Peter Schiff

The Humpty Dumpty Economy

Posted by Peter Schiff on November 16, 2008

Before the current economic crisis became apparent to all, the most popular fable used to describe America’s uncanny economic resiliency was the story of Goldilocks. It was argued that our economy was skipping down a sunny path of moderate growth, low inflation and rising asset prices. However, a much better parable for our economy over the last decade would have been the story of Humpty Dumpty: a bloated, fragile shell perched on the top of a dangerously high stone wall. This week, all the government’s horses and all of its men scrambled to put Humpty Dumpty back together again. Here is a look at some of this week’s highlights:

The Mother of all Moral Hazards

No doubt prodded by the administration, Fannie Mae and Freddie Mac announced a new attempt to stop the fall in home prices and foreclosures through a loan modification program that would cap mortgage payments so that a homeowner’s total housing expenses would not exceed 38% of household income for home owners who are 90 days delinquent.

In a classic case of unintended consequences, the plan will encourage a massive new round of delinquencies and household income reduction as homeowners will jump through hoops to qualify for the program and maximize their benefit. Those who could conceivably economize to meet their existing obligations will now have a strong reason to forego such sacrifices. Those who are not 90 days past due will intentionally become so. In many cases, dual income families may decide to eliminate one job altogether as reduced mortgage payments combined with lower child care and other work related expenses will likely exceed the after-tax value of the lost paycheck.

Unfortunately, the last thing our economy needs is falling household incomes and even more bad debt. But that is precisely what this plan will give us.

To Bail or Not to Bail

With the Big Three auto makers now in a plainly visible death spiral, the automotive bailout debate is kicking into overdrive. The disagreement hinges on whether a bailout is necessary to support an important industry or whether the unprofitable dinosaurs of the past should be allowed to fail as America focuses on an information-age, service sector, and alternative energy future.

As usual, both sides have it wrong. The government should let the Big Three fail not because we no longer need an auto industry, but because we desperately do. What we do not need is the bloated, inefficient auto industry that we have today. By allowing the Big Three to fail, their capacity will be turned over to new owners who will be able to acquire the means of production at fire sale prices and hire workers at globally competitive wages. The result will be a more efficient auto industry making cars that people around the world actually want to buy at prices they can afford. Such auto makers could conceivably be profitable and could become the cornerstone of a manufacturing renaissance in the United States. In contrast, Ford, Chrysler and GM are never ending money pits that threaten to swallow a good deal of our economy.

We Shopped and Dropped

This week, the bankruptcy filing by Circuit City and a profit warning from Best Buy, served as proof positive that America’s national shopping spree is over. As I have long said, the business model of importing cheap goods for Americans to buy with credit cards was unsustainable. We were told to “Shop till we dropped,” and we did.

Americans two primary sources of spending money, home equity extractions and unlimited credit card availability, have been shut down. With only dwindling paychecks to rely on, Americans are justifiably economizing. As a result, many more retailers will file for bankruptcy over the next few years, and those that remain solvent will only do so by drastically cutting their capacity.

In a desperate move to arrest this necessary process, Treasury Secretary Paulson announced his intention to use part of the $700 billion TARP (Troubled Asset Recovery Program) funds to re-liquefy consumer lending.

Paulson observed that “illiquidity is raising the cost and reducing the availability of car loans, student loans, and credit cards”, “creating a heavy burden on the American people” and reducing jobs. While all of this is true, this is precisely what needs to happen. Americans need to reduce their spending on all of these things, and market forces are in the process of bringing that change about. By encouraging even more borrowing, Paulson’s plan will aggravate the crisis.

Along those lines, our nation’s various bank regulators issued a joint press release this week that “encouraged” banks to make more loans and to reduce their lending standards if need be. Since lax lending standards are one of the primary reasons that those banks “needed” to be bailed out in the first place, it is lunacy to now encourage them throw good money after bad. More risky lending (and currently nearly all lending is risky) interferes with the market’s attempts to rebalance our economy along the lines that Paulson himself admits is necessary, and sows the seeds for even bigger bailouts in the future when this new crop of loans go bad.

