Tag: gm

Ron Paul on GM – It’s Amtrak all over again …

Ron Paul writes in GM, Amtrak and an Increasingly Fascist America:

Last week, General Motors finally declared bankruptcy. Many in government thought $20 billion in taxpayer dollars would save the company, but as predicted, it only postponed the inevitable. The government will dump another $30 billion into GM and take a 60 percent controlling interest for it. Public officials are now involving themselves in tactical business decisions such as where GM’s headquarters should move and what kind of cars it will build.

The promise that this is temporary and will eventually be profitable is supposed to ease the American people into accepting this arrangement, but it is of little comfort to those who remember similar promises when the American taxpayers bought Amtrak. After three years, government was supposed to be out of the passenger rail business. 40 years and billions of dollars later, the government is still operating Amtrak at a loss, despite the fact that they have created a monopoly by making it illegal to compete with Amtrak. Imagine what they can now do to what is left of the great American auto industry!

In a truly free market, GM would get your money one way and one way only — by selling you a car you want, at a price you are willing to pay. Instead, the government is giving public money to a private company in spite of the market signals it has been sending. Throwing money at GM does not stop it from being an engine of wealth destruction; on the contrary, it simply gives it more wealth to destroy.

Had it been allowed to fail naturally, the profitable pieces of GM would have been bought up and put to good use by now. The laid off employees would likely have found new jobs and all that capital would be in private hands, reinvested in companies that produce products demanded by consumers. Instead, we are all poorer now.

Political pressure, rather than the rule of law, is deciding how to divide up the remains of GM. The bondholders had billions in retirement savings invested in the company, and though they were entitled to nearly three times as much as the United Auto Workers, the bondholders were left with just a 10 percent stake compared to the union’s 17.5 percent stake. For their 60 percent stake, taxpayers have a future of constant bailouts to look forward to.

Comingling public control of private business is known as fascism. While today’s politicians may feel emboldened with all their new power, history will only repeat itself as all this collapses on itself. It is the height of hubris for bureaucrats and politicians to attempt to control the market and the freewill of the American people. In the end, the market always wins out. Maybe one day future generations will wise up and allow free markets to function and thrive without the albatross of government around its neck. For now, it looks like those in charge have not learned the lessons of the past, and have doomed us to repeat those mistakes once again.

… GM is here to stay for a long, long time. It will take ongoing subsidies, monopoly rights, and bureaucracy to keep it on live support. Bureaucracy is the scourge of the US System. More bureaucracy won’t fix it. Favoritism will be rampant. Corruption scandals along the way will be predictable. The solution presented to fixing such problems will be yet more bureaucracy. As Ayn Rand wrote in Atlas Shrugged:

Politicians invariably respond to crises — that in most cases they themselves created — by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.

There is no point in denying the inevitable Trouble with Bureaucracy:

So long as the government confines its activity to the protection of individuals against aggression and theft only little harm can be inflicted. Every expansion of governmental powers, however, will inevitably lead to a bureaucratic misuse of the scarce factors of production available, an increase in poverty, and a lower standard of living for everyone.

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Bail Out Detroit? – Now??

An obviously delusional and disturbingly confused Ben Stein once again contributes to dumbing down the masses by writing what appears to be an attempt to an article: Bailout Detroit – Now:

Usually this column is about finance. It usually is an attempt to help the reader make money and have a more comfortable life. I am well aware that I have made a lot of mistakes and that in the short run many of my suggestions have turned out badly. Believe me, I am sorry. I still believe that in the long run the investment ideas will do well, but I am terribly sad that people’s hopes have been disappointed in the short run.

That’s fine Ben. If people are stupid enough to listen to you they deserve to lose money. Another lesson learned means smarter decisions in the future. He who wants to understand finance and economics should seek advice with someone who does understand finance and economics, not with someone who has absolutely no idea what he is talking about.

My best guess is that we are in a panic of sellers and market manipulators and that we will recover within a few years, but I base this on history. We may have moved into a new phase where history is irrelevant. I would be surprised if that were so, since it’s never been true before, but one never knows.

