Re: The ending

CoinSpin wrote:
Briarroot wrote:
CoinSpin wrote:

There's a whole huge debate about this situation, and living in Michigan at the moment, I'm right in the middle of it... Things like "why was the banking industry, who doesn't actually produce anything and got themselves into this massive mess through their own stupid and downright criminal negligence with respect to the mortgage fiasco, just get handed 700 billion dollars to fix their own problems.


Banks produce *wealth* not goods. The banking system takes a fixed amount of capital, and by lending it and earning interest as well as full repayment, generates more capital. It's a mistake to say that banks produce nothing. What you should have said is that banks take something and magically transform it into more something!

That being said, I don't think the Federal government should bail out the banks and investment firms any more than it should bail out goods manufacturers. Let the markets fix the markets; let the markets punish the foolish and incompetent and reward the wise and able. Sure, the transition will be painful for us all, but postponing the inevitable will make the eventual collapse even *more* painful. That's precisely how we arrived at our current situation. The Federal government is already massively in debt, a circumstance which devalues the dollar and threatens our future. Running up more debts making feeble attempts to fix a system which _is_not_broken_ is the hight of folly. That's correct: the system is not broken. It's acting exactly as it should. When bad loans are made, the lenders should suffer defaults. If those lenders were able to spread the risks of those bad loans around to other lenders, then they too should suffer the consequences of their bad decisions. That's what's happening and it should be allowed to continue. A depression, should one come, is not the worst thing that could happen. The world still produce enough food to feed itself, and enough energy to provide for itself, and enough goods to satisfy the needs. Out of chaos, order will be produced, and the system will be all the stronger for it. Propping up failed banks and investment firms is the wrong strategy.

Well said... But there is an inherent problem with letting the market fix the market... Greed.

The housing crisis is a prime example of this... Since the Great Depression, housing prices have stayed very flat, rising at the same basic rate of inflation as everything else, wages included. But then some people decided they could make a fortune by prospecting on real estate, and suddenly the price of housing was climbing at excessive levels, far outpacing inflation and average salary increases. The quick (and ethereal) rise in real estate values drove banks and other institutions into bizarre lending practices, because the average consumer could suddenly no longer qualify for an average house. The lending schemes (and individuals taking advantage of the situation) finally escalated to the point where the bubble burst, and people found that their houses were devalued (actually just moving back to where they *should* have been), and they owed more than the house was worth... All because everyone sat back and let "the market fix the market" when it was obvious something had to give along the way - the trend couldn't sustain itself. A free market is a fine theory, but in reality it needs some policing to prevent greed from causing an implosion, with a few profiting and the rest of us suffering the devastating impacts. A little regulation just on housing valuation would have completely prevented every bit of the banking crisis we are seeing today, if it had been implemented when prices started artificially inflating.

Even more well said! 'True' Capitalism is about as much of a fairy tale as 'true' Socialism - human nature & greed always gets in the way.
Maybe we can program a government AI in the near future to run countries & world economics instead of fallible ppl...at least it wouldn't devolve to palm-greasing & popularity contests, like most of our democratic processes.

But US auto makers, who were just as hard hit by the economic downturn as anyone else (and often harder hit), can't get a measly 14 billion without massive conditions and a mountain of stipulations." Common comments up here. And they have a point, I mean they just *gave* the banks the money, and the bank bigwigs just kept right on throwing huge chunks away on junkets and ridiculous crap, not even a month after the bailout. Yet Detroit has been asking for a *loan* not a handout, and they get read the riot act. In a political environment where the big push for the presidential race was "we need to make new jobs and stop outsourcing" it would seem like the government would want to help keep actual US companies in business, rather than letting the US companies die and all of the foreign automotive companies have the industry.


The problems with Detroit's Big 3 are: 1) they already owe more than they're assets are worth (GM reportedly owes $48 billion right now); 2) their labor costs are far in excess of their competitors; 3) they have a bloated and hugely expensive retirement system which supports more retirees than they currently have workers; and 4) they don't produce vehicles which the public perceives to be worth what they cost to build. To sell their products GM, Chrysler and Ford are often forced to offer them for below cost. Lending Detroit more money won't solve any of these problems.

Very accurate... Which is why I'd like to see them actually get into bankruptcy proceedings, to be able to renegotiate many of those issues and alleviate some of the hemorrhaging. Just the union contract renegotiation would make huge strides, and keep in mind that most of that retirement/pension fiasco was union-driven as well. Foreign car makers don't have to deal with most of this crap, and even those plants in the US can skirt many of the labor issues without penalty - oh, but if a US company doesn't roll over for the unions, they get pummeled. Goes to show how easy it is to blind a government to issues in their own back yard, when you throw enough lobbyists and money at the individuals running the show.

We stopped needing Unions (in this country anyway) 50 years ago. But they keep on keeping on. Little men with little dicks & huge egos & nothing better to do with their time than run these legalised protection rackets. What we should do instead, for example, is make each employee in any company an automatic stakeholder, with ownership & shares commensurate with their salary/position <EG>. (oops, there goes my socialist streak again :)

Another problem: the CAFE regulations which force the Big 3 to produce a sufficient number of small fuel-efficient cars to offset the large luxury cars, SUVs and trucks which are their real bread and butter. The Big 3 can sell large expensive vehicles at a profit but their small cars can't compete with offerings from Japanese and European producers, who of necessity, have been making excellent small gas-misers for decades. The law forces them to put enough of these things on dealers' lots to bring up their average fuel mileage - but they don't sell except at a huge discount. Their losses on these small cars outweigh their profits on large cars and thus they sink further and further into debt. If they really want to save Detroit, Congress should repeal the CAFE laws, or at least give the Big 3 a waiver. That would be unfair to the competition, but then so is offering them a loan.

Hadn't even considered that issue... Very good point. But ironically, the SUV and luxury market is no longer the bread and butter, in fact that whole market became a pariah when gas prices hit record highs... Now that the prices are down to 3 year lows, no telling what will happen. Honestly, I think if they were to get a loan, the big stipulation I would like to see on it is that they produce more efficient vehicles... Not the ridiculous "hybrid" vehicles they are rolling out now, that actually cost more in production (and long term carbon footprint) than traditional vehicles, with very little gain - pretty sad when they hybrid version of some of these vehicles gets lower fuel economy than their traditional counterparts, eh? Make the Big 3 actually produce *real* green vehicles, and tailor them towards the new president's big energy and conservation push. Seems like a perfect opportunity for a meshing of goals there, don't you think?

Natural gas is a reasonably 'clean' alternative (CO2 aside). Electric or Hydrogen cars another very viable direction, if only we'd make a concerted & serious commercial effort to develop a new fuel source, such as nuclear fusion. Of course, oil companies & governments/military around the world are doing everything to prevent that coming to fruition, so I doubt I'll see it in my lifetime. Oh Brave New World...

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Nostromo
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