Bait and Switch

Reminiscent of his Bazooka maneuver, quick draw Paulson reversed course quickly with his decision to not use any TARP funds to buy the assets that the plan was specifically funded to procure. Instead, he will simply dole out the loot to his buddies on Wall Street and use it for whatever seemingly worthy initiative strikes his fancy.

Although Congress loves to grandstand about oversight, it has thus far shown no courage to interfere, or even question, the change in strategy. Paulson claims that he is simply rolling with the punches. The truth however, is that the original plan was flawed from inception, as I clearly pointed out in a string of commentaries following his proposal. How could the Treasury Department, with all its funding and PhD’s, not make similar predictions? Paulson is either a liar or completely incompetent. My guess is he is both.

It is mindboggling to consider that all of these developments took place in just one week. As the remnants of America’s shattered economy continue to ooze out over the pavement, look for even more bizarre, draconian, unworkable, and downright dangerous policies to emerge from Washington.

Peter Schiff is the president of Euro Pacific Capital and the author of Crash Proof: How to Profit From the Coming Economic Collapse and The Little Book of Bull Moves in Bear Markets.


Comments

“By allowing the Big Three to fail, their capacity will be turned over to new owners who will be able to acquire the means of production at fire sale prices and hire workers at globally competitive wages.”

The rich get protection while the workers are forced to compete for wages with Third World workers. 

Pat Buchanan has been right all along.

“The rich get protection while the workers are forced to compete for wages with Third World workers.”

Sure, that’s what all that talk about wage harmonization has been about. Funny how our all-American politicos never really explain the implications to the voters. They just keep up the drumbeat of “free trade good, protectionism bad.”

Welcome to the race to bottom, everyone. The globalizers haven’t even really begun to exploit Africa yet. Just wait until China and India get too expensive. Ghana here we come!

Ain’t libertarianism grand?

Posted by Ed on Nov 16, 2008.

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Don’t worry about Africa, they don’t work no matter what you do. That’s why there is a town in South Africa called Durban. When the Africans woudn’t work for slave wages the Brits brought in the Indians.

Anyway there are still billions of poor who will work for less than Americans so free trade can still be a gleem in the economists eye.

Speaking of things we no longer need.

We no longer need economists spewing drivel based on blackboard theories that have nothing to do with normal human interactions. We no longer need pundits writing garbage to fool the idiot masses. Put these people to work doing something useful like generating electricity on a treadmill for a bowl of rice a day.

You folks sure don’t like the truth. Autoworkers in Japan, Europe, and Canada make good wages. We can’t support the bloated big three anymore. We need a rebuilt auto industry with new management and without unions that discouage work. We will get endless bailouts under Obama, even though he wants everyone to ride bikes, not drive cars.

“ In many cases, dual income families may decide to eliminate one job altogether as reduced mortgage payments combined with lower child care and other work related expenses will likely exceed the after-tax value of the lost paycheck. “

And this is a bad thing? Mothers staying home with their children instead of subjecting them to day care so the family can buy consumer electronics?

Posted by al on Nov 16, 2008.

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Quote the original jack: “You folks sure don’t like the truth. Autoworkers in Japan, Europe, and Canada make good wages.”

Yes because they have PROTECTION. I would also like to point out the unions simply protected the wages that foreigner workers have with protection. Without protection, the unions are needed to keep wages high but they do so with a cost to profitability. How come all of you union-bashers don’t mention all high salaries of the CEOs or point to the fact the auto unions aren’t really functional unions at all but health fund managers and de-facto arms of corporate?

The reason to oppose the bailout is because it won’t work because it is too late for those kinds of measures and a bailout as of now is essentially a handout to the legendary asset strippers know as Cerberus or money wasters like GM and Ford who ought to be in prison not getting taxpayer money.

