Reinforcement of Failure...
Personally, I think that a bail out in any form on any industry is a reiforcement of FAILURE. If I do a bad job at work, I stop getting paid. Plain and simple. For some reason our govenment seems to see it some other way.
I can understand the bail out of the Financial Industry simply because we have to have a functioning economy to have anything at all. I also think that it can be argued either way. I have heard the argument that a bail out could do more harm than good, and of course I have heard the argument that it is absolutely required. When it comes to the economy there really is no way to tell for sure, you can only geuss.
There was a guy on the Daily Show the other night I think his name was Friedman who truly believed that economic bubbles were good for the economy.
Side Not. For those who do not know what an economic bubble is; it is when something grows incredibly fast and then crashes. For example the dot com bust a few years back.
This guy made some very good points but I found it hard to see how an economic bubble on the lending business could be good for the economy. One of the examples that he used was the railraod boom. This one made total sense. Years ago there were many companies, independent inverstors, and individuals that invested in the railroad industry. As a result companies like Great Northern, Burlington, and Sante Fe all recieved quite a bit of money from share holders and built a fantastic railroad structure. Eventually the railroad boom did crash and all those companies, independent investors, and individuals lost their money that they had invested in those companies. The three railroad companies were forced to merge to save themselves. For a little while there were two companies, one being Sante Fe and the other being Burlington Northern. Eventually they had to merge once more to create what we all know today as Burlington Norhtern Sante Fe (BNSF). As a result of this bubble we were left with an amazing railroad structure that we can now use to ship things accross the United States for a reasonably cheap price. He didnt really go into detail on how this kind of financial thinking could benefit the financial industry. I have done some independent research on this and I havent found much on how a bubble on the lending structure could be a good thing. Regardless thats not really what I am here to write about.
The last time I checked we live in a society that believes in a "free market". This was obviously ajusted pretty fast when a republican administration thought it was nessasary to perform a socialist move and bail out some specified companies (Ex. AIG).
Side Note. For those who dont know AIG is not a Financial Institution but an Insurance Company that has large stakes in Financial Institutions. Thus, is inextricably linked to the Financial Industry.
I can see why it needed to be done. We have to have confidence in our financial industry in order for it to work effectively. If people dont feel confident about investing they wont do it. Even though there is never any gaurentee when you invest people at least like to feel that way. To make a long story short, if confidence begins to wither the financial industry will go under.
So does GM deserve the same exeption that AIG and the Financial Industry received? I dont think so, I think that this is a defining moment for the US Government to "draw a line in the sand, over that line, YOU DO NOT..." The Big Lebowski. If we give it to them, who is next? The tax payers do not have the unlimited check book. It is not our fault that they have mismanaged and wrongly allocated their money and investments over the past 15 years. One of the main arguments that I have heard about this is how many jobs will be lost if we do not bail them out. I am sure that if we bail them out there will be MASSIVE lay offs. I have read that about 1/10 jobs is related to the auto industry; not to say that they wouldnt be effected by a chapter 11 of GM but they wouldnt nessasarily loose thier jobs over it. Im sure many of those jobs are car dealers who are quitting right now anyway, and lenders who are in the shitter already anyways. Nobody is buying cars right now. "Related" is a pretty loose term any how. Why bail out an industry that creates a product that nobody buys? It just doesnt seem logical to me.
GM reports that it will run out of cash in about nine months. I would say that regardless of how much money we give them they are pretty much screwed. They are burning 1 Billion in cash per week. Let me repeat that, 1 Billion per week. That is 52 Billion per year. If we give them 100 Billion that would last about 2 years, hardly enough time to turn their well being around. From what I can tell the collapse of this industry going to happen and there isnt much anyone can do to stop it. If we bail them out we are throwing our money away.
GM is trying to appear like AIG and the Financail Industry but Im not smelling it. They are not a completely nessasary component of our economy. They are a big component but they are not the foundation of it like AIG and the Financial Industry. Further more the problems that GM has are completely different from the problems that the Financial Industry has. The Financial Industry has a product that people still want. Money. People still want to take out mortgages and borrow money. People are not buying cars. The people who are buying cars certainly are not buying Cadillac Excalades. They are creating a product that is not selling. Would you invest your own money in this company? Do you think the govenment should? I wouldnt and I dont.
Back to the bubble theory. I think that the collapse of this industry is nessasary. It will force the United States to really have to recreate a new industry around new form of transportation. Meaning green technology. Cars that run off fusion reactors or some crazy futuristic shit I havent even heard of or hasnt been invented yet. This would create a new bubble of investments much like the railroads. Investors would throw money at it and ultimately loose it when they whole thing crashed; however, as a result we would get increadible technology being produced on an automotive infrastructure that was created by GM. Jobs would be created and financail lending would boom. Solutions for many more problems would arise out of the death of GM. Old companies have to die so new ones can grow and become stronger. Cant have life without death.
Things started to get kind of blurry towards the end. I hope this makes sense to some of you.
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