DETROIT—The General Motors Corporation announced Monday that it has covered its main production plant with a 500,000-square-foot blue tarp until it can get some revenue together to work on its cars again. "The rear-axle assembly line is all out of whack, and the carburetor department needs a complete rebuild," CEO G. Richard Wagoner, Jr. said while wiping his hands with an oily rag. "It's going to be at least a $50 billion job. Goddamn piece of sh*t American car industry." According to Wagoner, the automotive giant spent its last $18 on cinder blocks to help secure the tarp. [more]
[Personally, I don't believe there's much of a chance for the U.S. gov't to once again confiscate privately held gold. It was done by FDR to take the U.S. off of the gold standard. Since the U.S. isn't on the gold standard anymore, there's little reason for them to confiscate gold now, in my opinion.] [more]
“There’s more energy out there than anyone can handle,” Jon Auspitz, president of Wham Food and Beverage Company, said. “I don’t have to tell you how many brands there are. It’s crazy.” [more]
[This is going to take some time for me to go through all of this, but I thought all the gold and silver bugs would find this interesting, and would likely be able to agree or disagree with it or pick out any flaws in logic long before I will.] [more]
As the Federal bailout bonanza prepares to spread beyond the mortgage and financial sectors to fill Detroit's depleted coffers, few economic or policy analysts have spared a thought for the destitution of the U.S. government itself. Put simply, our government doesn't have enough spare cash to bailout a lemonade stand let alone a bloated and failing industry that is losing tens of billions of dollars per month. Washington can only offer funds that it has borrowed from abroad or printed. Unfortunately, the nation is in the grips of a delusion that money derived from these sources has the power to heal. But history has clearly shown that borrowed or printed money only has the power to destroy.
The argument that energizes the pro-Detroit camp is that the government should extend the same courtesy to the rank and file auto workers that it lavished upon the fat cats of Wall Street. While two wrongs certainly do not make a right, the fact remains that the Wall Street firms are still floundering despite the bailouts. What's worse, the money spent was either printed or borrowed from abroad. Both options are destructive to America.
When it comes to bailouts, the real discussions are not centered in Washington but rather in Beijing, Tokyo, and Riyadh. With no money of our own, our ability to bailout our own citizens is completely dependent on the world's willingness to foot the bill. While I am sure that Bush and Paulson are doing their best to convince the world that open ended financing of the United States is in the global interest, my guess is that, unlike Congress, our foreign creditors will see through the self-serving nature of our plea.
Like any bailout, our foreign creditors should consider the moral hazard of rewarding bad behavior, and the old investment adage of not throwing good money after bad. By continuing to "lend" us money, the world is merely delaying the necessary rebalancing of our upside down economy. By continuing to subsidize our reckless and outsized consumption, the world merely delays the inevitable re-balancing and exacerbates the underlying problem at the root of the current global financial crisis.
If Washington bails out General Motors, the funds will never be recovered. GM will simply burn through the bailout money and then be back for more. Talk of designing a new fleet of "green" cars that will pave the way to profitability by spurring a new buying spree is simply delusional. Given the staggering "legacy" costs of health care and pensions for millions of current and former workers, Detroit cannot produce cars profitably. Unless these costs are seriously brought down, and there is very little chance that they will be, Detroit will remain a bottomless money pit.
Similarly any money that the world lends to America to finance more consumption will never be repaid. We will simply blow through it, and be back, hat in hand, begging for more. As we painfully learned in the housing bust, lending people money that they cannot pay back makes no sense. This applies equally to foreign central banks lending to America as it does to commercial banks lending to homeowners.
So for the same reasons that Washington should not bail out General Motors, the world should not bailout America. Like GM, our economy is in desperate need of a restructuring. Spending must be replaced with savings, and consumption with production. The service sector must shrink and manufacturing must expand to fill the void. The dollar must fall, wages in America must be brought down to a competitive level, and hopefully government spending and burdensome regulation can be reduced.
This transformation will not be fun, but it is necessary. Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base. Only by swallowing this tough medicine now will our sick economy ever recover. By accepting a lower standard of living today, we will eventually be rewarded with a higher one tomorrow. [more]
Thursday, November 20, 2008 10:13 AM
By: Dan Weil [more]
By John Browne - Euro Pacific Capital [more]
Why Gold Is Down, But You Can't Get Your Hands on Any
At first glance, it appears as if the gold bugs, those bullish on gold, have been stepped on this year. Spot gold is down nearly 30% from its peak of $1033 an ounce set earlier in the year. [more]
Freddie Mac could post losses totaling $20 billion to $40 billion in 2009, hurt by higher credit costs and write-downs in mortgage assets, an analyst at Friedman Billings Ramsey said. [more]
The announcement of a massive stimulus package of almost $600 billion shows that China means business not just in reviving, but also in rejuvenating its economy. [more]
Hopes for the Future
With the election behind us, our country turns hopeful eyes to the future. I have a few hopes of my own. [more]
Doug Fischer, Canwest News Service Published: Wednesday, November 05, 2008
OTTAWA - The insatiable demand for scotch whisky in China, India and Russia has tipped three popular brands from the shelves of Ontario liquor stores, and likely will drive up the prices of popular single-malts in several provinces. [more]
The Moral Hazard of Regulation
Since the bailout bill passed, I have been frequently disturbed to hear “experts” wrongly blaming the free market for our recent economic problems and calling for more regulation. In fact, further regulation can only make things worse. [more]
Pepsi - Pepco Holdings Inc. late Monday reported its third-quarter net income fell to $118.8 million, or 59 cents a share, from $167.6 million, or 87 cents a share, in the same quarter a year ago. "During the third quarter, our results were adversely affected by lower sales in our Power Delivery business caused by both milder weather and lower non-weather related customer usage," said Chairman and Chief Executive Dennis Wraase, in a statement. Operating revenue increased to $3.06 billion from $2.77 billion, said the power provider. Analysts surveyed by FactSet had forecast earnings of 71 cents a share.
Copyright © 2008 MarketWatch, Inc. [more]
Survey finds that falling consumer demand, rising unemployment and ongoing credit crunch will fuel downturn through end of next year.
NEW YORK (CNNMoney.com) -- A survey of top economists released Monday shows that the vast majority of them believe the economy has fallen into a recession that will continue throughout all of 2009. [more]