Tags: U.S | Faces | Economic | 9/11

U.S Faces Economic 9/11

Wednesday, 31 August 2005 12:00 AM

Can a private company be ordered to re-open a money-losing manufacturing plant?

In most places, no. In France, oui.

Late last week a French judge ordered the consumer giant to exhume one of its chocolate factories near Marseilles, and repost the plant's 427 employees. Most of the employees had previously taken early retirement or had taken other jobs within the company.

The plant had been plagued by operational snafus and cost overruns for the past nine years, Nestle officials say. Demand for the factory's main product - a decaf coffee made at the site - had fallen off and capacity had waned. Nestle had taken other, more profitable product lines, like chocolate, and switched it to plants in Italy, Spain and in Northern France. Union officials said the move to the outside plants constituted a de facto lockout and asked the courts to intervene.

"Nowadays, it is prohibited to close factories in a savage fashion," said Elise Brand, the union's lawyer.

Nestle called the ruling "unbelievable and unprecedented", claiming that it abridged its basic freedom to manage its operations.

"This plant has no chance of ever making money in the long-term. We offered all workers jobs within the group in other parts of France, or early retirement for those over 55," said François-Xavier Pellourd, the company spokesman.

But the judge ruled that Nestle had breached France's strict code on plant closures and questioned whether the move was justified on commercial grounds.

Nestle said it would obey the court but denied breaking French law. "We have fully complied at every step of the way, even though it is an extremely long and complex process. We've asked the court to specify what the ruling means because we don't understand what we are supposed to have done wrong."

2. Expert Warns of Economic 9/11 for U.S.

There's an economic storm cloud brewing on the horizon; one that will sink millions of middle class Americans into poverty and the economy into financial chaos. And the flailing US dollar is to blame.

Unfortunately, few Americans are aware of the train wreck ahead.

So says Clyde Prestowitz, president of the Economic Strategy Institute, a Washington think tank, and author of the new book Three Billion New Capitalists.

Out touting the book, Prestowitz says that, for millions of Americans, the bulk of their investments, their life savings and their assets are tied up with the dollar-like an iron chain to a two-ton anchor. And right now, the US dollar is the most widely-held financial asset in the world.  But it is also the most dangerously overvalued asset in the world. And one of the worst performing.

As a result, the U.S. current account deficit, the broadest measure of foreign trade, has risen to nearly $600 billion, or around 6 percent of gross domestic product, as Americans buy more from overseas than U.S. businesses can export.

In a recent issue of Financial Intelligence Report, Warren Buffett warns that the excessive consumption in the United States has hit a point of real danger. Learn how to protect yourself against the fall of the dollar with our favorite mutual fund. Get your copy of this free special report, Go Here Now.

Thus the comparison to 9/11 -- a worldwide financial panic triggered by a sudden massive sell-off of US dollars that would lead inexorably to the collapse of economies around the world. And if that happens, Prestowitz predicts: "It would make the Great Depression of the 1930s look like a walk in the park."

"Right now," Prestowitz tells the newspaper The Australian on August 29, "we have a situation in which the US is running huge trade deficits -- about $US650 billion ($766 billion) in 2004 -- which are financed by borrowings from the central banks of Asia -- mainly the Chinese and the Japanese. All the world's central banks are chock-full of US dollars -- they're holding many more dollars than they really want. They're holding those dollars because at the moment there's no great alternative and also because the global economy depends on US consumption. If they dump the dollar and the dollar collapses, then the whole global economy is in trouble.

"However, some countries have a bigger stake than others in maintaining the status quo. China and Japan have a big stake in maintaining the flow of their exports to the US and keeping the US economy humming. Russia, on the other hand, does not export much to the US. India doesn't export much to the US. Yet Russia and India are also big dollar-holders. They hold many more dollars than they really want or need.

"It doesn't take any great stretch of the imagination to see what could happen if one of these central bank managers decides to dump dollars. We had a situation recently when a mid-level official at the Central Bank of Korea used the word 'diversification'. It was a throwaway remark at some obscure lunch, but there was instantaneous overreaction. The US stock market fell by 100 points in 15 minutes because the implication was that South Korea might be shifting out of US dollars.

