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Posts Tagged ‘GM’

If we’re going to be spending tons of money on helping banks and dying, mismanaged companies, would it be too much to ask that the redistribution does not go from the productive 25% or so of this country to the risk-preferring .0001% on Wall Street, but that these huge sums actually goes to homeowners in some plan that injected capital into their pockets or forgave their debt in the process? Perhaps such a plan would allow those with reasonable prospects of repayment to pay down 25% of principal or lock in 5% notes over 40 years or something else that actually will not quickly blow up in the government’s face. Wouldn’t this be preferable to the current scheme whereby the housing-induced insolvency for banks is resolved by moving huge sums of taxpayer dollars around from AIG to Goldman or Credit Suisse and then back into the pockets of a few sovereign wealth funds, hedge funds, bank bond holders, and the like?

I mean, I’m not for any of this, but between helping Bear Stearns, GMAC, and AIG with capital infusions and helping average guys who are upside down on their houses, I guess I’d rather just have good, old-fashioned wealth redistribution. After all, the latter arguably would help more people, cut out the middle man in the form of the banks getting direct cash infusions and FDIC leverage, and would at least spread out the benefit of the inevitable inflation that we will face as result of the Treasury’s abject terror at the prospect of a few big banks’ failing. Welfare at least is more transparent and likely to create some Republican (and renter) backlash in comparison to the dishonest claims of “investment,” “emergency,” and Rooseveltian prescience surrounding the bank bailouts.

Of course, the banks have in reality failed, and they are insolvent. The loss is simply being spread to the taxpayers and the few well run banks through FDIC premiums. None of these measures will replace the huge sums of lost wealth nor lead to more lending–for housing or anything else.  Why?  Because the whole economy is uncertain, malinvested, and buried under huge sums of debt undertaken in times where we collectively foresaw a rosier future, and Obama’s reactive responses to these phenomena increase uncertainty, which is a major impediment to wealth creation and risk-taking economic behavior.

What exactly is propelling this Democratic Tribune of the People to spend so much money and political capital to bail out mismanaged bank shareholders and bond holders, who in effect endorsed the banks’ acquisition of huge positions in MBS and ABS products? I don’t think, like Clinton, he is a kind of globalist pro-capital guy, who wants to help international capital so long as DC gets a slightly larger cut. Judging by his rhetorical clumsiness on this issue, it seems more likely that Obama is acting out of a combination of ignorance, fear, and insecurity. After all, it would take real philosophical vision of free markets or a philosophical commitment to Krugman-style redistribution to stare down Bernanke and Geithner in a game of chicken. Obama has effectively outsourced the most important policies of his administration to these Wall Street lackeys, preferring instead to strong arm Detroit into making flying cars and spending time to gin up exquisitely nuanced youtube videos for the Iranian censors to jam.

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Bush was never a real believer in Free Markets. He instead believed in preserving the power and privilege of people like him. He sold it as a new kind of middle way, so-called “compassionate conservatism.”

Bush did not work hard to get where he was, instead inheriting his name, his network, and most of his money from his family. My experience with these “fortunate sons” is that they have a certain blindness about their own and others’ economic fortunes. Not having attained their success through their own efforts, they either feel guilty about it and indulge in various guilt-driven flirtations with leftism, or, alternately, don’t care about the structures that allowed their enterprising ancestors to attain wealth, aiming instead to preserve what they have at the expense of the economy as a whole.  Consider Bush’s perception that a woman who needed three jobs to support herself and her family was “uniquely American” rather than a tragic consequence of a low wage, screwed up economy.

Bush has been willing to sell out American workers and manufacturers out for many years to China and Mexico in the name of a cockeyed notion of fairness.  Now, worried about his legacy, he’s willing to kick the auto manufacturing can down the road by giving away TARP money to the Big 3 automakers.  There is no rhyme or reason to it, and his selective involvement in the economy is an invitation to chaos and politically chosen winners and losers.  Instead of setting the rules of the road, under Bush, the government has chosen very distinct winners and losers in the economy.

Consider Bush’s numerous deviations from free market principles and basic fair play:

  • The giveaway to MBNA and other credit card companies in the ex post facto bankruptcy reforms of 2005;
  • The giveaway to the pharmaceutical industry in the form of the prescription drug Medicare benefit of 2006;
  • The rescue of Bear Sterns earlier this year coupled with the rejection of a Lehman Brothers bailout;
  • The $190B farm subsidy bill of 2002;
  • The cheap-money, high deficit imposition of various costs on future generations in order to create the present day illusion of prosperity.

