Let GM Fail

[w¡n9Nµ7 §£@¥€r 123]

I expect this article will make me in the neighborhood of at least 300,000 new enemies. That’s how many employees GM has. However, the unfortunate thing about truth is that it is relentless and apathetic. Please don’t confuse the messenger with the cause.

The reason GM should be allowed to fail is because in its current state, its production overcapacity, if maintained by government money, can only churn out even more cars that nobody wants or can afford to buy. In other words, it would only prolong the inevitable.

The fact that its management team clung to the illusion of perpetual growth and refused to acknowledge the irrefutable business cycle demonstrates gross incompetence, the result of which should be annihilation. That’s what’s going to happen regardless of how much money is pumped into General Motors or the economy in general. It is the excess liquidity in the system that exacerbates the peaks and troughs of natural business cycles, and so pouring more and more into the system only confounds the economy’s natural ability to repair itself through an unfettered continuation of the cycle.

Bear in mind that all that GM represents is not going to disappear in a puff of smoke if they declare bankruptcy. The assets will merely be re-allocated to other automotive corporations, and the industry itself will become slightly more efficient, and contract as it needs to. Autoworkers who are skilled and reliable will have to add resourceful to their repertoire to stay viable in a contracting economy. There are just too many autoworkers and zippo demand for their product.

Since everybody’s had access to all the cheap liquidity for nearly a decade now, and has got two cars and a parking lot full of brand new recreational vehicles (if they haven’t yet been located by repo man), pumping capital into GM is like trying to continue filling up a bathtub with water after its already full. It only makes a big mess, the water is wasted, and the more you continue trying, the bigger the mess gets and the more the resource is wasted.

The situation we’re in should be a plain signal to the world’s leaders that over-capacity across all industries, fuelled by years of near-zero cost credit, is the result of excess liquidity. The economy, contrary to modern economic theory, simply cannot expand ad infinitum no matter how cheap money is. This only causes overproduction of resources, overproduction of products, and volatility in the business cycle.

On the off chance that isn’t clear enough, hear it is again:

Perpetual economic growth is impossible.

I think this is the fundamental flaw in all of our G8 leadership’s assumptions. If we were to allow the economy to undulate in terms of growth and contraction in a uniform wave pattern, much as nearly all natural systems in biology and physics do, then our existence perhaps becomes sustainable.

The current economic policies cause artificially high concentrations of demand because the net result of excess speculation on the long side in any market creates the illusion of physical demand, which in turn promotes productivity. We end up consuming our finite natural resources prematurely, and the truly destructive effect will be felt more acutely as generations progress. Imagine your grandson or granddaughter trying to buy real estate or gas or gold after decades of increasing real demand (population expansion) and diminishing production of everything due to shortage of raw materials. Imagine the prices.

Trying to force continuous and perpetual economic growth through credit and monetary expansion is just plain suicidal, in the long term. It aggravates peaks and troughs into angry jagged lines that inflate the casualties both human and economic obscenely. The revision in economic policy required to facilitate that reality does not, at this time, appear to be forthcoming. At least, not while George Bush is still flapping his gums and swaggering around the podium playing president.

His address to the G20 meetings makes it clear that he is still preoccupied with asserting U.S. unilateralism when it comes to joint foreign policy decisions. I don’t know what the G20 leaders were hoping for. This meeting should not have happened until Obama was in the driver’s seat. I’m sure they all realize that now. It's clear that Bush seeks to establish credit for initiating the recovery that also is not yet forthcoming.

http://seekingalpha.com/article/106412-let-gm-fail

[spookyturtle 9,466]

Then I assume you felt the same way about AIG, WaMu, Citi, etc. And if it was your company or industry too?

[one...two...tree 2,762]

He makes a solid argument.

[웃 910]

Today should be an interesting day on Wall Street! I am glad I sold everything I had. I heard Harry Reid on the radio around 12am say “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.” I haven't been able to sleep tonight, I've got way too much on my mind with Wall Street, final exams, and my fiancée's interview on Tuesday.

"We were about three words away from a deal," said Sen. Bob Corker of Tennessee, the GOP's point man in the negotiations, referring to any date in 2009 on which the UAW would accept wage cuts. U.S. Senate Majority Leader Harry Reid recently made comments saying that lawmakers will not make it to the “finish line” on the auto bailout bill. Reid called the bill's collapse "a loss for the country," adding: "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight." Connecticut Senator Christopher Dodd added “we will not get cloture; this will fail.” Despite such views, Tennessee Republican Senator Bob Corker stated that “there is still a way to make this happen.” Risk-averse investors may see equities plummet tomorrow on the news. In turn this may allow the U.S. Dollar to rally and continue its status as the world’s safe-haven currency.

Dow Jones and S&P 500 Index futures are currently down 2.229% and 2.847%, respectively.

EURUSD traded through 1.3333 at 22:30 EST.

[spookyturtle 9,466]

Today should be an interesting day on Wall Street! I am glad I sold everything I had. I heard Harry Reid on the radio around 12am say “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.” I haven't been able to sleep tonight, I've got way too much on my mind with Wall Street, final exams, and my fiancée's interview on Tuesday.

