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A vacant burned out house sits in an area that used to be filled with houses in Detroit's east end (Deborah Baic/The Globe and Mail)
A vacant burned out house sits in an area that used to be filled with houses in Detroit's east end (Deborah Baic/The Globe and Mail)

Business Briefing

Neglect, corruption, exodus: What drove Detroit to historic bankruptcy Add to ...

According to Mr. Orr, spending by the city outpaced revenue by an average $100-million (U.S.) a year between 2008 and 2012, with a deficit at the end of the last fiscal year of $326.6-million.

 “The city of Detroit continues to incur expenditures in excess of revenues despite cost reductions and proceeds from long-term debt issuances,” Mr. Orr said in his first report to Michigan’s government.

“In other words, Detroit spends more than it takes in – it is clearly insolvent on a cash flow basis.”

In 224 square kilometres, Detroit is now home to at least 60,000 parcels of vacant property and 78,000 vacant buildings, some 38,000 deemed as potentially dangerous.

“This surplus land presents enormous socio-economic challenges and affects public health, crime rates, economic development and property values.”

Late-breaking earnings
Shares of Google Inc. and Microsoft Corp. sank in after-hours action today after quarterly results disappointed investors.

Calling its results a “great quarter,” with revenues up 19 per cent in the second quarter, Google sent a troubling message on advertising prices.

Google’s profit climbed in the second quarter to $3.2-billion (U.S.), or $9.54 a share, from $2.8-billion or $8.42 a year earlier.

“The shift from one screen to multiple screens and mobility creates tremendous opportunity for Google,” said chief executive officer Larry Page.

“With more devices, more information, and more activity online than ever, the potential to improve people’s lives even more is immense.”

Microsoft’s fourth-quarter profit, in turn, jumped to just shy of $5-billion or 59 cents, from a loss of $492-million or 6 cents.

“While our fourth quarter results were impacted by the decline in the PC market, we continue to see strong demand for our enterprise and cloud offerings, resulting in a record unearned revenue balance this quarter,” said chief financial officer Amy Hood.

Bernanke on bullion
Ben Bernanke no doubt got the tongues of gold bugs wagging today with this comment: “Nobody really understands gold prices, and I don’t pretend to really understand them, either.”

The Federal Reserve chairman was in his second day of congressional testimony in Washington, discussing how some investors hold gold as a type of disaster insurance. Gold prices, he added, have declined because there's less need for that among investors.

“One reason gold prices are lower is people are less concerned about extreme outcomes, particularly negative outcomes, and therefore they feel less need for whatever protection gold affords,” he told the Senate banking committee when asked about prices.

“A lot of people hold gold as an inflation hedge but the movements of gold don’t predict inflation very well."

Mr. Bernanke also again buoyed markets on reassurances from the central bank chief that the Fed would be cautious in any move to wind down quantitative easing, its asset-buying program worth $85-billion (U.S.) a month.

Gold, funny enough, also gained on the second day of Mr. Bernanke’s testimony.

Poloz 'perky'
Bank of Montreal’s chief economist believes the Bank of Canada is rather “perky” when it comes to the economic outlook beyond 2013.

That, Douglas Porter says, is because the central bank is betting consumers will do their part for the recovery given that we’re saving more and getting a better handle on our record levels of personal debt.

“The Bank of Canada is consistently more optimistic on the growth outlook than most others, especially when looking beyond the current year,” Mr. Porter said today.

“Why so perky? The bank is counting on the consumer to contribute more than half the growth in coming years, and they may have something there.”

As The Globe and Mail’s Sean Silcoff reports, the Bank of Canada now believes the economy expanded by a weak 1 per cent in the second quarter of the year, but projects a pickup in the current quarter.

“While growth will be chopping in the near term as a result of unusual temporary factors, underlying momentum in the economy is expected to build into 2014,” the central bank said in its monetary policy report yesterday.

“After picking up sharply in the first quarter of 2013, exports are projected to continue to recover, which should boost confidence and lead to increasingly solid growth in business fixed investment,” it added.

“The economy will also be supported by continued growth in consumer spending, while further modest declines in residential investment are expected.”

While economic growth is forecast at just 1.8 per cent for all of 2013, the central bank projected that that would climb nicely to 2.7 per cent in each of 2014 and 2015 as the U.S. economy picks up steam and business confidence rises.

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