I highly recommend you end the guessing and try some specific thinking. Otherwise, how are we to believe you actually switched the brain on as you continued writing. For beginners like you: We have seen an excessive credit expansion from 1990-2007 which has diverted goods from occupations where the majority of the consumers demanded them and are now in the inevitable and soothing correction which our government is turning into a depression by not allowing it to happen. Those who are in panic mode are you and all the bailout fanatics and government officials. Had we let it occur cleanly it could have been over by now and we’d be ready to get back to useful work. Now we’re in for a decade of agony.

However, today, let’s talk about the American auto companies. They need a bailout from us taxpayers, and they have to get it yesterday. Here’s why

First, we are on thin ice economically. To allow our largest heavy industrial component to fail at this delicate moment is suicidal. To put a couple of million more Americans into unemployment is just not sensible. Mr. Barack Obama is talking about public works projects to employ hundreds of thousands of Americans -bridge building, school building, airport building. These projects take time to start, disrupt local community life, and are famously wasteful.

And that’s why we should do neither of the two. Bailing out Detroit will, from the consumers’ point of view, continue to keep resources from being employed in more useful lines of production, and force the taxpayer, the common man, to cut down on his consumption in order to be able to keep the failed operation going. Our car industry will continue its miserable decline into inefficiency and irrelevance and be back quickly for new bailouts once the money is squandered. How I know that? Oh right, maybe it’s because Chrysler got a bailout years ago and is now back asking for another one!!! You claim to be a financial adviser. Did you ever take a look at GM’s financials? The company is worth minus $60 billion. In a time like this you are asking taxpayers to sacrifice their hard earned dollars and throw them at a business that is worth LESS THAN NOTHING. Shame on you, Mr. Stein! You are one lousy adviser.

I will not again go into details as to why public works projects are going to accomplish nothing but the same. All I needed to say on this I already wrote in detail in The Trouble with Bureaucracy.

Why not be smart about it and NOT LET AMERICANS GET UNEMPLOYED IN THE FIRST PLACE? (Please pardon the shouting.) There are millions of Americans already hard at work making great American made cars and trucks. Why not keep them on the job? Wouldn’t that be smarter than allowing the whole upper Midwest to fall into oblivion and then rescue it over a fifty year period?

BECAUSE OTHER AMERICANS ARE ASKING THAT THEY BE EMPLOYED IN USEFUL OPERATIONS AND NOT IN THEIR CURRENT ONES. (Please pardon my shouting back.) You should really familiarize yourself with the simple economics 101 on entrepreneurial profit and loss. That should help you understand why factors of production should not be kept in operations that generate a loss. You are not the only person in the world, Mr. Stein. There are other Americans who, in their purchasing decisions, express their willingness for a change in Detroit.

Second, I get sick when I hear about how this or that professor says we cannot have bailouts in a free market. Really? How about the bailouts the professors get because gifts to colleges are tax free? How about the bailout they get because if they have to teach six hours a week they feel overwhelmed, while the guy on the line in Dearborn works a grueling forty and doesn’t whine about it?

Ben, if you want to make gifts to the auto companies, please, go ahead and do it. No one is holding you back. And take a lot of people with you when you go. Nothing wrong with that. And if you would like to lobby for a law that makes voluntary gifts for auto companies tax free, go ahead, you’d have my support. Until then, please spare your readers pathetic and irrelevant comparisons.

Somehow, we can give bailouts to investment banks where the top dogs make hundreds of millions a year for running the company into the ditch and wrecking the whole credit picture in America. Somehow we can have bailouts for Fannie Mae and Freddie Mac, whose bosses were trading on the credit of the taxpayers to make themselves rich while pumping up a serious housing bubble.

Exactly right, we shouldn’t have done that either. And I have consistently argued against it. You have not. Now you do. Yet, in the same article you support bailouts to car companies where the top dogs make tens of millions a year for running the company into the ditch and wrecking the whole auto picture in America. Somehow we can have bailouts for GM, Ford and Chrysler, whose bosses were making and reselling auto loans on the credit of the taxpayers to make themselves rich while pumping up a serious consumer credit bubble. It is in the realm of possibilities that you are being a hypocrite?

Amazingly, we can have whole fleets of C-130’s fly to remote areas of Iraq and Afghanistan with pallets of hundred dollar bills piled from floor to ceiling. Then we can pass them out to warlords who make tea for our soldiers one hour and blow their guts out the next. We can send CIA operatives into Somalia and give millions, maybe hundreds of millions, to warlords to fight other killers.

