Coffee Break: Debt, Banks, Recalls and McDonald's... : Planet Money This post sums up the news-worthy events of February 9, 2010. Articles are linked to stories on the US budget deficit, UBS' bumpy road to profitability, the Toyota auto recall and McDonald's recent success in the Italian market.
NPR logo Coffee Break: Debt, Banks, Recalls and McDonald's...

Coffee Break: Debt, Banks, Recalls and McDonald's...

What we read over lunch....

Returning to work after a snowed-in weekend, Washington faces its next approaching storm... the budget deficit. Are we entitled to live in debt forever? The Economist says something's got to give:

In the medium term there are only two ways to bring the deficit back to a sustainable level—which means no more than 3% of GDP. [Ed: It was 9.9% in 2009] Either taxes will have to rise, or a serious attempt must be made to rein in the entitlements—legally mandated programmes such as Medicare, Medicaid and Social Security—that constitute the great bulk of spending....

...Mr Obama is proposing only a bit of the first, and none of the second. Taxes on the rich (those earning $250,000 a year or more) will go up from next January, as the Bush tax cuts expire; but Mr Obama had promised middle America that it will pay "not one single dime" more in tax, and so he is extending George Bush's budget-busting tax cuts for the remaining 98% of Americans.

After huge losses during the financial crisis, the Swiss banking giant UBS is returning to some semblance of profitability. But it only survived with government help. And many customers are still pulling billions of francs out of its wealth management unit.

"UBS made a net profit of 1.21 billion francs, or $1.3 billion, during the fourth quarter, helped by lower costs and a tax credit... UBS benefited from a 480 million francs tax credit in the fourth quarter mainly attributable to the revaluation of deferred tax assets, principally in the United States, it said... But the outlook remains cloudy. Aside from volatile markets it, like other global banks, faces regulatory uncertainties as governments debate measures to prevent another financial crisis."

So where's all that money heading? To its US competitors.

If you're a Toyota owner or shareholder, the snow is the least of your problems. Today we heard that resale values for Toyota vehicles plummeted again. A new investigation (this time into the power steering on the popular Corolla Model) may soon be underway and many pundits are calling for the company's president to resign. BusinessWeek's William Pesek was particularly biting in his remarks:

"A name once synonymous with quality has fallen so far that Americans are actually rushing out to buy Detroit's clunkers. You have to love a corporate scandal that boosts General Motors Co. and Ford Motor Co. and gins up consumer advocate Ralph Nader in one fell swoop. Toyota President Akio Toyoda has done just that and it's time for him to resign. He must go not because of the company's biggest-ever and growing recall, but to take responsibility for how pathetically he is handling the crisis. Thanks to unsteady leadership, Toyota's market value has lost the equivalent of Latvia's annual gross domestic product since Jan. 21."

The Italian government and fast food giant McDonald's recently teamed up to bring Italians a burger dubbed the "McItaly." Although the pair claim that the red, white and green creation (Italian beef, Asiago cheese and artichoke spread) is a much-needed boost for the nation's farmers, the collaboration has incensed our Apennine cousins and foodies alike. The Guardian's Matthew Fort led the charge for the English speaking world:

"For many Italians, their very sense of identity lies in the food, not just of the region in which they were born, but of the town, village, hamlet, even house. And they hold to the superiority of their local produce and dishes with passion. That is why eating your way round Italy is such a continual delight. Pleasure lies in diversity, not homogeneity. Who wants to eat the same stuff the whole world over? It's boring. It's the kind of global mind-numbing sameness and taste bud-mugging mediocrity that McDonald's embodies. No-one in their right mind can see McDonald's as either a force for good in the world or as representing the sunny uplands of gastronomy."

For better or worse Italians gobbled up 100,000 units of that global, mind-numbing sameness during the first week of the McItaly launch.