GM: The fall of an American giant

you assume it is govnment intention to help them, you couldn't be more wrong, it is to squash them and take them over.

The gov't intends "to squash them and take... over" a failed, indebted company? To what ends? That makes no sense at all. The intentions, whether reasonable or not, whether attainable or not, must be to turn GM around. (BTW, as suggested by my previous post, I find this goal neither reasonable nor attainable.) But to have it just to have it is absurd, considering the political detriment that comes along with a GM failure.

You had the choice to buy their product or not!
Now you will not have a choice, you will be forced to drive one of their new "folkswagons" green cars.
I hope you are elated comrade.

you delivered the joke with perfect timing

using text?

cool

I agree 100%.

Yes, we're all asleep and irrational.

All hail the great and mighty prophet dharmadog.

Your condescension has finally brought me to the light!

=|

GM employs less than 250,000 people worldwide. It's a lot, but it's not 5 million.

In any case, I don't want to get hung up on that point. For the sake of argument, let's just say that they employee 5 million people. If the company is unprofitable, how will those people be paid? And for how long? Should the government just keep giving them money to support their payroll? And where does the government get the money? They, after all, produce nothing. The government just reallocates money. This is the broken window fallacy -- that is, people only focus on what's in front of them, and in doing so, ignore opportunity cost. So on the one hand, you have a group of people (the 5 million workers) who now have a paycheck. So that's good, because now they can go buy stuff and stimulate the economy. Maybe one of the workers goes out and buys flowers from the florist, who in turn uses that money to get dinner at a local restaurant, and then that restaurant owner uses it to buy...etc... Simple so far, right? Good. That's only half of the picture though. Where did the money come from? Well, simply stated (if you want to get into it more, we can), the government takes it from people. Let's say a local butcher is affected. The butcher planned to buy his son a new jacket from the local tailor, who would then buy bread for his family at the bakery down the street, who would then use that money to...etc... But since the government taxed the butcher to keep the 5 million people employed, the butcher can no longer afford that new jacket. Therefore, the tailor, the baker, and whoever else is down the line never see that money.

GM is not profitable, but they do have assets. It's not like the world is going to stop making cars if GM closes down -- someone will come in and buy these assets (factories, for example). That same person will probably employ many of the workers who are now unemployed. The rest of the people will find work in other profitable businesses. It's a necessary reallocation of factors of production, but life will go on.

EDIT: I noticed you said that GM probably keeps an upwards of 5 million people employed (including jobs which are not directly on the GM payroll). That might very well be the case. Anyway, like I said in the beginning of the argument, the actual number is irrelevant to reach the conclusion.

The government will soon need to get its own house in order as each and every person in America is responsible for $188,000+ in U.S. unfunded liabilities and debt.
getting corporations off welfare is the first step to reclaiming our government by the people, for the people.

"GM employs less than 250,000 people worldwide. It's a lot, but it's not 5 million."

I should've clarified, but what I meant is that it INDIRECTLY employs that many people.

Whether it's through the wages it pays to workers who use their capital to support others to the small shops and factories that supply them wit hall their needs.

Also, I might be wrong, but don't they directly employ 2 million total? Or is that the big three combined?

"And where does the government get the money? They, after all, produce nothing. The government just reallocates money. This is the broken window fallacy ...Therefore, the tailor, the baker, and whoever else is down the line never see that money."

I understand the basic economic points behind this, taxes stifle growth and limit the ability of people to increase their own wealth. Although it is utterly wrong to say the government produces nothing, the U.S. government employs a shitload of people and is responsible for the construction of many different buildings and projects, including but not limited to defense weapons, office buildings, roads and bridges. But that's a tangent.

The tax argument you're using really applies to ANY expenditure, so the question really is not a matter of taxation but is this project worth the effect on the larger economy?

Given, it might NOT be, since we seem to have just burned up 30 billion dollars with no real benefit to show for it.

But really, I can't answer that question until the end of this.

I mean, how long do we keep giving them money? I dunno, I'm not looking to give them ANY more. Like I said earlier, the bailout was mainly out of necessity. Hopefully we won't have to dish out any more. But I would rather go double or nothing than just quit now. In other words, if we stop giving them money now, we WILL have basically have just burned up this cash. We're committed now, we're investors. I'm willing to risk more cash to make this investment worth it rather than just cutting my losses now.

I guess my limit would be 100 billion, which sounds insane but it's really not considering how much we spend on the military or how much we spent bailing out the banks.

"GM is not profitable, but they do have assets. It's not like the world is going to stop making cars if GM closes down -- someone will come in and buy these assets (factories, for example). That same person will probably employ many of the workers who are now unemployed. The rest of the people will find work in other profitable businesses. It's a necessary reallocation of factors of production, but life will go on."

Hypothetically, yes. Realistically, uh, who?

All that's left after this is Chrysler and Ford right? They're not doing too hot either.

"The government will soon need to get its own house in order as each and every person in America is responsible for $188,000+ in U.S. unfunded liabilities and debt.
getting corporations off welfare is the first step to reclaiming our government by the people, for the people."