Ben, if you want to argue in favor of the auto bailout, it might make sense to actually talk about the auto bailout. The US foreign policy you describe above it indeed a bad one. But this does not in the slightest make the auto bailouts a good one.

But we cannot find it in our hearts to save our fellow Americans in Ohio and Michigan and Indiana who make the cars and trucks that about half of us buy? We can send billions to Germany and Japan to bail them out after they bombed us and killed our POWs and killed six million Jews. But we cannot help the children and grandchildren of the men and women who fought our war and made us the arsenal of democracy?

Something is very wrong here.

Sure we can help them. We can release them from their current inefficient occupations and enable them to be integrated into a productive modern economy. We need to do this sooner rather than later. The auto companies will fail either way. We can either prolong the agony and then leave the workers without any viable experience in modern, profitable operations, or we can let the companies restructure quickly and efficiently. The longer you want to keep them where they currently are, the worse will the situation be for the very people you are trying to help.

And please don’t tell me how GM and Ford and Chrysler have made bad cars that people don’t want. I drive only American cars, only GM cars actually, and they are the best, coolest cars I have ever driven: my 1962 Red Corvette, my mighty Cadillacs whose potent engines and super brakes have saved my life many times on the freeway. Yes, the cool people in DC and New York don’t drive American cars. But a lot of other good people do and we love them. And my Cadillac dealer down here in the desert, Jessup Motors, gives me a lot better service than my Mercedes, Porsche, BMW, Jaguar, or Acura dealers ever did. I would trust my life to Detroit iron any time.

That is good for you. I have no problem with your desire to buy GM cars. Nor do I have a problem with other people having the same desire. I do have a problem when you want to send IRS agents after me to take my money to subsidize your car. I don’t ask you to give me money to pay for my next ski trip either. A simple solution: Why don’t you and all other GM lovers, out of patriotism, simply pay 4 times the price you currently pay for your car. This way GM might actually break even next year.

And why are we so angry at the car companies’ executives? They get miserable pay by Wall Street standards and have much harder jobs.

I’m not sure what your high and mighty standards are that you call $14,000,000 a miserable pay. Still, I’m not angry at them. In fact, I don’t care about them. They’ll do just fine. I’m not asking more of them than a bakery owner asks of his manager: Be profitable so we can pay our bills and have some money left at the end of the day.

Why are we so angry at the unions? They negotiated their deals in good faith. It’s not their fault that roller coaster gasoline prices messed up their world.

What makes you think that bailout opponents are angry at the unions. I’m not. If they want to close deals that bankrupt their business, it’s their free decision. Just don’t come knocking on my door afterwards to help you continue make bad decisions. Make better ones next time.

They are our brothers and sisters. They fight our wars. They maintain our middle class lives. Maybe they get paid a lot, but they have been giving back for years. When will it ever be enough?

Ben, are you suggesting that GM workers are the only ones who are our brothers and sisters and fight our wars? I hope not. What do you mean by “they maintain out middle class lives”. You mean their middle class lives? Did you know that there are a lot of people who earn less than the average UAW worker? Did it ever cross your mind that there are people who are suffering quite a bit more than the GM auto worker who makes $150,000 a year? Why do you want to milk these people for tax money when they are already struggling? Have you no compassion for them?

And what about the retirees? They get the benefits they were promised. If those can be taken away, then whose benefits are safe? And do you think it will be cheaper if the government takes on those costs directly?

And what about the retirees whose pension money will be worth close to nothing once the inevitable result of this bailout mania unleashes the inevitable hyperinflation upon us? What about the taxpayers whose money can apparently be taken away without a qualm from your end.

Let’s stop the Depression before it starts. Let’s show some fairness and good faith to our own. Let’s bail out the Big Three, help them slim down, shape up, and keep making great cars and trucks. The Big Three are us and if we cannot help ourselves, who can we help?

Correct, let’s not cause another Great Depression. Let’s not again prolong the agony of a necessary correction by trying to keep prices up and failing businesses going, like we did in 1929 and 1930. Let’s help the big 3 become efficient by allowing the consumers to decide what is to happen. Let their owners go through Chapter 11 if necessary. Let the good pieces be turned into efficient and successful businesses and the useless parts be released for more useful occupations so the American car industry can once again be a force in the world rather than a caboose. The Big Three are NOT us. They are GM, Ford, and Chrysler. If they can’t help themselves, then who should?

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