CDsDontBurn

Last week was a busy one for President Obama. First he reportedly finalized his plans for fuel economy increases for 2011 -- the first such increases in two decades. And then over the weekend, he rocked the auto industry when he demanded that GM CEO of 8 years, Rick Wagoner, resign. Rick Wagoner complied.

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Source: DailyTech

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Judas

fail.

this should have occured the first time...

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SFOSOK

Funny, the largest banks in the world get their bailouts with few guidelines and no questions asked while American automotive companies get the shaft if they don't "play by their rules".

Hopefully the terms and conditions for the bailout are released to the public.

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*Warning* - Explicit Content Preceeding



METAL!!

Judas

it's called double standards and is just a load of shit...

in the words of Lewis Black "Exponetially crappier"

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OldBuzzard

Now, now, let us not question the actions of Comrade Obama. All of this is "for the greater good".

Soon we will all be equal, and the evil rich will get what they deserve.

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When looking for a reason as to why things go wrong, never rule out sheer STUPIDITY

OmegaRED

Not good enough. Now that Obama has shown he is prepared to intervene and force a corporate scumbag to step down he has to follow through and make this happens with hundreds of those responsible for the economic crisis. I accept that the Obama admininstration is committed to the bailouts and this is why they've kept upping the amount of money but this should also mirror the committment to get rid of the guys that caused this mess. I don't believe anyone in Washington has the guts for this and it disappoints me.

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Judas

theres only about 3 people in washington that has the guts to do it.... only those 3 specific people have been ostrisized by everyone specially the media

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OmegaRED

Are they talking heads or do they actually have a seat in government?

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Judas

they actually do actually have a seat in the government... they vote on the bills..... (usually against alot of them due to how utterly rediculious 99% of them are)

One of which is Ron Paul

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OldBuzzard

You mean guys like Barny Frank, and the other liberals that FORCED the banks to make loans to people that they KNEW weren't able to re-pay them? And then blocked any efforts to regulate the Fanny Mae and Freddy Mack?

You're right...every one of those weasels should be forced out of their positions.

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When looking for a reason as to why things go wrong, never rule out sheer STUPIDITY

Judas

Greenspan, goerge bush... obama himself since he allowed it and continues to allow it...

the list includes nearly every single person sitting in the whitehouse as authorities...

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Kazeko

Ugh. I should stop posting on internet forums.

Reason for the Bankruptcy suggestion (coersion?)

Here you have a business (take any one of the auto makers) that has been doing poorly, not for years, but DECADES. These makers started failing when foreign vehicles entered the US Market (largely from Japan, at first) and started selling smaller, better built, more efficient cars for less money. The american auto industry's solution, was to lobby for import quotas, and tariffs to drive up the costs and limit importation on foreign vehicles.

Their tactic was government coersion. NOT competition. They didn't try to improve, or compete, they sought to destroy competition through government intervention (The framework, of which, was laid out by previous legislation like the New Deal.)

As years pass, these tariffs and quotas get eliminated and removed. Now, a base-model BMW 1 series coupe, runs you < $5k more than a base model Chevy Impala. Every last spec, warranty detail, financial option and point SCREAMS buy the Bimmer. It's a better car in EVERY way.

Why would you buy the Chevy, when the best bang for the buck is the BMW?

Want a 4 door with front wheel drive?
A 4 door Toyota Camry starts at $19k. The Impala? $24k.

Think I'm the only one on to this? So are the rest of the American Consumers, even if you're one of the few who isn't. THere's a reason these car manufacturers are failing.


So, the proper question to ask, is why? Why aren't American cars selling? They're lower quality, higher priced. Why, again?

So, here's the reason for the Bankruptcy.

Disclaimer: I DO NOT ENDORSE COMRADE OBAMA (Very aptly put, OldBuzzard). I think he's a friggen communist. End.

In most states where American Auto factories are built, you are REQUIRED by law and the company to join a union in order to work at the plant. You have NO CHOICE. The average lineman at these factories is paid somewhere on the order of almost $70k USD per year. Broken down that's about $33.65 an hour. Compare that to foreign manufacturers (i.e. the Japanese) who get paid about 1/3rd less, or approximately $22.50 an hour, within the United States.

