Thursday, Jan 22, 2009
Does this epitomise how far we've all departed from reality?
BBC News: Fast bucks: how Porsche made billions
"Porsche is world famous for its iconic sports cars.
But car manufacturing isn't the only thing the company is good at.
Last year it made six times as much on the stock market as it did making cars.
Industry insiders are only half joking when they call it a hedge fund with a carmaker attached.
Porsche says its stock market trades are only for one reason: to take it towards its long term goal, the takeover of car making giant, Volkswagen."
Off topic I know, but how many would lose their jobs if this gamble went wrong?
Whether it's by talentless celebrity, BTL or stock market gambling, will this maximum money by minimum effort obsession ruin us?
Who will actually invent or make stuff
Posted by shipbuilder @ 10:43 AM (789 views) Add Comment
10 Comments
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1. troy said...
Yes it does shippy
and it's not as if there were no warnings
from 2003
The financial system: unbalanced, unfair, unsustainable
On a global level, there is $100 trillion of debt outstanding, but only $33 trillion of income with which to repay those debts. Even the drastic recent stock market falls have barely dented the credit superstructure. When this credit bubble bursts in the United States and Britain, it will be middle-class consumers that will first bear the brunt of the financial crash.
That will be unjust and unfair, because American and British consumers have been actively encouraged in their borrowing by the financial deregulation policies of both central bankers and governments. Moreover, politicians and bankers have watched as dutiful and compliant consumers have propped up these two big economies – helping to keep the global economy afloat. They will be rewarded for their heroic efforts by bankruptcy, losses, liabilities, and personal anguish – which will extend some time into the future. The impact of a collapsing credit bubble will reverberate around the world, and hurt the poorest most.
Ann Pettifor
http://www.jubileeresearch.org/worldnews/europe/opendemocracy010903.htm
2. troy said...
from the same 2003 article
On the whole, it is the poor and the middle classes that rely on wages and salaries – while the rich derive their incomes from wealth.
However, while the rich have been getting richer, they have not become indebted. Nor are they using these assets to spend and boost the economy. Instead, on the whole, they are standing by while their assets rise in value.
The poor, by contrast, have watched as their wages and salaries declined as a share of GDP, and have had to borrow to compensate for these losses. By doing so, they are providing a service to the rest of the economy, and helping asset prices stay high.
Winston Churchill’s storm warning
The team producing Real World Economic Outlook warns that the coming “first world” debt crisis will resemble the debt crisis of the 1920s – when bankers and politicians embarked on a similar experiment of “globalising” and deregulating capital. Then, as now, their liberalisation of capital markets and reckless inflation of credit encouraged massive borrowing. Then as now, the burden of resulting debts fell most heavily on the middle classes and poor.
Winston Churchill, in his book about that period, The Gathering Storm, described it well:
“The year 1929 reached almost the end of its third quarter under the promise and appearance of increasing prosperity cont. . .
3. richc said...
I wonder how much money RBS, HSBC, et al. have lent to Porsche to play these games? Did the banks know what Porsche was doing with the money? Presumably not, as their shareholdings wouldn't have been a secret. It would be fine (maybe?) if Porsche were doing this as a hedge fund, but presenting themselves as a carmaker and borrowing money on that basis, and then turning around and using that money in the stock market has to be considered deceitful and possibly fraudulent.
4. Cusinvinnie said...
You Brits are just jealous that the Germans beat you at your own game....and still make beautiful cars!
From a Dutch guy.
5. troy said...
Ann Pettifor on mortgages
2003
The latest official US government statistics show that mortgage debt rose in the previous year by a staggering $700 billion, to $6,219 trillion, in the first quarter of 2003. That is double the increase in the 1990s. At the same time, personal bankruptcies in the US rose in the last quarter by 9.0% more than in the same period in 2002; business bankruptcies in two successive quarters rose by 5.9%. Samuel J. Gerdano, executive director of the American Bankruptcy Institute said as far back as May 2003: “Today’s new bankruptcy record is continued evidence that U.S. households continue to struggle with the burden resulting from consumer debts incurred in the 1990s”.
Avoiding the next great crash
For some, therefore, the day of reckoning has already arrived. When it arrives for the millions more that are dutifully and heroically borrowing and spending, and thereby propping up the economy, great pain and anguish will be inflicted on individuals, businesses, their workers, families and communities. The consequences for the rest of us, and particularly for those in the poorest countries, are frightening.
6. letthemfall said...
They must be a very cash-rich business. This is a good example of what can happen when there is insufficient regulation (ironic that the UK is better regulated in this respect than Germany). It allows too much money and power to end up in the hands of the few, which is perhaps the major reason for our current pass. Hopefully the German govt will resist pressure to abolish the takeover law.
Still, Porsche may be making rather less from their manufacturing business over the next few years.
PS My other car is not a Porsche.
7. paul said...
Just a second. I know from friends living in southern Germany that Porsche is a very honest company - they elected to overpay tax to the city of Stuttgart after being offered a lower rate.
Like a lot of successful German companies, they are very proud of their achievements and their social responsibility role.
I would bet that the senior management got sick and tired of being taken for a ride by hedge funds, and saw an excellent opportunity to get their own back.
You can't blame Porsche for riding hedge funds when that's all hedge funds do themselves.
8. letthemfall said...
paul
Come to that one could say the banks are honest companies, in that they did not break the law (with one or two exceptions perhaps). The question is whether taking big stakes in secret is in the interests of the economy and society at large. Perhaps there is justification here - I don't know - but I don't have much sympathy for the hedge funds who got stung.
9. shipbuilder said...
Paul, I am in no way attacking Porsche - I see this as just one example of how we've become focused on money to the possible detriment of other things. Who will do the real work? When vast amounts of money are made while producing no actual real wealth, where does that money come from? It seems that money creation has multiplied far beyond wealth creation in the last decade - that either indicates a massive transfer of money from the majority wealth creators to the minority financial sector, or inflation, or both.
10. paul said...
I was kind of pointing that out to richc I suppose.
Money creation vs. wealth creation - yes. That's the truth really isn't it?
Here's another way of looking at it though - what Porsche did was actually a direct transferral of wealth from the money generating hedge funds to a wealth generating manufacturer!