The other thing that bugs me is that I keep hearing about this about being a “socialist measure” which it isn’t. It is a fascist measure and you folks better start learning about Schactian economics real quick and understand fascism starts on the left. The bailout is essentially fascist because it deals with problem in monetary terms and leaves the corporate structure in place and that doesn’t happen in socialist regimes which replace the capitalist class with their people. Fascist policy the leaves the finance oligarchy in place so the bailout is a “fascist” measure not a “socialist” one.

Secondly, conservative should start calling it fascist because for 30 years they have been calling every pro-working class policy “socialist” and frankly it having the opposite effect. If Sean Hannity or Rush are calling it socialist then it sounds good because I know those guys are total anti-worker shills for Big Corporations.

We are now faced with four options. 1. The Schiff solution i.e the total loss of all major industrial capacity in the United State and it shipped overseas sold to the Chinese and their army of slaves.

2. The bailout which fail cost taxpayers even more money still result in what happens the Schiff option but maybe few months later.

3. The true “socialist” measure i.e. nationalization which actually keep the industry here and protect the industry from itself i.e. Cerberus.

Now I know “nationalization” is worst thing ever according to the ideologues but since we aren’t blind extremist let’s look actual history of nationalization and no nationalization doesn’t Soviet style economics and anyone who says needs to read some history. The first example is Rolls Royce which was nationalized in 1971, British Steel in 1967, and many more which nationalized then later return to private operations after the crisis ended. Now many SOE actually work better than privite enterprise for example Singapore Air, POSCO, the Chinese TVEs, Renault, Alcatel, Usinor and many more.

4. The most unthinking to the ideologue but the best idea i.e mutalization by American workers i.e. breakup the corporations under bankruptacy and settle worker contracts by selling individual plants to local worker co-ops. That is best solution and of course will not be done. Now this will be called “communist” by the Lew Rockwell types but it is actually mutalist and the least state directed option. It will operate essentially like nationalization but the operations will be chaperoned by the government rather directly owned and controlled by them while ownership transferred to newly forming worker co-ops and helps provide the financing to the worker co-op.

I called it “Co-Op-imization” and think if we can organize politically for this option then we have a chance because the inherent populist appeal without the “socialist” nationalization baggage.

If the bankruptcy and asset sales which would result, in a free market, or even an objectively regulated market, were to occur, then the new owners of the assembly lines and tooling etc. would benefit. Then, when cars produced with these assets showed up in our markets, (built by whom? the engineers, assemblers, testers etc. who formally worked for the big 3 - one would presume) the public would have a new choice.
There is nothing wrong with that, morally, legally or theoretically.
Septues7’s option #4 is not so far off the mark. If the workers’ coops could make the buy themselves, they would be as eligible to purchase the assets as anyone else.
I think the real problem may be that the competition will be ‘gamed’ or rigged by people who already have influence with the state or federal government (let’s just call them ‘insiders’) who will be ready with prearranged financing. They will be on the carrion before the workers and their co-ops have a chance.
Another possibility is that some government (state or federal agency) may see this as an opportunity and get in on the act before the insiders.
There is no reason for optimism.
I don’t think a free market exists here. The only way a real free market alternative (and I consider the option above to be one, at least in its potential) stands a chance is in the absence of any interest of the big players. In other words, if the most likely or capable buyers, see no potential in it.
No reason for optimism, yet no reason to bail out the failed enterprises either.
Fascism or Socialism, neither is likely to result in free enterprise in the long run.
Let’s start something new, something the dickheads don’t know how to reggulate.

What’s wrong with high wages?  I thought that the whole point of being a rich and powerful country is so that its people enjoyed higher wages for their work.

Peter Schiff is correct about everything above, except what is to be done about the big 3 American auto makers. I told you the powers that be were only robbing us of the $700 Billion, and now the facts bear it out as Schiff can’t help but notice.