To add to this, the pensions and retirement benefits coerced out of the company by the unions amount to somewhere on the order of 1/3rd of the purchase price of every new vehicle GM or Ford sells.

Why can't they make money? Because their employees (and on a more grand scale, the unions) won't let them. The head of the UAW Ron Gettelfinger refused to re-negotiate union contracts to ease the pay and retirement burden on GM, which would allow them to invest more money into things like R&D, expansion, and improving the quality of their vehicles, which might actually allow them to COMPETE.

So, to the point. The purpose of suggesting bankruptcy, is to FORCE the UAW into re-negotiating the union contracts (or allowing GM to completely eliminate them) which will allow them to start actually making money, and as such, allow them to produce competitive products at competitive prices.

While I don't endorse bankruptcy, or Barack Obama, this would atleast allow them to shed the chains and leeches to potentially make a profit.

The best solution, IMO... Let them fail. Put the UAW out of work by default and MAYBE, when they're starving in the streets, they'll realize that their hearts won't save them, and they might find out the basic premise of WHY capitalism works, and why...

THIS IS NOT CAPITALISM.


This is a whole lot of blankets that requires a bit of knowledge about how capital (lol, words) moves in a company. Profit margins are not just simply "Money in the CEO's bank." It's just not how it works, because it CAN'T BE. Companies who shot themselves in the foot are currently seeking bail outs from the Fed, because they mismanaged their business. Capitalism is a system of profit and loss. If we were truely capitalist, these companies would FAIL.


The reason many in the other thread thought capitalism had failed... is because we are not truely capitalist. This society is half Free and half Looted.

Fun Economic and Historical Tip of the Day:
In the 1966s a man wrote an article in a magazine called "The Objectivist" titled - "Gold and Economic Freedom" endorsing a gold standard, and explaining why things like the Real Bills Doctrine and the abandonment of the gold standard was bad. The person who wrote it, was part of a group jokingly titled "The Collective" which was a think tank headed by a woman named Ayn Rand.

This person's name?

Alan Greenspan.

Judas

lol alan greenspan....... what a flipflopper..

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Kazeko

In the world of politics, not trying to appease everyone makes you a "radical."

That's part of the problem with party politics and democratic process. It's predicated on charisma. Obama got elected, not because he was more capable than the other candidates, but because he has a better smile, is more attractive, and speaks in a tone that's pleasing to our ears and hearts, etc. He's charismatic, while John McCain and the other candidates have the charisma of a doorstop.

Greenspan was being crucified by the media and less knowledgeable peoples for not trying to deflate the housing bubble that he knew about.

He even wrote about it in his book, which was published before the housing bubble burst. He couldn't stop it, because he didn't have the power to, outside changing interest rates. But, people want someone to blame and someone to hate.

He "flip-flopped" because it was the best career move, and what the world believes you agree with, and what you ACTUALLY do, are two different things in American Politics. Look at Bill Clinton - Paradigm Case of how to avoid taking a stance on politics, or changing your appearance to avoid Political Suicide.

Like Greenspan or don't. Most haven't gone back in history with figures in the media to understand why the televised news often times, doesn't make sense.


Another Historical Note.
The collapse of Lincoln Savings and Loan in 1989 may very well have been what sparked the economic downturn in the early 90's (and subsequent unemployment rates the likes of which we have yet to touch.) The story involves a Scandal and a group called the Keating Five.
Keating Five - Wikipedia, the free encyclopedia

Note one of the members of the Keating Five. Admittedly acquitted. Possibly best he lost in 2008.

Judas

Greenspan has stated that no US government or any agency for that matter has any control over what the federal reserve does, all they can do is ask, and get a yes no answer. Greenspan stated that they have no laws to govern them.

Considering this, this would mean that the federal reserve and the current float of cash in the system, internest rates and such are dictated without rule.

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Kazeko

This is correct, but you have to understand WHY and pursue what that lack of control means.

1. Can you tell me the effect of their ability to change interest rates? What effect does it have? If the federal interest rate is .5%, why do I get a 1.3% APR on my CD through my bank? Why is my car loan 7% and my Home Mortgage 2%?

