions of dollars of cold, hard cash. The politicans will take 50% and give the country the remaining 50%. Problem solved, Greece saved, austerity finished, and common Greek on the street can resume evading taxes. What is the procedure to apply for Nobel Prize?
Citigroup and Bank of America, which have struggled to fully recover from the financial crisis, were among the hardest hit. After the downgrades, the banks stand barely above the minimum for an investment grade rating, a level also known as junk and a sign of the difficult business conditions they face. With lower ratings, creditors could charge banks more on their loans. Big clients may also move their business to less-risky companies, further crimping earnings.
But some analysts feel that Moody’s is playing a game of catch-up. The latest actions, say critics, are backward-looking and do not consider the measures that banks have taken to strengthen themselves, including raising capital and getting out of certain risky businesses like proprietary trading.
2 Any British banks in the Premier League? (Robert Peston on BBC) Moody's main rationale for all these downgrades - of US, Swiss, French, German and British banks - is that investment banking is a riskier business than many might have thought a few years ago. Really? Some would certainly say that is a statement of the egregiously bloomin' obvious. The most interesting thing about the Moody's analysis is that it, in effect, creates three new categories of global banks, the banking equivalent of the Premier League, the Championship and League One.
Of our biggest banks, only HSBC is in this Premier League. Barclays is in the Championship and Royal Bank of Scotland is in League One. So what will be the effect of the downgrades? Well, they might push up the cost of borrowing for the banks fractionally. But it would be odd if the impact was terribly significant - largely because they have all been downgraded, and those who control vast pots of cash have to put their money somewhere.
It is worth remembering that the Bank of England and HM Treasury have announced two new schemes to provide copious amounts of cheap loans to British banks, which can be seen as insurance against the downgrades leading to any kind of renewed credit crunch. After all this, if you are worrying that British banks don't look as robust as you might like, I would direct your attention to Thursday's publication of how much capital Spanish banks may need to raise, as per the assessment of consultants hired by Spain's government.
3 Air France to cut 5,000 jobs (BBC) Air France has announced it is to cut more than 5,000 jobs by the end of 2013 in an attempt to reduce costs and return to growth. The figure represents just under 10% of the total workforce of 53,000. Air France says it is hoping to avoid compulsory redundancies through natural turnover and voluntary redundancies. Air France, one component of the French-Dutch air carrier Air France-KLM, launched a major cost-saving programme, Transform 2015, earlier this year, after posting a loss of 809m euros for 2011 and a first quarter net loss in 2012 of 368m euros.
4 Capitalism and economic madness (The Guardian) As people in the developed world wonder how their countries will return to full employment after the global recession, it might benefit us to take a look at a visionary essay that John Maynard Keynes wrote in 1930, called Economic Possibilities for our Grandchildren.
His General Theory of Employment, Interest and Money, published in 1936, equipped governments with the intellectual tools to counter the unemployment caused by slumps. In this earlier essay, however, Keynes distinguished between unemployment caused by temporary economic breakdowns and what he called "technological unemployment" – that is, "unemployment due to the discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour".
"Technological unemployment" has risen. Since the 1980s, we have never regained the full employment levels of the 1950s and 1960s. Modern capitalism inflames, through every sense and pore, the hunger for consumption. Satisfying that hunger has become the great palliative of modern society, our counterfeit reward for working irrational hours. Advertisers proclaim a single message: your soul is to be discovered in your shopping. Aristotle knew of insatiability only as a personal vice; he had no inkling of the collective, politically orchestrated insatiability that we call economic growth. The civilization of "always more" would have struck him as moral and political madness.
5 'McDonald-isation' of hotels (Khaleej Times) A boom with a view — budget hotels take off in Asia. Surrounded by fine beverages and elephant motifs in the Tusker bar of Accor’s new luxury Sofitel hotel in Mumbai, chief executive Denis Hennequin is unsurprisingly betting on Asia to make up for uncertain prospects at home. He is also convinced the real elephant-sized growth will come from looking downmarket at low-cost, high-return economy hotels — piggybacking on the rise of budget airlines that have opened up domestic travel to Asia’s emerging middle classes.
Facing economic malaise in Europe and the US, as well as heavy local competition to build hotels in China, the world’s fastest growing hospitality market, global hoteliers see a window of opportunity in India and Indonesia. "We are a French-European company, but if you look at the pipeline for the next 3-5 years and beyond, more than 70% of the inventory of new rooms is from this part of world," said Hennequin.
Hoteliers such as Accor, Europe’s largest hotel group, InterContinental Hotels Group, Marriott International and US investment group Starwood Capital’s Louvre Hotels are hoping that early-mover advantage will help them build their budget brands on a profitable scale. In India, the concept of branded mid-scale hotels, where rooms cost between $40 and $80 a night, is in its infancy, whereas in Indonesia, other international hoteliers are waking up to a sector already pioneered by local firms and Accor.
6 The great digital 'divide' (Anand Giridharadas in Khaleej Times) The technology world is divided over what to ask of you.In one camp are the wave of services that urge you to come online and stay a while, that offer numerous ways to fritter away the day. Facebook, where one can easily misplace 12 hours, is the reigning champion of this camp. In another camp are services with a very different mission: They want you to use them, then stop using them. To tell them what restaurant you’re in, peruse a friend’s tips on what to order, then put your phone away and eat (Foursquare).
"The current wave of ‘get offline’ start-ups is a reaction to our saturation with the ‘come online’ start-ups," said Hilary Mason, chief scientist of the link-shortening service Bit.ly. "I think the start-up community is starting to realize that the real value is in enriching human experience, and most of that takes place in the physical space that we inhabit."
7 A solution for Greece (Sidin Vadukut in Khaleej Times) Many people assume that anyone who writes for a newspaper must know everything about pretty much everything. And so it was earlier this week when I met family for dinner. "Tell us Sidin, how do you think the Greek economy can be saved? Tell us! Tell us!" As they were haranguing me the television was streaming the daily news. And then suddenly it struck me. I knew exactly how to save Greece.
Listen carefully. The new Samaras government in Greece, or whichever one is in power when this column goes to press, must immediately declare a civil war situation in the country. This is easy enough to do anyways. Greece is currently deeply divided. Of course there won’t be an actual war. Just fake media reports and government press releases that seems to indicate extreme rebel violence. Greece must escalate this till it becomes a United Nations issue. As usual Russia and China will vote against interfering.
Subsequently Greece must secretly approach China and Russia for military assistance. It is one of the ironies of the modern world that while countries seldom lend each other money, they are more than happy to ship container loads of guns and bombs. Both countries will ship mountains of weapons over. Which the Greek government will then sell to Egypt or Syria for billions of dollars of cold, hard cash. The politicans will take 50% and give the country the remaining 50%. Problem solved, Greece saved, austerity finished, and common Greek on the street can resume evading taxes. What is the procedure to apply for Nobel Prize?
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