But Schiff is yet only a ‘product’ of his times in ‘believing’ it’s about reducing hard working Americans to a ‘global’ wage. That’s really the plan here of the powers that be, so Schiff’s job is secure. Get it? How many times over could the $700 Billion buy lock-stock&barrel;the big 3, many times over to give you some idea of what that $700 Billion figure is for Paulson to give away to the richest people in the world, not only in this country. Reorganizing the big 3 while keeping it all in American hands as part of each company’s loan deal and preserving the positions and salaries not of top management, but of all those just below who do ALL the actual work would be the top priority of say a Jeffersonian or even Hamiltonian government, which was yet still about the same country it ruled.

Today foreigners through the Fed Reserve System have this nation by its short hairs, after scuttling the place slowly for almost 100 years, while sucking it dry. If EVER the saying ‘taxation without representation is TYRANNY’ was accurate in this country’s history, it was NEVER more so than today.

And they love when you go through this ‘pretend’ game every 4 years of electing new shills, because it keeps you in line waiting to continue to be sheared.  So keep pretending – enjoy!  With hindsight from 1778 to 2008, anyone who can see what’s in front of their faces would probably have to say bring back the British.

Posted by Sulla on Nov 16, 2008.

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Isn’t everybody already doing what Gordon Brown tells them to do?  :-))

Auto manufacturing is doing fine in this country. Honda, Toyota, Mercedes etc etc. Workers make 25+ dollars an hour.  These plants don’t need any protection. The problem with Detroit is the UAW.

The orginal jack-O sed: “You folks sure don’t like the truth. Autoworkers in Japan, Europe, and Canada make good wages. We can’t support the bloated big three anymore. We need a rebuilt auto industry with new management and without unions that discouage work.”

Well, given the FACT that Japan, Europe and Canada are examples of STATE Capitalism that encourage and protect high wages, this is hardly an argument for “free market” forces that are collapsing the Big Three.

YOu also missed the FACT that many of the auto plants in Europe and Canada are owned by the Big Three. As usual, those in favor of the “free market” are ignoramous-es, or just plain disingenous. Shades of George Will and other apologists for the CEO classes.

No Mr. Jack-Oh, you might take a jaunt down to MeXICO if you want to compare “free market” forces and their effects on wages. Mexico, like the US has a system that protects the rich, has no STATE Capitalism, and thus NO middle class, and you might find what real “libertarianism” is all about.

HInt: It’s about defending the rights of the rich, at the expense of the nation.

William E sed: “Auto manufacturing is doing fine in this country. Honda, Toyota, Mercedes etc etc. Workers make 25+ dollars an hour.  These plants don’t need any protection. The problem with Detroit is the UAW.”

Well, arguing for foreign ownership of American manufacturing is something that “Lazy Faire” and “free traitor” types like to do. Yet, like most “libertarians”, you forget some important facts. Like the FACT that without the Big Three to compete with, and the threat of political reaction, there would be no incentive for foreign manufacturers to build cars in the uSA---and employ US workers. Secondly, most of the UAW labor contracts at the Big Three have been negociated down to reflect the prevailing wages. Nor do the foreigners have the “legacy costs” of retirees to pay for…

Of course, Mr. William also should be reminded of the FACT that Japanese, Korean and European automakers are nurtured by a system of state capitalism and aggressive trade policies that has the government subsidize their businesses--and their aggressive pursuit of American car buyers.

Shees..."Libertarians" are such simpletons when it comes to thinking, their simple solution is always the “free market”, despite the fact that there is NO free market, it doesn’t exist, never existed, and is a complete utopian fantasy sold to fools and idiots seeking the simple solutions to complex problems. Like Commies and Socialists and Liberals, whose mind set they so resemble.

Joe Populist, with all due respect, the Union contracts are killing Detroit. They are unsustainable. Detroit needs to be allowed to reorganized.  And until the union contracts are junked this won’t be possible. Public school teachers, Airlines, and Detroit Auto. All dominated by unions and all a disaster.