2. Ability to print moneys.
The economic principle is called the "Real Bills Doctrine." This was the dominant thought at the time the FRB was established. The quick version of the theory (since proven wrong by inflation and later stagflation) basically states that so long as goods and services are exchanged for a Fiat currency, that currency will retain it's value, regardless of the volume of currency in circulation.

Now, modern economic thought says something else, but eliminating the FRB would be like de-regulating the housing market. Watch the economy crash. Still not insidious, as the theory is, atleast in part, true.

The historical element, was the fear that the gold standard could not expand at the rate of population growth, therefore the value of gold would increase at an uncontrollable rate, starving the population of tangible wealth. - You can only spread so much gold between so many people.
There's a fundamental problem with the basis under which they sought to eliminate the gold standard, but it's a book worth.

Basically, even if they could actually print dollars. It's pointless. Money, now a days is printed when the actual paper dollar supply is necessary, but simply printing dollars is superfluous. The bigger problem is in lending.

Lending creates dollars (without actual, printed dollars) by putting a dollar figure on a balance sheet. You make a bank transfer, pay by cashiers check, debit card, etc, real paper money is not being transfered, only a figure on a balance statement. So, if you aren't limited in what you can loan, you can flood a market with money (inflation) regardless of what people are actually capable of paying. Read: The housing bubble and subsequent stock market crash. If you follow this to the end, you'll find out that the market will never "Rebound" back to post-crash levels, without real production to back it up. It was a false surge in the market.

Answer to #1...

The effect is a whole of zero. The rate set is a "target rate" (not a forced or imposed legal regulation) for private lenders to lend funds to other banking institutions.

It indirectly has an effect on monetary supply in an economy.

Banks are required by law to maintain a certain supply of cash on hand at any given time. (Generally 10% of their demand accounts, or loans) Often times loans are taken (at the federal rate) from one bank by another bank to ensure supplies are on hand. When the interest rate is low, banks are less likely to provide those loans to one another, because it won't generate a profit. As such, those lenders can't loan money, and subsequently decrease the money supply in an economy, because loans are not being granted and this superfluous, or fiat currency isn't being created.



So.

A. The FRB's control over federal interest rates has an effect only because loaning allows any private bank to create money to begin with. The FRB's control is irrelevant.

B. "Printing Money" is a Media Gimmick. The only reason to print any actual dollars has nothing to do with creating or controlling inflation, nor does it have anything to do with filling some CEO's pockets. It can't. All printing money does, is affects the amount of tangible dollars are in circulation. When you get a bank loan, you can withdraw circulated dollars, but more often, transactions are simply positives and negatives on an accounting record.


C. This is the essence of what "Fiat" currency is. It's government regulated and controlled. A gold standard imposes a similar "cash on hand" law like I explained, but purely because you can't loan more than you have.

D. in the end. So what if they aren't controlled by law. It doesn't make any difference.

The potential problem with a gold standard, is that it can't expand like fiat currencies. I've got more thinking on this to do, before I can really extrapolate further, regarding potential flaws and perks in a gold standard.

Judas

how can a ever expanding currency not lose per dollar value... that's apparent with the inflation.... or did i completely miss what you said?

Considering that in the last number of months, the printing of money has been going steady. There has to be a cause and effect occuring at every level in some manner. Why would there be massive amounts of money being printed right at the time that the loans and such are being halted?

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Kazeko

First section - It can't, and that's part the problem with Fiat currency.

Second - $8000 dollar First Time Home Buyer Credit, $400 dollar Making Work Pay Credit, $2500 dollar American Opportunity Credit...

Tons of tax credits, and basically, the Keynesian solution to economic depression is...

SPEND SPEND SPEND.

Barack Obama spent, in the first 60 days in office, more than the COMBINED total of our last five presidents, in the last three decades.


That's the basis of the upset with the government "Creating" inflation, and you're right, they can, though generally it has little to no effect, even with the big spenders, historically. At this point, however Obama's out spent even FDR, a number of times over. Point is, it's not the standard, and it's not the process of actually printing money that causes the problem.

The end result, however, is something called "hyper-inflation" which we'll see in about 3-4 years, if "Mein Fuhrer" isn't intelligent enough to can the spending, cut taxes and try to spur job growth to offset the massive flood of cash into the market.

