Spending spree over as Americans walk without safety net

Americans are drawing down their personal savings at the fastest rate since the depths of the Great Depression, suggesting that US household finances may be more fragile than they look. The savings rate fell to minus -1% in 2006 and has now been negative for 21 consecutive months, according to Commerce Department data. Such a rate was last seen in 1933, when a quarter of the American workforce was unemployed and whole families were kept alive by charitable soup kitchens.

Charles Dumas, chief strategist for Lombard Street Research, said a spending spree by rich Americans sitting on fat asset gains might have played a role, but the main driver was distress borrowing by households struggling to keep their heads above water as each source of stimulus dried up. "There are no more tax cuts, no more house price gains, no more real income growth, and no more petrol price bonus," he said.

Some $390bn in mortgages with adjustable rates, taken out in 2004 and 2005 when interest rates were far below current levels, are due to ratchet up this year, in some cases doubling payments. Until last year, Americans were subsidising their lifestyles to the tune of $70bn a month through withdrawal of home equity. This has since dropped to nearer $30bn a month. The shortfall has been more or less covered by the falling savings rate - so far.

The slide into negative savings could hardly come at a worse time, just as 80m or so baby boomers start feeding into the retirement pool and prepare to draw down wealth. Large numbers could face poverty in old age. Yale professor Jacob Hacker said the average American was now walking a shaky financial tightrope, without a safety net. "American family incomes are on a frightening roller-coaster, rising and falling much more sharply than they did thirty years ago," he said.

The welfare net of health care and pensions once provided by corporations is crumbling as a result of globalisation, leaving families to shoulder the risk. Prof Hacker said personal bankruptcies had risen from under 300,000 in 1980 to more than 2m in 2005. Many were well-educated and with children. "They are not the persistently poor: they are refugees of the middle-class, drowning in debt, and frequently wondering how they fell so far so fast," he said.

(2007-02-13 12:40:47 SGT) [Biz] Permalink

Richard Branson offers $25 million global warming prize

news.yahoo.com :

Airline tycoon Richard Branson announced on Friday a $25 million prize for the first person to come up with a way of scrubbing greenhouse gases out of the atmosphere in the battle to beat global warming.

Flanked by climate campaigners former U.S. Vice President Al Gore and British ex-diplomat Crispin Tickell, Branson said he hoped the prize would spur innovative and creative thought to save mankind from self-destruction. "Man created the problem and therefore man should solve the problem," he told a news conference to reveal the Virgin Earth Challenge.

The winner will have to come up with a way of removing one billion tonnes of carbon gases a year from the atmosphere for 10 years - with $5 million of the prize being paid at the start and the remaining $20 million at the end.

(2007-02-13 12:32:18 SGT) [Env] Permalink

Alcatel-Lucent to slash 12500 jobs

news.yahoo.com :

Alcatel-Lucent will shed 12,500 jobs or 16% of staff, more than expected, as a result of its complex transatlantic merger and it sees tough times ahead with another dip in sales in the first quarter. The Paris-based group incurred a net loss of 618 million euros ($802.3 million) in the three months to December 31, including exceptionals of 755 million euros, compared with a profit of 381 million euros a year earlier.

Workers at Alcatel-Lucent have called for a strike on February 15 to protest against the job cuts which were previously expected to amount to 9,000, or 11% of staff. Details on the speed of the downsizing or breakdown were not given. "There are still 40 percent more jobs cut than announced (previously) which proves that there are some difficulties that had not been foreseen," Jean-Baptiste Triquet, a member of the CFDT union told Reuters.

(2007-02-13 12:28:50 SGT) [Biz] Permalink

Edison's light bulb could be endangered

news.yahoo.com :

The incandescent light bulb, perfected for mass use by Thomas A. Edison in the late 19th century, is being supplanted by fluorescent lighting that is more efficient and longer lasting. Edison perfected the process of making the long-burning filaments used inside incandescent light bulbs so they could be mass produced.

Last month, California Assemblyman Lloyd Levine announced he would propose a bill to ban the use of incandescent bulbs in his state. New Jersey Assemblyman Larry Chatzidakis introduced a bill that calls for the state to switch to fluorescent lighting in government buildings over the next three years. In New Jersey, the state where Edison acquired more than 400 patents for innovations such as the phonograph and electric railroad car, utility is trumping nostalgia. The state recommends switching to compact fluorescent lamps as part of its Clean Energy Program.

Fluorescents, which create light by heating gases inside a glass tube, were developed in the early 20th century and sold publicly by the 1940s. They are generally considered to use more than 50% less energy and last several times longer than incandescent bulbs. However, the mercury vapor inside fluorescents can damage the environment if the bulbs are broken, leading some states to require businesses that use large quantities of fluorescent lights to recycle them.

(2007-02-13 10:27:14 SGT) [Energy] Permalink

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