If, when the government wishes to forestall panic and reassure the quixotic actions of human economic nature by bailing out the automakers and adding another bullet in the chamber of the gun called inflation..., but if when they do this, there are policies put in place that respond to....and facilitate the great economic opportunities of a decidedly different future, it might be worth it. Inflation will come but if there is something concrete and productive at the other end of this astringent, it might have been worth it.

While we are debating laissez faire (as though it has existed) vs. planned economies and libertarian notions of government vs. the statist and increasingly militant norm, the world is careening into a major shift that will either be recognized and responded to productively or ignored and hence chew us up and spit us out in another chapter of the Idiots Guide to Empire.

The last 50 years have seen an explosion in arms, a vast technological consolidation, hyper-centralization and the short-centric financialization of the world’s strongest economy. Despite vastly and near continuously consumptive wars, population has skyrocketed. Malthus stalks this passage of time but there is always an epilogue that suspends the dire prediction.

Cheap and abundant fuel have facilitated this period of American dominance and this era , despite recent declines in the cost of oil, is coming to a close. As it comes to a close, we hold fast to the bygone era by maintaining a consumptive military posture across the planet while stubbornly believing that we can borrow our way out of debt and perpetuate the congeries of a popular culture that is based not on the authentic but upon the artificial and fantastic vicarious agora, where being a spectator, a consumer factotum is enough. Libertarianism, in this diminishing and formulaic atmosphere really is an anachronism because the State .....an omnipresent and increasingly dictatorial agent of force is required to suspend or forestall the natural entropy of imperial projects. Humans, contrary to their widespread belief are of nature and their economic pursuits are how they modify and control their habitat and entropy is an inescapable part of this ecology. As thinking creatures, sapiens, ...... uniquely endowed with a remarkable ability to transform our environment...... we possess a reasonable capacity to discover the diminishing returns of entropy and adjust our actions away from it but at this juncture, we seem only to desire actions that accelerate it.

Just as we have forsaken the Separation of Powers in the government of what had been a durable democratic republic, we have forsaken this same Separation of Powers, the checks and balances of human economic interaction by releasing our fate to the sirens of Efficiency and Centralization. We have developed a name for the unfortunate devil whose name must not be spoken and who always comes home to dinner uninvited and its name is External Costs. Well, External Costs are no longer external. The apotheosis of this mindset is the notion that debt is actually a commodity. “Reform”, a warm and comfy notion will be insufficient if we expect to rediscover the fertile grounds of frontier on this shrinking planet.

Simple ludditism or the seductively romantic clap trap of Rousseau will not do here. We need a return to the Socratic , discursive and optimistic vehicle of the Separation of Powers in all of our socio-economic endeavors. This is a world where neither the Natural-Primitive nor the Technological-Modern are a pejorative. It is a world both flat and round, one which requires both kinetic and intellectual ability and where the local is as important as the global. This is a world where democracy is as much a responsibility as it is a freedom.

Large Institutions have fostered both the growth and decline of the Detroits, Clevelands, Baltimores and Bridgeports of the nation and it is way past the time that we recognize the failures of the current paradigm and seek productive means, utilizing all our faculties for decentralizing prosperity rather than consolidating it. Terrorism is the natural progeny of the latter. I have yet to detect any awareness of this great potential that lies before us. All our actions are now fear-based and the change we think we want is just another version of fear. It would appear that we think diminishing the impacts of catastrophe is as prudent as averting them altogether.

Some wise men, tired of the predations of a centralized monarchy declared “We hold these truths to be self evident”. It would appear that we have taken this defiance against centralization and recast it as an anthem which defends the hidebound dogma of centralized power and its large institutions. At some point during the last fifty years, the American Revolution came to a close.

There is a memory of it still but if this current emergency does not rekindle both the philosophy and actions left us by the Framers and, most importantly… enhanced by the lessons of the intervening period, we will find a world where the modern is far more primitive than we ever dreamed in our darkest nightmares.