We'll see how it goes. "The worst is ahead of us" means paying $8.00 for a gallon of gas, $10.00 for a gallon of milk and $5.00 for a loaf of bread.

Watch the prices skyrocket.




Other News:

When you do your taxes the year after next (or even if someone else does them for you) go grab the 1040 Instructions, and flip to the back page, that shows the federal incomes and outlays for 2009. A simple breakdown of the federal incomes and outlays (what comes in and what goes out) is provided. Here's 2007, from the 2008 1040 Instructions.




Note that 6% borrowing to cover deficit... Watch it skyrocket. Unfortunately, it won't be published until 2011.

Other points to note - 2007 was the year the Bush administration's massive tax cuts went into effect. If you compare 2007 to 2006, income tax revenues went UP almost 10%, despite the reduction in tax rates. Irony is, when people are taxed less, they're more inclined to produce more, and make more money, which means they pay more taxes. This has been common economic knowledge for decades.

Judas

See we do indeed agree on a considerable number of things..

while i've been waiting for the sudden insane drop in the USD not to mention countless other currencies including the canadian, mexian, Euro, well actually by the time you get it all figured, every currency will fall appart the same way it did in 1929.. only far more extreme.

The usual motto has always been "Save your money durring the good times, spend it durring the bad times" However, it's a problem when you have no money to begin with technically. At which point Obama has been excersising "Throwing good money after bad" on a scale like you mentioned, yet so many millions of "sheep" continue to praise his presidency, even stateing that he's only been in office for so long, give him time to fix it, yet people insist on ignoring the very issue he's accelerating at a rate that even bush couldn't dream of.

I would expect people being unable to afford the simple electricity necessities let alone bother owning a car in the coming uber-inflation that we have yet to see.

Keeping an eye on the stock markets, it's quite evident that no one has a clue. they can't explain the downers and the uppers.... the drop to 6500 points and then the rise to 8000 again, it's fluxing, and it's following the EXACT same trend as 1929-1932, only a wee bit faster.

The predictions have been made of about 3-4 years, some 5..... But everyone that's predicted the things just recently experiened is a full 2 times or more faster then expected.

I work with alot of "if"s in my relatively consistant 10 year plans/goals that i set, If such and such occur, what do i have to predict, and make changes fast enough to still be able to obtain my goals.... And when i raise these if questions, with a bit of valid possibility not to far fetched, the number of people that have a fit even on these boards is quite astounding.

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Kazeko

It won't be the catastrophic failure that we say in the 1920's, though. Technology is far more advanced, infrastructure is far more deeply rooted, information travels faster and sweeping changes can be made over night.

If you can find the definition of the word "Catallaxy" you'll understand why I say that it won't be catastrophic.

The drop in the value of currency is largely irrelevant, if other currencies are dropping in tandem. The question is what your currency buys you.

For example, a new BMW M3 costs the equivalent of $83k US in the UK, while the same car costs $65k here in the states. Gas is more expensive in the UK, relative to the states, etc...
Cars, on a whole are VASTLY cheaper in the US than the UK.

So, yes, things may get worse. Things are also appearing to get better for a lot of people. Will it be the end of the world? Well, the emotional reactions would tell you it could be.

But that's where I separate from Libertarians, and where many others have as well. There's a rational reason for all this, and a rational solution, as well as a rational reaction. The knee-jerk emotionalism that's defined a good portion of the Libertarian party, is a lot of what you find on the internet, and a lot of why I won't call myself a Libertarian. It's also the defining characteristic in why Libertarians are commonly referred to as the "Hippies of the Right."

So, while we agree on many things, Judas, there's a fundamental difference in how we reach these conclusions. The lack of that fundamental principle, is a HUGE part of the reason our economy took a dive. No one understood why, they only understood what they felt, and they felt what they were doing was right. Obama feels he's right. Libertarians, Republicans, Democrats all FEEL as though they're right. Problem is, few to no one has really thought about it, rationally.


Affluence, allows us to disconnect with the Core Element of Human survival. - Rational thought. All animals can feel emotion. Even insects show fear. Emotion doesn't make us survive, if anything, it assists in our demise. I'm not saying you shouldn't be emotional, but I'm saying that emotion shouldn't guide thoughts and actions.

I'll stop there, before I start proselytizing.

