Imbalance

At the end of this month Corus Steel will layoff 1,700 workers on Teeside.

On another planet, the Financial Times today tells me that "Banks have traditionally paid out about half of revenues to employees in salaries, bonuses, insurance and other benefits, dwarfing the compensation ratios used in most industries".

For Goldman 2009 revenues are predicted to be $44bn - you can do the arithmetic.

Financial literacy

I am financially "old-fashioned", illiterate if you prefer, but the response of the market to Dubai World's request for a 6-month hold on debt repayment seems typically overblown. Hedge funds call their lawyers, markets are in turmoil. I am always bemused by the "market" as if it were more than the sum of its parts, some uncontrollable behemoth with a life of its own. The editorial in yesterday's Financial Times was typical. "The economic crisis was caused by the build-up of leverage. As the crisis unfurled, policymakers rescued debtholders, rightly betting that the best escape route was to meet obligations to creditors and then rely on future economic growth to make debts manageable.
As a result, the financial system remains over-leveraged and under-capitalised."

Let that "remains" sink in. Nothing has changed. The crisis was caused by the uncontrolled and irresponsible build-up of leverage, not the build-up of leverage per se.

Mind games

Headline from today's FT:

"RBS cautious after reporting £1bn loss"

and from the Wall Street Journal:

"RBS Posts Loss, Takes Dim View on Recovery"

But from the BBC:

"RBS downbeat despite £15m profit"

But then the BBC is not what it was.