Dirk W. Sarbin
“we will find a world where the modern is far more primitive than we ever dreamed in our darkest nightmares.”
Sometimes I feel that this world is already upon us. That is why I almost stopped reading the newspapers and rarely watch televison.

Recommending Mr. Dirk Sabin’s post directly above this one to read in its entirety with emphasis on this quote of his:

(Quote): “This is a world where neither the Natural-Primitive nor the Technological-Modern are a pejorative. It is a world both flat and round, one which requires both kinetic and intellectual ability and where the local is as important as the global. This is a world where democracy is as much a responsibility as it is a freedom.” –D. Sabin (end quote)

Sadly, Democracy & responsibility history has taught us are usually if not ‘always’ a contradiction in terms. Let’s look at the Greeks. During their Democratic Age all values were reduced over time to zero. The commercial classes and the scum of the earth ruled Athens; they went to a ridiculous and bloodthirsty war with Sparta, which they handily lost; and later out of sheer revulsion with who they had become turned Athens over to a series of tyrants. The first one of which only made everything worse; until gradually things, with a bit of aristocratic intelligence inevitably being applied, started to improve.

How is this any different than our american ‘experiment’ with democracy? I would submit it’s only different in that since christianity tends to lets say ‘freeze-dry’ or preserve values within its adherents, american democracy or Republicanism at first was only possible for that reason.  And for that very ‘reason’, its ability to preserve values in a people, it is precisely Christianity which has been under the most attack by the powers that be (which are primarily foreign not american) so as to be able after looting this place empty, then in our state of complete value-less-ness grind the rest of us down into powder.  I’m asking you, how else do you, Mr. Sabin want to explain, that this is EXACTLY what’s happening. It’s not only the typical empire burlesque & tumble off stage Mr. Sabin, is it? Do you also understand it has a guiding intelligence as well in excellerating us all down this path for its own ends?  Do you ‘get’ it, really?  Maybe you do, and I don’t?

Posted by Sulla on Nov 16, 2008.

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Mr. WilliamR sed: “And until the union contracts are junked this won’t be possible. Public school teachers, Airlines, and Detroit Auto. All dominated by unions and all a disaster.”

No, if by union contracts, you mean the"legacy" costs--the costs of providing pensions and health insurance to retired workers---then you might be partly right. These “legacy costs” are not being carried by the foreign automakers since they don’t have many retired workers.

Of course, what’s YOUR solution? A round of bankruptcies like happened in the Steele Industry, and the Airline Industry. Bankruptcy which permitted speculators to acquire the manufacturing ASSETS and dump the pensions and health insurance of the retirees on the government!

Oh yeah, here is another “libertarian” free market fundamentalist advocating the “free market” solution of dumping the economic security of the white working class in favor of the profits of hedge fund managers, international finance capitalists, Wall STreet bankers, corrupt CEO’s and the rest of the buzzards that you “libertarians” are allowing to feed off the corpse of America’s greatness!

Traitor or fool? Which are you?

I’m Sulla which means it’s time for 10,000 plutocrats to go to their graves.

I’ll reform us. And give it back in workable shape, and retire as consul.

Back to a Republic again when I leave, thanks to me and my army.

Don’t bother asking questions, at this point you don’t even know which are the right
ones.

Posted by Sulla on Nov 16, 2008.

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The inability to stop immigration while unemployment goes up shows our government doesn’t have the understanding to do anything right.

“By allowing the Big Three to fail, their capacity will be turned over to new owners who will be able to acquire the means of production at fire sale prices and hire workers at globally competitive wages. The result will be a more efficient auto industry making cars that people around the world actually want to buy at prices they can afford.”