This whole economic crash and bail out process, was referred to by a writer for the Wall Street Journal as being "Straight out of Atlas Shrugged." The fundamentals I refer to, have to do with Objectivist Epistemology, much of which isn't explicitly present in Rand's fictional work.

Judas

i'm not really reaching a conclusion just a fyi.... but i perseive the possibility of these things occuring....

while technologically advanced... majority of those technologies are made emediately useless when it comes to foods...

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Kazeko

I perceive the possibility too. Much in the same context I perceive the possibility of getting...

A. Hit By a Car.
B. Winning the Lotto
C. Getting tossed after work.


But rank these in order of probability. I'm probably gonna get tossed tomorrow after work, I almost definitely won't win the lotto, but getting hit by a car is a potential, though not very likely.


Total societal collapse ranks somewhere on the order of winning the lotto. The way you respond to this stuff, it would seem to me that you'd be happy about a collapse.

Again, check that term, and check the premises. Anarchy and Chaos are fundamental impossibilities.

Judas

i guess it depends on how optimistic you are about how people will react in comparison to todays standards vs previous history's own standards under a similare set of circumstances.

And unfortunately, with the amount of BS i'm seeing, i think it's time for it..

but then again, choas and anarchy can come about due to design. So depending on where you standing, and looking at things.. it all up to how you want to perceive it.

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Falstaff

I am very disappointed at the lack of depth in many of the remarks by the media about the economic plan for America to get it back on its feet. America might be rich
enough to bail out some banks and failing businesses, but the free market solution was and is still the best idea.
If you think American banking is corrupt or flawed, look at the UK, which is equally troubled.
The current administration will disenfrrancise many of its former allies and many former allies that supported it in the years to come.
There are no easy or quick answers to our problems, they began after World War II, and until we see the economic giants of India and China begin to throw more muscle into the economic arena, we are content to eat our young and chastise with extreme ignorance, the very people and policies that built our country in the first place.
I rarely see any depth to any arguments anymore, but Kazeko my hat brim is dipped in your direction and I look forward to more comments from you.
I used to come here all the time for a good spat, but the remarks as of late tend to be more viceral than informed.
But it is the province of the common man to question the government, to divide politics by "good" guys and "bad" guys and play out political drama like a John Wayne movie I suppose.
Economics is more complex than poltiics, but reduced to the siimpliest terms, might not escape the man on the street, or at least I hope so, because the media remains absolutely commited to Obamanizing everything and ignoring the truth and facts in leau of statistics and superlatives.
I am not sold on this president, nor many others until I see some real progress, and frankly I have seen very little in a long long time.
Obama's only strength might be pure rhetoric. If he can be convinced by anyone in our government, or one of his advisers that the direction or course he is takinjg is sound then he should do so.
Lots of hard working Americans do not believe in Obama yet, so he has his work cut out for him, and I dont believe any progress his current economic strategy will deliver any dividends for the common man right away, or even in years to come.
I am not convinced an Obama can do this, it iwll take more sacrifce on the part of middle class taxpayer to accomplish this.
Just look at the UK, the tax payer here suffers a much larger burden and Gordon Brown has seen fit to stack more bricks on the average tax paying citizen to accomplish its new economic strategy.
I believe Obama will do this as well, begin to stack the bricks of taxation on the common man, even with all the "tax cuts" and political leveraging, the fact remains that nothing will really change in the near term for Americans, so prepare to suffer a bit more, just be thankful you are not taxed as heavily as UK citizens.

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Kazeko

This is an oxymoron.

Not an attempted shot, just stating the obvious.


And Falstaff, you are correct, Obama's budget included an extra 460 million in funding for the IRS, to improve collection action and start a hiring intiative for enforcement.

The upsetting thing, is that the increase in taxation is likely to cause a number of economies to stagnate (See Also: Sweden's tax problem (Search for: Tax Wedge)) instead of recovering.

Edit: The essence of the problem, is actually a misinterpretation of Keynesian Economics. The modern application is the idea that the government can spend it's way out of an economic recession by "guiding the economy with an invisible hand" (to quote Obama) - The over-simplified essence of Keynesian Econ, is that the government had the capacity and responsibility of guiding economic elements, through semi-direct involvement. What he refers to, in his works, however, is more akin to social engineering than it is to direct taxation, monetary flooding etc.