My calculations put your number at $56,400,000,000,000. 56 trillion is like 5 times what the national debt is right now, so I have no idea where you're getting that number from. If you're including mortgages and private loans, that's pretty much not the government's jurisdiction yeah?

Otherwise I agree, I don't want corporate welfare either. Especially since most of these assholes send our jobs overseas and destroy our country.

But what does that have to do with my point about necessity. I don't WANT to give the banks a bailout, but with Glass-Stiegel repealed the assholes got so BIG that not doing it would collapse the economy. I don't WANT to give GM a bailout but just letting them crash and burn isn't exactly a great option either.

Sure we need to ween off this corporate welfare bullshit, but uh, the house is kind of burning down right now. We should probably consider rebuilding the foundations once the fire is out.

The broken window fallacy isn't necessarily a tax argument, but you're right -- it does apply to any expenditure where money is allocated from one place in order to stimulate another.

You say you'll be able to tell me if bailing out GM was worth it when all is said and done, but really, we can only know if it completely fails in the end. For example, if GM manages to sustain profitable lines of productions, it will be after they have trimmed away so much fat (jobs) that it won't look anything like the GM today. So at that point you can say that GM is still in business, but you won't be able to say at what cost. The reason you won't be able to do that is because the opportunity cost will always remain a mystery. That is, if GM was allowed to fail like the market would have dictated, you don't know who would have purchased their assets (factories, machines, workers, etc...)

We can look at the history though. Let's look at Lehman Brothers, for example. Their assets totaled $639 billion and they employed over 26,000 people. They were "arguably" to big to fail, but what happened when they went out of business? It just freed up resources for the rest of the market to use. In a matter of days, the market had allocated all the good assets of Lehman Brothers to various buyers and the bad assets had vanished. As Frank Shostak says, "It was like poetry."

I agree with you when you say $100 billion sounds insane, but in the grand scheme of things it's pretty modest. That doesn't mean that $100 billion is okay though. From that, I'd tend to take away that we're spending too much on all this other stuff.

Also, I think masterzip was referring to the total American debt, not just the federal government debt. That is, the federal debt, state and local government's debts, international debts, private household's debt, business and domestic financial sector's debts and federal debt to trust funds. As of April 2009, the total debt was just over $57 trillion. So your calculation is correct.

"We can look at the history though. Let's look at Lehman Brothers, for example. Their assets totaled $639 billion and they employed over 26,000 people. They were "arguably" to big to fail, but what happened when they went out of business? It just freed up resources for the rest of the market to use. In a matter of days, the market had allocated all the good assets of Lehman Brothers to various buyers and the bad assets had vanished. As Frank Shostak says, "It was like poetry."

Yeah but a lot of those assets were toxic and fucked over the companies that vultured them.

"I agree with you when you say $100 billion sounds insane, but in the grand scheme of things it's pretty modest. That doesn't mean that $100 billion is okay though. From that, I'd tend to take away that we're spending too much on all this other stuff."

Definitely, but it's so late in the game to be saying that IMO. We're in a serious crisis, now is definitely NOT the time to be talking about miniaturizing government and handing out tax cuts. We're just not stable enough. And for all the vitriol and kicking and screaming from fiscal conservatives, I do think it is an incredibly wise decision to spend like crazy in a situation like this and save the conservatism for when we're prosperous again. Seems tried and proven to me.

"Also, I think masterzip was referring to the total American debt, not just the federal government debt. That is, the federal debt, state and local government's debts, international debts, private household's debt, business and domestic financial sector's debts and federal debt to trust funds. As of April 2009, the total debt was just over $57 trillion. So your calculation is correct."

That's fucking insane. I had no idea it was so bad.

What is that ratio to ACTUAL money? How much does the debt outnumber our actual circulating currency?

Fractional reserve loaning is fucking out of control.

your so full of it, i don't know where to start.
lets just deal with the lie that the pentagon lost 2.2 trillion.
It's a lie -- all of the fighting since 911 has not even cost that much.

oh and by the way NONE of these bailouts were a necessity, keep kidding yourself to justify that you voted for a marxist.

@Saladin

The Fed only keeps track of M1 and M2 now. M1 is total currency + checkable deposits (money in your checking account). I think you're looking for the total currency, which is M0 (or the monetary base). Here's a graph from the St. Louis Fed.

http://research.stlouisfed.org/fred2/series/BASE

Here's a scarier look:

http://research.stlouisfed.org/publications/usfd/page3.pdf

Looks like it was about 900 billion last Septemper and now M0 is about 1.8 trillion. Within a few months the Fed doubled the monetary base. That's good for bankers, and really good for the Fed (but really, is there a difference?).

If you really want to put that into perspective, check out M3 in relation to M0 (M0 is the green on bottom):

http://upload.wikimedia.org/wikipedia/en/9/95/Components_of_the_United_States_mo...

I don't think this link is still up at the St. Louis Fed, but wanna see a trend of M0 from the fed's inception?:

http://www.jbs.org/images/stories/Article_Images/stlouisfedchart.jpg

The money multiplier can be described as m = 1/R, where R is the reserve requirement (10%, for example). Work through that, and the newly created 900 billion gets scary.

