OT - Financial mess 101 ($700 billion bailout)

[Rodster]

GM considering Chapter 11 filing

http://news.yahoo.com/s/nm/20090214/ts_nm/us_gm_plan

If so, then GM shouldn't get a cent of government bailout money.

Chapter 11 will allow GM to reorganize. Once that happens, then it should fix their union problem and build better a better product, just like any other business.

Take care,
PK

Agreed which is why I felt that was the better option to unload the UAW from building their cars. That would help immensely in getting GM back to being competitive with the Japanese automakers.

[wco81]

Building a better product isn't going to matter much in the near term.

First of all it takes years to build a better car.

Second, all car companies are hurting now, including Toyota and Honda, which are cutting both US jobs and jobs in other countries.

They're also probably going to get help from the Japanese govt.

[Rodster]

Building a better product isn't going to matter much in the near term.

First of all it takes years to build a better car.

Second, all car companies are hurting now, including Toyota and Honda, which are cutting both US jobs and jobs in other countries.

They're also probably going to get help from the Japanese govt.

GM actually builds a pretty good car right now. Ford IMO has probably the most all around reliable lineup in cars. The problem with GM, Ford and Chrysler is that they have to charge more for their cars to compensate for the UAW costs.

Don't be too surprised if Toyota and Honda come asking for a US bailout as well.

[XXXIV]

Don't be too surprised if Toyota and Honda come asking for a US bailout as well.

They would be stupid not to...Free money!!! come and get yours now!

[bulls23]

Don't be too surprised if Toyota and Honda come asking for a US bailout as well.

They would be stupid not to...Free money!!! come and get yours now!

Why would we be giving JAPANESE car companies AMERICAN money? Tell them to ask their OWN government for a bailout! Sayanara!

[Rodster]

Why would we be giving JAPANESE car companies AMERICAN money? Tell them to ask their OWN government for a bailout! Sayanara!

Well um because they built factories here with their own money and um because they hired American workers and the world economy is in the crapper.

Don't you just love economic globalization?

[Rodster]

GM, Chrysler ask for $21.6 billion more

http://money.cnn.com/2009/02/17/news/co ... 2009021716

I'm shocked they came back for more.

[XXXIV]

GM, Chrysler ask for $21.6 billion more

http://money.cnn.com/2009/02/17/news/co ... 2009021716

I'm shocked they came back for more.

Some crazy s*** huh?

You might just your depression yet. Second giant step towards it taken today.

[Rodster]

GM, Chrysler ask for $21.6 billion more

http://money.cnn.com/2009/02/17/news/co ... 2009021716

I'm shocked they came back for more.

Some crazy s*** huh?

You might just your depression yet. Second giant step towards it taken today.

Even Neil Cavuto is starting to question whether we are in fact in the beginning stages of a depression. I think we are. There's way to much sh*t going down to just slap the recession label on it.

[TheHiddenTrack]

Nothing at this point would surprise me. It's clear we are dealing with a problem that no one has dealt with before (recently, and the global scale of it), maybe nobody is qualified to deal with, and the all of the options on the table may not work and they just happen to be very unpopular politically. I'm not sure if there is a way out of this one but the alternative seems to be jumping off the cliff. It seems the choices are either to be dragged off the cliff or deny there is one, different route... same result.

[Teal]

You may be right, track. But if I know one thing, the solution most certainly isn't what they're claiming as a solution now, the big roasted pig they've thrown out as the salvation of the economy-this stupid bill the president signed yesterday.

I'm not the smartest man in the world, but I'm smart enough not to pour gasoline on a fire and claim that I'm putting it out.

[Rodster]

You may be right, track. But if I know one thing, the solution most certainly isn't what they're claiming as a solution now, the big roasted pig they've thrown out as the salvation of the economy-this stupid bill the president signed yesterday.

I'm not the smartest man in the world, but I'm smart enough not to pour gasoline on a fire and claim that I'm putting it out.

And the worst part of this whole thing is your new baby girl and her kids are going to be paying for this crap. And now for more good news:

"Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed

http://finance.yahoo.com/tech-ticker/ar ... C,^DJI,RTH

There's no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment.

