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You Just Gave $2,000,000,000 More to General Motors

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April 24, 2009 – Comments (8) | RELATED TICKERS: GM

Pretty please, make a profit?

The government is taking a new strategy in its quest to waterboard a profit out of GM, or else!

GM: Or else what?

Treasury: Or else we'll give you more money, that's what!

The Treasury announced today that it will lend GM another $2B in an effort to.. ahem... kickstart the ailing automaker.  Excuse me.  I just threw up a little bit in my mouth.

The loan pushes the total amount of GM's government aid to $15.4 billion after the company said it would need more money in the second quarter to stay afloat.

You Can't Hope For Profits

Let us examine a case where two people are engaged in a credit relationship. Let's call them George and Jim.  George runs an unprofitable business, but has an excellent plan for returning to profitability. Jim steps in and lends capital to George's operation in hopes of a greater return.  The terms are set according to a private contract betwen Jim and George.  This is simple stuff.  We know what happens if George defaults.  We know Jim's motives and can calculate his expected return, George's credit worthiness, etc.

Suppose however, that Jim decides that George is not profitable and likely never will be or perhaps George does not want to pay the interest level that Jim requires to ensure profitibality. What then?  Should George be able to engage a third party to act on Jim's behalf, to transfer Jim's wealth to George on the "promise" that Jim will eventually get his?  After all, it's for the "common good."

Or should we put George and this nefarious third party in jail for theft of Jim's property?

I'll Have A Side Order of Constitutional Apathy, Please

So much for the principles of a democratic republic. These bailout programs are insane when measured against any civilized standard, so don't even bother bringing up the Constitution (the dirtiest C-word around.)  Questions of Constitutioniality are always the first thing dismissed when the merits of government intervention are debated.  I would like to urge all my friends to start a game of one-ups-manship.  Anything they can do, we can do better.

It's The Oath I Took

How many here served in the military?  That's quite a few hands going up.  Remember your oath?  Let's refresh your memory and enlighten the Statists:

"I, _____, do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; and that I will obey the orders of the President of the United States and the orders of the officers appointed over me, according to regulations and the Uniform Code of Military Justice. So help me God." (Title 10, US Code; Act of 5 May 1960 replacing the wording first adopted in 1789, with amendment effective 5 October 1962).

You didn't swear allegiance to the Republican Party. You didn't swear allegiance to the Democratic Party.  You didn't swear to AIG or GM or Wall Street. Notice also, that your orders to obey the President only apply when they accord to the UCMJ. I don't remember the UCMJ class on bailout support, so I'm guessing there isn't one.

Don't Enlist, Withdraw

The government has trampled your Constitution.  The public seems to care little for it so long as the Handout State continues to grow.  So why are you serving?  Let the New Age Volunteers lead the new revolution.  Hey, why not let the little community planners get their hands dirty for once?  Let's see how they like facing rounds coming down range.  Until things change (yep, there's that word again), it's time to withdraw.  No more protest.  No more outrage.  Just withdraw.  Advise your kids and grandkids.  Tell them the truth: 

"There's no Constitution anymore, Son. They destroyed it. They called it a living document, and in doing so, killed it. Don't bother fighting for something that's already dead."

Don't Fight The Fight You Can't Win

You can't beat the bailouts, the government expansion, the endless threats against your liberty, and the constant bombardment of misinformation and propaganda. You lost your power years ago. They took it when you stepped in that ballot box and voted for the lessor of two evils.  We tried to warn you but you didn't want to hear it.  It was always about the other guy. He's so awful.  Yeah, my guy is bad, but that other guy is really bad.  I remember telling you that, despite your noble intentions, you were still supporting evil. Dejected and despondent, you vaguely succumbed to duty, unaware that your duty was to serve the State. The chickens are coming home to roost now.  It's too late to stop it. 

I Know Where I Was The Last Eight Years

"Where were you the last eight years when Bush was wasting billions, starting wars, and taking away our liberties?"

Right beside you, my friend, fighting him every step of the way.  I kept fighting because I knew the fight didn't end at the ballot box.  I kept fighting for you because I thought you were fighting for me.  I thought we were brothers and sisters in this war.  It turns out, you were fighting for yourself.  Now that the election is over, you've got your little piece of the pie (and what a tiny little crumb it is!) Now you're happy and content.  Suddenly I'm your enemy because I think the fight isn't over. 