I.e. The Mortgage Interest deduction here in the states. In the US, you can deduct (that is, reduce your income by the amount of) mortgage interest. They provide the tax incentive to promote home-ownership and spur new house sales. - Houses, by their nature are tangible assets, whereas a rental or lease is basically money down the drain.
- Engineering tax code and policy which creates incentives to (hopefully) ebb monetary flow to a particular market. -- This is Keynesian Economics.

Instead, it's been taken out of context by most Liberals, and even many Conservatives to mean that the government has the responsibility of social welfare and direct, overt economic control.

For those who don't have the Poly-Sci details to put that concept into perspective; Government Control of an Economy (but not ownership) is the basis of the form of Government we've come to know as Fascism. Fundamentally, the only separation between Marxist Communism and Mussolini's Fascism, is the private ownership of the means of production in an economy. The decisive factor, is government control. Ownership is irrelevant. - See Also: Fed Owns 10% of the banking industry.

The basis for privatizing the banking industry I MAY be able to see, but the problem goes deeper, as I mentioned previously, with Fiat Currency. But why stop at banks, right? Let's go for the housing mark... oh wait. That's Fannie Mae and Freddie Mac.

Sorry, I had to throw some knee-jerk in at some point.

Falstaff

It will either be facism or socialism that this country will endure if the Democrats or the Republicans take their agenda to the extreme. All things in moderation. I know Obama's plan, I remember when he was a senator, before even that. He surrounds himself with people like limbs on a tree temporarily grafted to the great flexible trunk and if they fail or do not impress, he will lop them off. The measure of a man is not what he says but what he does and so far his the salmon with the most chance to make it up stream, only to be eaten by a bear, and that bear is the economy of failure.
Having the taxpayers bankroll a bailout for companies that should have failed to begin with is obscene. Look at the UK, its a heartbreaker, and no matter what Gordon Brown does, his cronies and other cronies mind you, shall continue to pursue schemes that will keep them in power regardless of what financial sacrifices the middle class have to make or endure.
Osama, Obama, Tijiuana...etc.
there are not simple answers to questions and Obama better get some gladiators in the arens soon because Rome is a mob, and his popularity will wain as quickly as his predecessors when there is no money shot or hollywood finish to many of the problems he or his administration wishes to tackle, because three presidents tried before him and failed.
The only thing, and I mean the only thing that he has on his side is rhetoric, and lets face it, if your a clever poltician, and you get a away with what you attempt, then it isnt hutzbah is it?

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Judas

shame the people for there insistance to continuely puts these people in power.

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Falstaff

finish your beer Judas...
poeple will do whatever they intend to do whether they are informed or not.
Democracy is scarier than fascism or any other form of government, because everyone shares the burden of the consequences of their actions, good or bad.

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Judas

democracy is a horrible term... the concept of the orginal concept of democracy is far worse then anything.. it is for lack of a better word, "virtually elected" tierrany.

The worst kind of prison is a prison in which you beleive you are free, your vote counts, and you can pass any obstacle.

btw... beer is disgusting

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Falstaff

beer is disgusting..?
sorry but it was an analogy.
Democracy is more of a challenge for choice, than any other form of government, and the idea of electing our leaders is not new or peculiar to Americans.
I say, if the world wants the governments to do the thinking for them, then continue on the disasterous path that it is on or stop and take stock of what does and waht does not work.
but the free market system is intoxicating isnt it,
look at you, with your own shop or interest in a business.
to be in control or be in charge of your own destiny and be the captain of your own ship...
isnt that what we want?
a Captain?
Obama is not my Captain...
far from it..
he is a surley upstart that needs the burden of command ot define his weaknesses or strenghts..
I didnt have champagne with his spin crew
or go to the photo ops
nor did I embrace the bullshit rehetoric of his pre election bully pulpit.
no I waited till America decided and wondered how long this flash in the pan would last
for the sake of America, I hope he learns something and becomes a competent leader
he certainly is a competent politician....or so we think
enough bullshit and more action
OBAMA you need to light some fires under some asses or you are no better than those that came before you

ACTION NOT WORDS........

America waits..

Kudo's to the Canadian...at least he posted.

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