But "the worst is yet to come," according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better as a result of:

* An $8 trillion negative wealth effect from declining home values.
* A $10 trillion negative wealth effect from weakened capital markets.
* A $14 trillion consumer debt load amid "exploding unemployment", leading to "exploding bankruptcies."

"The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car," Davidowitz says. "A lot of that is gone."

[TheHiddenTrack]

To use your analogy, maybe it will turn out to be gasoline but if the other choice is letting it burn down, I can understand why they are doing it, human nature is to do something when problems occur. Trying to use short term solutions to fix long term systemic problems may not work but I'm not sure what they are supposed to do, at least there are some credible economic principles behind it.

The economy is going to keep contracting, more businesses will go under because no one is spending or lending, more people will lose their jobs and homes, all because of a mutual-symbiotic greed between financial institutions and people who wanted to live beyond their means. I think the stimulus is needed but even if it works nothing will be fixed, it will just be less bad. And then the financial system will be close to collapsing again and they'll need more money.

I think it's easy for us to get sick of these bail outs and the bullshit going on in congress but I don't envy their positions for a second. They are in charge and have to pick between terrible choices with a limited amount of knowledge while the American people are angry and confused at what is going on. If there is one thing democrats and republicans have agreed on in the past, it is debt, they just disagree on why it's needed and the way to spend. The problem is this may be a moment in history where that's the only sliver of hope there is, and now it's going to compound the mistakes of the past.

I hope this all works and then we can start laying the foundation back to some sort of sustainable economy but it seems more likely it may require more pain than Americans will tolerate. It seems like we may need a restructuring of what life in America is in order to lay that foundation, and that won't be solved over night by anyone.

[fsquid]

Nothing at this point would surprise me. It's clear we are dealing with a problem that no one has dealt with before (recently, and the global scale of it), maybe nobody is qualified to deal with, and the all of the options on the table may not work and they just happen to be very unpopular politically. I'm not sure if there is a way out of this one but the alternative seems to be jumping off the cliff. It seems the choices are either to be dragged off the cliff or deny there is one, different route... same result.

I would argue that this trend started in the 60s. Several of the things that are being talked about regularly clearly started that long ago and have proceeded pretty much in an unbroken path since then--the outward migration of manufacturing jobs, the increasing disparity between rich and poor, the decline in savings, the overconsumption by both citizens and government. Basically the supply side of the American economy has been getting progressively sicker for 40 years. We are the world's leading importer, with net imports that exceed the total for the 100 other net importing countries in the world. Demand-side "cures" aren't going to fix that; if demand goes up, but what we're buying is made in China, how does that fix the US economy? Neither are irresponsible tax cuts in the name of "supply-side" economics; tax cuts need to be focused in areas that will spur investment and growth. Responsible tax modifications and curbs on wasteful spending to get the federal budget into balance are about all that the government can truly do.

I think Nixon/Ford/Carter brought us to the brink of disaster and Reagan pulled us away from it, but the underlying trends were never addressed. Perot tried to call attention to them, but his message only got so far (and got a bit overwhelmed by the anti-NAFTA message, which overlooked the fact that NAFTA would not be a problem if we were taking care of business in other areas). Clinton didn't really do anything that didn't fit inside the true supply-side economics envelope (despite claims by both republicans and democrats that he did). He also got a bit lucky. Shrub completely disregarded all reason, and that blew away whatever was left holding us away from disaster. Now Obama has done what IMO will bring disaster quickly and more certainly.

At least maybe we'll hit bottom and finally start recovery.

[XXXIV]

The era of the "night of the living dead" economy has begun.

Keeping the zombies afloat and dragging this thing into a prolonged depression doesnt seem very smart to me.

Let the failures fail so that the damn thing can start moving in the other direction.

Id like to thank the economist I heard on the radio yesterday for his thoughts

[pk500]

I think it's easy for us to get sick of these bail outs and the bullshit going on in congress but I don't envy their positions for a second. They are in charge and have to pick between terrible choices with a limited amount of knowledge while the American people are angry and confused at what is going on.

That's a mighty big leap to assume that members of Congress actually give a sh*t about the angry American people.