Bush has repeatedly put a particular social class–corporate America, its multinational managerial elite, and the wealthy in general–above the good of the country as a whole.  Unlike Reagan and the long traditions of the Republican party, Bush has shown indifference to American workers and businesses most threatened by globalization. Obviously the Big 3 have problems largely of their own making, caused not least by the short-sighted greediness of their unions.  But they did not create the last decade’s unbalanced trade with China, our overly leveraged and under-regulated financial sector,  the slow money-suck of constant inflation, nor the immigration-driven wage gap with the rest of the “blue collar” economy.  They should not be bailed out now, not least because they have a tool in bankruptcy to reform themselves.  But the trade and monetary conditions of the last 10-20 years should never have come to pass.  Now terrible decisions are being made under crisis conditions by an ideologically unmoored failure.

Unfortunately, Obama and the Democrats promise more of the same whether in the form of spending on make-work infrastructure programs, appointing an “auto czar,” or “investing” in new technologies.  Their policies, an exagerrated version of Bush’s with even less regard for the national interest, will perpetuate the legacy of cronyism and failure with slightly different winners and losers, i.e., giveaways to minorities, the unproductive, and politically correct Third World supplicants.  Whenever the government gets involved in these matters and insulates participants in the market from the usual requirements of profit, loss, and competition, then political considerations come into play, just as they do in a smaller way in the realm of government contracts, such as the practice of affirmative action set asides and other forms of patronage.

Bush did not embrace free markets tempered by some consideration of the necessity of a strong, vibrant, and diversified national economy.  Unfortunately, his term went down in the recent history books as “extreme conservatism” rather than the nonideological jumble that it was, the reflection of a man with a peculiar past and a worldview formed by lifelong associations with preservation-minded elites in the world’s most corrupt nations.

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I thought Mitt Romney’s op-ed opposing the Detroit bailout had the right combination of free market instincts, industry knowledge, patriotic compassion, and credibility. It reminded me of why I voted for him.  I say that as someone who recognizes the unfairness of bailing out Wall Street while letting this strategically important industry suffer.  But there’s no reason to throw good money after bad.  The Unions have screwed themselves, management has done little more than make excuses, and the only way to get it right is a “cut to the bone” slashing of workers, debt, and other costs in a Chapter 11 proceeding.  I don’t buy the criticism that Chapter 11 is the death of GM or Ford, not least b/c the actual products are decent enough and warranties can always be exempted from the stay, something that occurs routinely in manufacturers’ bankruptcies.  But without changing their cost structure, all these companies are dead, to our collective detriment as their well-paid workers do not have skill sets that can be easily transferred, and there are a lot of reasons America should be making its own cars.

This bearish report by Gerald Celente predicting tax riots and mass homelessness rivals my own bearishness and, sadly enough, comes from a guy that has been right on everything from the Panic of 2008 to the Asian Financial Crisis of 1997.

This analysis of the ebb and flow of “idealism” in American politics was interesting. Some of my favorite homeboys like Burke and Oakeshott make an appearance.  I’m glad the author noted that Obama is at best a pragmatist but, more likely, a purveyor of washed up 60s-era Welfare-statism.  One thing I wish Obama and his supporters would remember is that deficit spending is not wealth-creating, the government rarely “invests” right, and that all this money for bailouts to failed sectors and infrastructure and healthcare must be siphoned out of the healthy parts of the economy, which risk suffocation under the burden of “spreading the wealth around.”

The David Brooks thing on the “formerly middle class” is depressing, but worth absorbing.   I’ve met more such people (or people on the brink) in the last 12 months than I have in my entire life previously.

On a related note, I perused gunbroker.com recently. It’s the ebay of gun buying.  Colt 6920s are now going for $1700.  CMMG, STAG, and other generic M4s are north of $1000.  Thirty round PMAGs have crept north of $20, though they were previously available for about $14.  Ammo prices remain ridiculous, in spite of the drop in commodity prices.  This panic will probably last a while, both from the fear that Obama, the former Brady Campaign/Joyce Foundation board member, will make guns now available banned forever and untransferrable to boot.  I think the overall conditions also suggest fear of increasing crime, disorder, and Depression-era conditions.  My gut instinct on this is reinformed by the ridiculous premiums over spot–20-30%–for silver and gold coins.

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