And I have to disagree with you -- cutting down the size of government is the only way we're going to get out of this mess. Government intervention only distorts the market more and slows the market's reallocation of the factors of production. Here's a good talk from Tom Woods on the depression from 1920-21: http://www.youtube.com/watch?v=czcUmnsprQI

Also, more spending did nothing for the great depression, but worsen it by creating a bigger debt. It was a reduction in government spending which pulled us out (not the war spending). Murray Rothbard has a lot to say on this topic.

your short sighted blaming management when this company was leeched to death by unions.
Any idea when these car companies last made a profit?

Montesooma...
You're absolutely right in that the unions have been a big part of this breakdown along with NAFTA and other trade concessions to foreign countries like China...

stripping them of govnment welfare? they are now property of the govnment and taxpayer.
If you believe this good, maybe you should go read some history about fascism in the ussr and germany.

yeah, because michael moore represents the type of American we should all strive to be. he's as worthless as the propoganda he spews.

Micheal Moore and Geraldo Rivera two peas in a pod...

Are you both opposed to high speed rail and job creation in Michigan?

Michael Moore? Fat slob who should be tried for treason- he hates the USA- he's the 90's version of "Hanoi Jane"
Hey, I'm all for job creation, but when Michael Moore talks about it, I change the channel....

Michael isn't a beauty queen but he is a great activist and a patriotic American. lol, If being fat makes you a bad American we are a country of bad people. He cares about what is happening, and is proposing a solution - what are you guys doing about it?

Denica -- moore is not a good american, he would love nothing better than for america to fail.
That is why he pushes socialism so hard.
This may surprise you dear, but there are people who's mission is to break americas back by loading it down with wellfare recipients (This just happens to be in the mission statement of A.C.O.R.N) the which taxpayers continue to support because they do the dirty work for politicians.

It's too bad that people's opinions of Michael Moore overshadow a legitimate point he made about public transportation, job stimulus, and eco-friendly alternatives.

I believe you, but I don't think it's a conspiracy. Conspiracy is speculation. That stuff just about happened, from watching Penn and Teller and who killed the electric care, it's pretty much a reality.

I believe Jay Leno also has a completely ELECTRIC car from the twenties... it was built buy Henry Ford for his wife... I saw it on Planet Green with Ed Bagley Jr..the auto companies try to act like Oh, we have a partially electric car, but we really don' know how to go any further with this idea.. try taking a peek at history and do what the world wants you to do... GET US OFF OIL!!
here is an excerpt from a piece Jay Leno wrote
" All the current interest in hybrids and other vehicles with some sort of alternative powertrain is kind of amusing to me. Oh, don't get me wrong. I'm all for pursuing other ways to power cars. (Click here to visit Jay's Green Garage!) But I smile because I've owned three alternative energy cars for years. The newest was built in 1925; the oldest, 1909. Each one is a rolling manifestation of a brilliant idea. Sadly, they were all way ahead of their time and all three makes failed.

My Baker Electric dates back nearly 100 years — and it's a late model. By then, the company had been selling electrics for more than a decade. Unlike other early cars, the Baker Electric needed no cranking, had no gasoline smell and was essentially maintenance-free. Not surprisingly, it was marketed to women. The interior of my Baker is rather froufrou, complete with a little makeup kit. Even though it's almost a century old, the car drives totally silently — like any modern electric vehicle. In fact, when I take it up into the hills, I have to be extra careful of deer. They usually just stand there and look in the windows, which makes the Baker my wife Mavis's favorite car. "

but according to current auto makers this is completely impossible to do within the next fifty years even??

im a conspiracy theorists. only because i can clearly see the conspirators conspiring to rape the land of its good and plenty. big biz, banks, irs, the fascist govt, etc. the veil has been pulled away from my eyes.

Let me guess, you don't understand that the money permitted enough time to alter/structure to permit a chapter 11.

wait...I bet you don't know the difference between a chapter 11 and a chapter 7.

who fucking cares what the difference between chapter 11 and 7 is. I have not seen a bailout for college kids, the ones who DESERVE and NEED the help,and who will actually go on to help us change things in the future, but no we can say screw those who are trying to get educated... let's help the idiots over at GM who can't pull their heads out of their butts long enough to figure out that the cars they are building are outdated... try going green, try electric cars or something... if you don't grow and change with the times your company deserves to die off. I don't even buy domestic automobiles anyway, they suck, and until they improve they won't see a dime of my money...

Wow...ALLNATURALVEGANS,

you addressed bankruptcy, lack of understanding of said concept, education policy, allocation of resources, sex, intelligence, anatomy, business strategy, comparative technology, basic economic assumptions, and your future buying practices all without the use of paragraphs, sentence structure or other useless English niceties.

I agree w/ your statement that the college kids/recent grads need help.....

BTW, Beth you need to chill a bit.

your forgetting about the added benefit of the govnments new position of controling what kind of cars can be made and sold. FASCISM!
maybe the new cars will be a hit like the volkswagen was in germany.

Now the Obama's running GM...he will make up rules as he goes (you know, the stupid environmental kind) that will benefit "his" company and make it more difficult for the foreign competition. In the end, only the consumer gets screwed.