New uses for old industry

With this morning's news on car sales maybe this posting from Robert Reich should be listened to.

It was written followong the latest US unemployment figures which came out on Friday

Energy independence and a non-carbon economy should be the equivalent of a war mobilization. Hire Americans to weatherize and insulate homes across the land. Don't encourage General Motors or any other auto company to shrink. Use the auto makers' spare capacity to make busses, new wind turbines, and electric cars (why let the Chinese best us on this?). Enlarge public transit systems.

A familiar story across the Atlantic

What we can do the Americans can do better.

The front pages of the US papers today suggest that AIG are planning to pay out $165 million in bonuses to 400 employees in its financial products division.

According to the New York Times,

Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

Whilst the LA Times says that if the the bonuses are not paid

financial products employees who are denied payments could quit and that AIG's losses -- the insurer took the deepest bath in red ink in American history last quarter, losing $61.7 billion -- could spiral enormously if the only people who understand the company's convoluted dealings are not around to "unwind" the damage they have caused.

Signs of a shift in economic power

You wonder whether the warning by the Chinese to the Americans ovrer their debt levels may be the shape of things to come.

The Chinese demanded that the Obama administration "guarantee the safety" of its $1 trillion in American bonds worried about the spiralling US debt.

China is now the largest holder of American treasury bonds as has enormous leverage over the US economy whilst holding them.If it sold the cost of borrowing would rocket,hardly something that the Obama administration could deal with in the middle of a financial stimulus package.

However does this episode offer a taster of a seismic shift to the Far East and maybe a shot across the bows for the West ahead of G20?

US job figures - a fundemental shift in the economy

Yesterday's US unemployment figures were dreadful.

An article in thsi morning's New York Times suggests that they may be merely the start of a reconstrction in the US economy.

For those who missed the Feb figures,651,000 people joined the list that represents around 8.1% of the working population and it is the highest level in 25 years.

The paper reports that John E. Silvia, chief economist at Wachovia in Charlotte, N.C says that the jobs wont return

A lot of production either isn’t going to happen at all, or it’s going to happen somewhere other than the United States. There are going to be fewer stores, fewer factories, fewer financial services operations. Firms are making strategic decisions that they don’t want to be in their businesses.”

Ok this has happened before in recessions but never across such a mix of industries.It has effected services as much as it has effected manufacturing.

The question for the Obama administration is what replaces these industries?