"So picture this: you have a quiet day in the market and maybe some smart MBA at the Central Bank of Chile or someplace looks at his portfolio and says, 'I got too many dollars here. I'm gonna dump $10 billion'. So he dumps his dollars and suddenly the market thinks, 'My God, this is it!' Of course, the first guy out is OK, but you sure as hell can't afford to be the last guy out.

"You would then see an immediate cascade effect -- a world financial panic on a scale that would dwarf the Great Depression of the 1930s."

Whether one agrees with Prestowitz or not, he isn't alone. Billionaire  financiers Warren Buffet and George Soros have taken steps to hedge their currency positions against the possibility of a cataclysmic plunge in the greenback.

Then there's Paul Volcker, head of the Federal Reserve before Alan Greenspan, who has said publicly there is a 75 per cent chance of a dollar crash in the next five years.

"No wonder people look at this and say, 'Holy cow!'," he says. "No one knows for sure what will happen, but clearly the global markets could implode very quickly. The lack of an alternative to the dollar is the only reason it hasn't taken a big fall already."

As Congress seeks to reform the defined benefit system, most large employers have changed or plan to change their pensions by either freezing them totally or closing them to new hires, a new study shows.

Sixty-seven percent of large employers altered their pension plan over the past three years or are contemplating doing so, according to a PricewaterhouseCoopers survey (http://www.barometersurveys.com/) of 147 CFOs and managing directors at U.S. multinational companies.

Three in four large companies that made changes protected their current employees: 59% adjusted benefits only for future hires and 48% grandfathered in certain employees, based on age or service, PricewaterhouseCoopers finds. Only 15% provided additional benefits to employees affected by the pension changes, while 11% gave all employees a choice between the old and revised plans.

 "It's very thorny for employers to change pensions for current employees," says Steve Metz, principal in PricewaterhouseCoopers' human resource services group. "But many employers change the deal going forward for new hires to stop the bleeding."

Get your free special report exclusively from MoneyNews. Go Here Now.

4. New Thinking on 529 Plans

Depending on what day you pick up your local paper or read a personal finance magazine, you will either read an article singing the praises of 529 plans or criticizing them for their faults. However, for those who have them, 529 Plans can make affording a child's college education a little more realistic.

Plus, there is an exciting edge to 529 plans that could help finance an adventure or two for the parents, says J.J. Burns, CFP of J.J. Burns & Company in Melville, NY.

"If your child ends up not using the 529 plans funds for college, the money does not go to waste," explains Burns. "The money in the plan can be used for other things, beyond a child's education."

Maybe junior wants to be a student in a theater program in London or at a cooking school in France? Or maybe your daughter would like to earn a Professional MBA in Golf from Methodist College in Fayetteville, North Carolina, where the practical work is done on the fairways of the famed Pinehurst Golf Club? 

"The 529 plan is typically in the parents' names, and they too can use it for their own schooling, if they'd like," states Burns. "So, if Junior is lucky enough to earn a ‘full ride' to college, it might allow mom or dad to get some enrichment of their own." 

Get Your Free Copy of "Protecting Yourself From the Coming Real Estate Crash" -- a FREEE Special Report from NewsMax's Financial Intelligence Report. Go Here Now. 

Get your free special report exclusively from MoneyNews. Go Here Now.

Get Your Free Copy of "Protecting Yourself From the Coming Real Estate Crash" -- a FREEE Special Report from NewsMax's Financial Intelligence Report. Go Here Now.�


© 2019 Newsmax. All rights reserved.

1Like our page
Can a private company be ordered to re-open a money-losing manufacturing plant?In most places, no. In France, oui.Late last week a French judge ordered the consumer giant to exhume one of its chocolate factories near Marseilles, and repost the plant's 427 employees. Most of...
Wednesday, 31 August 2005 12:00 AM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

America's News Page
© Newsmax Media, Inc.
All Rights Reserved