Buy oil. It will probably skyrocket soon.

[Dr. A ♥ O 203]

I know some hard core Republicans here in Idaho that say let em all fail, especially GM, and don't give them any piggy back rides. These companies need to rethink their businesses from the top on down.

[NickD 203]

Henry Ford would have been fat, dumb, and happy to keep on making his Model T, his dealers all got together and said no, we can no longer compete, he listened to them, came out with the Model A, then two years later, the first fully one piece cast V-8 engine. I spoke to many GM dealers, does GM ever listen to their dealers, hell no was the answer.

GM really screwed the investors that took over Delco and Delphi in reducing what they originally agreed to pay for parts, Delco is gone and Delphi is on it's way if not already, why should I care. GM also screwed the State of Wisconsin, with our tax payers money to build a plant and Janesville employing 4,000 workers and making the Yukon, they didn't want to make the Yukon, were told to make the Yukon. Anyway, GM is shutting that plant down completely December 23, 2008. Not a lay off until things get better, but a complete shut down. With a total population of 62,454 that kind of layoff will kill that town.

I have no sympathy for GM, some of the most arrogrant egostistical management I have ever had the displeasure of meeting, but unfortunately, the workers are the ones that will suffer, and that management will not suffer. They already have plenty of bucks to buy groceries. Not sure of what they did is a crime or not, but should be.

[Saddle Bronc 124]

Then I assume you felt the same way about AIG, WaMu, Citi, etc. And if it was your company or industry too?

Why are you assuming that AJ necessarily shares the opinion of the article's author (the fact that AJ doesn't understand notwithstanding)? Edited December 12, 2008 by CherryXS

[Donna A 4]

i hope karma bites u in the butt one of these days.

[mawilson 2,133]

Perpetual economic growth is impossible.

It is when we have 5% of the world's population and 50% of the world's guns

[Trumplestiltskin 5,791]

I'm not sure I understand why the execs of these companies are being blamed simply for relying on an economic model that has been the basis of economic policy for decades.

Should we bail them out? its arguable, but given the size, scope and scale of these industries - not to mention the companies that supply them, I don't think people have adequately considered how much it could further weaken our economy if they go under.

Obviously what we should be thinking about at this point is throwing out the economic system that has lead us to this point.

[EstebanTrabajos 7]

After watching the movie "Who killed the electric car" I've come to hate GM, fk 'em, let them go down...

I'm ok with bailing out Ford and Dodge

[Trumplestiltskin 5,791]

I can't say I'm particularly sympathetic to the Union - given that the company is coming hat in hand to govt, and will undoubtedly have to shed some jobs anyway, resisting pay cuts for its staff seems rather dumb.

Beggars can't be choosers and all that.

[NickD 203]

I can't say I'm particularly sympathetic to the Union - given that the company is coming hat in hand to govt, and will undoubtedly have to shed some jobs anyway, resisting pay cuts for its staff seems rather dumb.

Beggars can't be choosers and all that.

Just heard on the news that the senate, even after that 34 billion was dropped down to 14 billion, they said no. But Bush is considering giving some of that 750 billion, to the auto makers. Can he do that? What do we have a congress for?

Some things I would like to see is an access plate for the fuel tank mounted fuel pump, not bad enough where you have to pay a couple of hundreds bucks for a two buck Chinese made motor, but adds insult to injury when you have to drain a tank without a drain, drop it along with four other hoses that are impossible to reach, just to change the damn thing. Ha, buy a Toyota, same thing, except that 2 buck fuel pump is 450 bucks!

Why can't we deduct automotive expense driving to work or to school?

With for the vast majority of us depending on the automobile for our only means of transportation, they got us where they want us, and they are sure giving it to us. Where? You guessed it, bend over and take it like a man.

[Trumplestiltskin 5,791]

I can't say I'm particularly sympathetic to the Union - given that the company is coming hat in hand to govt, and will undoubtedly have to shed some jobs anyway, resisting pay cuts for its staff seems rather dumb.

Beggars can't be choosers and all that.

Just heard on the news that the senate, even after that 34 billion was dropped down to 14 billion, they said no. But Bush is considering giving some of that 750 billion, to the auto makers. Can he do that? What do we have a congress for?

Some things I would like to see is an access plate for the fuel tank mounted fuel pump, not bad enough where you have to pay a couple of hundreds bucks for a two buck Chinese made motor, but adds insult to injury when you have to drain a tank without a drain, drop it along with four other hoses that are impossible to reach, just to change the damn thing. Ha, buy a Toyota, same thing, except that 2 buck fuel pump is 450 bucks!

Why can't we deduct automotive expense driving to work or to school?

With for the vast majority of us depending on the automobile for our only means of transportation, they got us where they want us, and they are sure giving it to us. Where? You guessed it, bend over and take it like a man.

Well back when the original bailout bill stalled a few months ago - John McCain was saying that President Bush could go ahead and spend the money without Congressional approval - to buy up the bad mortgages.

So I'm sure there are ways around it, if Bush were so inclined to do so.