Just what is the new SuperGlobalCapitalist Auto Corp. going to build in the plants bought at fire sale prices when all of the assembly lines are designed to build the very Big 3 cars that Randian’s decry? And if SGC Auto does design a great new car in 3 weeks or so, because that is so easy to do and costs very little in R&D;(and credit is cheap to fund the R&D;in our super-charged laissez-faire Goldilocks economy), who is going to build their gleaming new assembly lines when the people who do that have gone out of business with the car companies everybody hates? And if they do get these SGC assembly lines built and running, who is going to supply the parts for their cars when all of the tool-and-die shops have gone bankrupt along with the Big 3? And how easy will it be to constitute a dealership network to sell SGC autos in a deep economic contraction when well-funded foreign competitors already control the market. And how much profit will there be in selling SGB when the competition is already selling cars at or near break-even? And who will buy these cars in a credit contraction?

Posted by Ed on Nov 16, 2008.

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Sulla’s army is only for those of principle and also subsequently practicality. Christians finally learned they can walk hand in hand. However there’s 10,000 plutocrats who must now go to their graves, not even a tithe to save the planet. And, make no mistake about it you my friends are safe, but thankfully they are gone. … Don’t ask questions or I’d open it up, sadly through no fault of your own you no longer know what are the right ones.  You will.

Posted by Sulla on Nov 16, 2008.

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No offense Joe, but you’re delusional. Cars made right here in the good old USA are killing Detroit. Not free traitors as you call them.  American consumers are buying a superior product from Honda Toyota etc etc produced by their fellow Americans.  Yes, the legacy costs are killing the big 3. They had no choice but to swallow them. They’re not realistic. Decades of collective bargaining with unions and the results are pretty obvious. An industry on the brink.

I guess I don’t understand how this comes to being an argument about whether ‘Randians’ or ‘Socialists’ or ‘hang your favorite effigy here’ is to blame for failing businesses.
The fact that these businesses and others exist in a state where the market is neither free, nor totally controlled by government must be the source of confusion.
There is no free enterprise here at all, and virtually no chance that we will see it come to be.
All the technical analysis and political posturing is just an energy sink.
Divide and conquer? Why? We’re so divided over this nonsense that we’ll never be able to construct a car or anything else that is purely what we want it to be.
Grudges die hard I guess, but we’re driving down the road to serfdom and we are driving fast, and recklessly.
Another brick in the wall? (Pink Floyd)

William O sed: Cars made right here in the good old USA are killing Detroit. Not free traitors as you call them.  American consumers are buying a superior product from Honda Toyota etc etc produced by their fellow Americans.  Yes, the legacy costs are killing the big 3. They had no choice but to swallow them. They’re not realistic. Decades of collective bargaining with unions and the results are pretty obvious. An industry on the brink”

Either you are an idiot, or merely disingenuous. I might remind YOU that the Big Three were doing fine making big trucks and SUV’s and vans until the price of OIL went sky high. Up until recently, the Ford F-150 was the highest selling auto in the WORLD! What nonsense are you talking? Americans loved big cars...and the Big Three made big profits on these sales.

We might wonder if the skyrocketing price of oil might have a lot to do with the deregulation of the commodities market, the manipulation of the market--a la Enron. As we know, the deregulation of the investment banking industry has a lot to do with rising prices, not DEMAND for oil, as the media pimps for the Investment Bankers and the CeO classes like to tell us.

And what exactly is WRONG with auto workers or steel workers having pensions and health insurance? Are you against that? I guess so---so you ARE a “free traitor”....

And finally, you forget the FACT that the Japanese and Korean Auto manufacturers are subsidized by their governments! Don’t you remember the “dumping” that was going on in the 1980’s until Reagan clamped down on it. Under the Japanese system, workers were no laid off during times of economic slowdowns...and their wages were either subsidized by the Japanese government, or their wages were deducted from corporate income taxes.

All garbage you spout...like the pimps for the big Corporate think tanks whose “Libertarian” delusions you’re repeating.

America is simply returning to the historical norm of a small upper/ruling class while the rest of the population lives in lower class wage-slavery conditions.