The only reasons Congress is acting on this bailout are that pork is the best way to ensure re-election and because their personal fortunes are dwindling with the tanking of the market.

As for giving a flying f*ck about Joe Sixpack, forget it.

We are now veering toward a socialist economy (note I said economy, not political system! ), and it scares me.

Take care,
PK

[davet010]

I can see why - after all, rampant corporate capitalism has worked so well.

[XXXIV]

I can see why - after all, rampant corporate capitalism has worked so well.

Great point...Im still in wonder at the glory of communism.

[Teal]

I can see why - after all, rampant corporate capitalism has worked so well.

Great point...Im still in wonder at the glory of communism.

I can see why-after all, rampant socialism and communism have worked so well.

[Brando70]

I can see why - after all, rampant corporate capitalism has worked so well.

Great point...Im still in wonder at the glory of communism.

In Soviet Russia, XBox returns you in a coffin!

[XXXIV]

I can see why - after all, rampant corporate capitalism has worked so well.

Great point...Im still in wonder at the glory of communism.

In Soviet Russia, XBox returns you in a coffin!

...Good stuff...

[pk500]

I can see why - after all, rampant corporate capitalism has worked so well.

True. It's only produced the most powerful economy in the world. Small potatoes, I know ...

Take care,
PK

[wco81]

There's national support for doing something instead of waiting and letting things play out.

Are the measures they're undertaking going to work? Who knows, but Peter King of New York said if the economy recovers, the GOP will attribute it to natural business cycles.

If a policy doesn't hew to strict supply-side principles (which have been applied for almost 30 years now), it's labeled "socialist" or "communist."

Or any politician who isn't a Republican is alternatively a socialist, terrorist or a Nazi:

http://www.hbo.com/docs/programs/righta ... index.html

Not a terribly useful way to discuss fiscal and economic policy by using incendiary labels.

[fsquid]

GM, Chrysler ask for $21.6 billion more

http://money.cnn.com/2009/02/17/news/co ... 2009021716

I'm shocked they came back for more.

Nobody should be surprised by this...every auto industry analyst said that the first cash injection was merely the beginning of a MUCH larger feeding frenzy at the expense of us taxpayers.

A bankruptcy re-org is the only way to go from here, folks...it's inevitable.

[pk500]

From Wikipedia: "Socialism refers to a broad set of economic theories of social organization advocating public or state ownership and administration of the means of production and distribution of goods, and a society characterized by equal opportunities for all individuals, with a fair or egalitarian method of compensation."

This "stimulus package" is the largest government intervention into U.S. business and finance since the 1930s. I think that definitely qualifies as a move TOWARD socialism, or at the very least, more government control.

An example of that is limiting executive compensation, which is a farce. The Federal government has no right to tell a private company what it can pay its employees, even if that entity is receiving Federal money. Many businesses and industries already receive government funding and tax breaks, yet there were no limits placed on executive compensation for those firms before the blood-thirsty gomers in Everytown USA started yelling, "Yeah, YEAH!" when Congress questioned the Big Three automakers' CEOs about corporate jets and pay.

It's beyond hypocritical that an entity that embodies corruption, greed and waste -- Congress -- has become the schoolmaster for rapping the knuckles of greedy, wasteful, corrupt Corporate America. "Hey, let's have the heroin addict shoot up during the filming of his PSA against drug abuse!" Brilliant.

There's a simple solution: If the government is upset at the level of executive compensation and bonuses, then it shouldn't provide any bailout money to those firms. That would send a very clear message to the company that it needs to get its affairs in order, pronto.

Of course, pro-stimulus advocates will counter by saying, "Doing nothing will guarantee disaster." Well, there's no indication or consensus from economists or political leaders that the stimulus will work, either. So maybe it's my mojo, but I tend to keep my wallet shut until I'm certain it's a good deal.

This entire stimulus package is just a giant vote grab designed to appease a lazy, "IT'S NOT MY FAULT!" electorate and the inefficiencies of certain industries.

The dead leaves on the plant should be pruned, not covered with Miracle-Gro in hopes that somehow the Lazarus Effect will take hold.

It took the massive industrial complex of World War II for the U.S. to completely exit the Great Depression. So what will it take this time?

Take care,
PK