The massive post-WWII expansion of the middle-class was a historical anomaly and this is currently being corrected as we speak to more normal historical patterns.

the plan will encourage a massive new round of delinquencies and household income reduction as homeowners will jump through hoops to qualify for the program and maximize their benefit. Those who could conceivably economize to meet their existing obligations will now have a strong reason to forego such sacrifices. Those who are not 90 days past due will intentionally become so. In many cases, dual income families may decide to eliminate one job altogether

This absurd, groundless supposition derives from a contemptuous appraisement of working and middle classes as denizens of a Bruegel World filled with ravenous, greedy peasants hell-bent on gaming the system to their own benefit. A few will do so; overwhelmingly, most won’t. Our financial catastrophe did not originate with nor is it aggravated by wage earners. It was the same contempt for and exploitation of “little people” mirrored in your post that has so despoiled us, but it may just be their industrious spirit that will reclaim our solvency… given half a chance.

.... boy, these libertarians really are pieces of work....

“By allowing the Big Three to fail, their capacity will be turned over to new owners who will be able to acquire the means of production at fire sale prices and hire workers at globally competitive wages.”

petey, do you realize that there are no more American-owned press builders?.... *Psssst* - presses make the machines that make the machines that make stuff.... ummmm.... and well....

so, it’s all come down to “globally competitive wages”.... where does taki find these mopes?.... sheeessh - l.c.d., then, huh?....

.... this cat’s a *ahem* “broker,” folks.... dude sits ‘round all day starin’ at an ILX screen....
money-changer, that’s all - prolly makes 3%-4% on “assets under management” - regardless of their return - i know, i’m one of them - just have a conscience, that’s all.... these libertarian jokers wax poetic ‘bout “markets”.... blah, blah, blah.... let me ask you this, petey - you refund your fee(s) on losing trades?

AH HA!

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.... would seem to me that petey has a vested interest in keeping balance of payments right where they are.... no?

By allowing the Big Three to fail, their capacity will be turned over to new owners who will be able to acquire the means of production at fire sale prices and hire workers at globally competitive wages....

Who do you think will buy the “means of production” at “fire sale prices.”?

What do you think the “globally competitive wages” will be?

“The result will be a more efficient auto industry making cars that people around the world actually want to buy at prices they can afford.”

Who will buy these competitively priced cars if they have no job? The people making slave wages in China?  Without jobs for Americans; where do you think the tax dollars will come from to fund our local state and national governments?

Mr. Hunter, your theory is a race to the bottom for the people in this country. Have you thought far enough ahead to question who will control the world’s wealth if they have all the world’s “means of production.”

Sir, you are a globalist!

You are not a patriot!

My apologies to Mr. Hunter....

Mr. Schiff... your theory is a race to the bottom for the people in this country. Have you thought far enough ahead to question who will control the world’s wealth if they have all the world’s “means of production.”

Sir, you are a globalist!

You are not a patriot!

There will come a time soon where we’ll have to take up arms.

Jefferson pointed it out. He knew human nature, and it’s absolute limits.

If we don’t know our limitations we have one more (not one less.)

Personally, I’ll be honest. I’m looking forward to that, God forbid it if possible, since I’m (actually) a military genius.

What does this financial disaster say about the economics profession?

See Peter G. Peterson “The Morning After” in the Oct. l987 Atlantic. He was right.

I agree with William R that the union contracts are killing the Big Three.

This country is too corporate-centric. They are like big trees in the rain forest working to deny the sunshine using their lobbyist leaves to deny competition. Also the US Government needs to go into into a classical liberal rehab for it’s destructive addictions and paranoid, grandiose delusions.

Let the dead wood burn, repeal the government’s chains on the American people’s creativity, and let the American people flourish. I’m tired of corporatism and would rather have a highly competitive capitalistic society. The race to the bottom kitty is out of the bag. I think it is time for evasive actions and rethink society from the ground up. Managerialism was a bad idea and along with Keynesianism needs to be thrown out.

Posted by eep on Nov 20, 2008.

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