I Don't Want To Fight You. You Can't Win Anyway

The expansion of the State into every aspect of human life is untenable. It can only come about by the complete submission of human will and human intellect.  I know of no religion that has ever brought about a submission on the scale envisioned by the modern day prophets.  It violates every principle of economics and human nature.  It is going to fail and the end result will be violence unprecedented in the history of America.  Man has never become a slave voluntarily and modern man has tools to resist slavery that his ancestors could only dream of. 

Brothers and Sisters, Don't Buy American, Buy Your Freedom

There is one way we can win. It's a step towards victory. We can stimulate our economy.  First, pay off all your debt, even your mortgage. Don't invest another penny in anybody until you have invested fully in your own future.  Put everything you own into yourself.  Debt freedom is the answer.  The State's power over you is your debt.  Without debt, you can stop working.  You can go on strike.  You can tell them to look elsewhere for revenue.  You can tell them that you will no longer be their slave. 

Have you ever jumped out of an airplane?  Can you describe the feeling when you are in free fall?  You are untouchable. You are in complete control (granted that you packed your own chute =D). That's what it feels like to be debt free.  You'll never get that free in America - not with property taxes - but you can get close.  You can bungee jump.

It's a step.  Take that step.  Buy your freedom.

David in Qatar

8 Comments – Post Your Own

#1) On April 24, 2009 at 7:11 PM, checklist34 (99.73) wrote:

the value of GM, Ford, and Chrysler is not something that can be measured in terms of jobs or money.  The recent resurgence of the American auto industry in terms of quality, design and performance came a bit too late, with some misplaced energies (trucks just when trucks were falling out of favor), and ran into the worst car sales market of all time, and thats all too bad.

But keep them alive, allow them to complete the tasks of breaking free of the union stranglehold, returning to the top of the automotive heap, and they will bring a value to the country far beyond jobs and income.  They will once again become a source of national pride. 

Particularily if domestic brands rise to the front of the "green" vehicle market as Obama has hoped.  THAT, my fine fellow fools, would be a HUGE thing for this country.  Because the liberal component of the nation tends to be very, very anti-american, and if the greenest vehicles they had avaialble to them were American it might begin to decay the trend of them being so anti-american, which might begin to stop the rift between liberal and conversative/libertarian.  It might stem the tide of their desire to harm and see harmed anything clasically american.  And that would be a very good thing.

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#2) On April 24, 2009 at 7:19 PM, whereaminow (< 20) wrote:

checklist34

There is so much we agree on (like your support for the LP), but I'm sorry this isn't one.  Others survived the downturn in the economy.  Lots of businesses survived. Some of us prospered.  We don't have outrageous debt and we don't have a track record of bad business decisions.  Let the entrepreneurs that are successful, innovative, and responsible pick up GM's carcass and run with it.

If you want greener technology and innovative solutions, that's where you'll get them.  You want get anything from GM except more debt, more waste, more fraud, and more violations of the Constitution, private property, and liberty.

David in Qatar

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#3) On April 24, 2009 at 9:06 PM, cbwang888 (25.56) wrote:

USD is trashed. Treasury can give whatever they want to whoever. Fed will print whatever amount of UDS  to buy Treasury-bonds.

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#4) On April 25, 2009 at 3:34 PM, SideShowMel0329 (47.30) wrote:

It's hard to tell whether or not this is a good idea. I think that spending money and running a deficit during a recession is a good idea, but have we gone too far? Even some Keynesians are starting to say yes.

I can't convince myself that helping GM will be profitable in the long run. They've made too many bad business mistakes in the past and they're in a deep debt hole.

But the future of the automotive companies look promising. As checklist34 said, green technology will be the future of energy whether we like it or not. If the U.S. could be pioneer new green technologies, we would quickly catch up with the rest of the world both technologically and economically.

Also, car companies (mostly foreign ones) have been leading the way in robotics research, another technological step humanity will eventually take. I know Honda has already designed the infamous robot ASIMO. Can the U.S. follow suit?

Anyway,  what's done is done. I have a feeling that we won't be seeing much success with GM though.

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#5) On April 25, 2009 at 6:09 PM, bostoncelitcs (50.35) wrote:

It's amazing how quiet Mr. Romney is on these bailouts of the our US automakers seeing his father, George Romney, was the former 3 time Governor of Michigan and VP at AMC.  You figure he would have his former company Bain Capital "buy out" GM or Chrysler.....that is the way "capitalism" is supposed to work.

Either that or we should have our government forego the "tax-exempt" status of instutions such as the Mormon Church and the Church of Scientology if they are going to fund anti-prop8 campaigns in California.

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#6) On April 27, 2009 at 2:36 PM, nzsvz9 (< 20) wrote:

David,

As one of the last people actually still working for General Motors, this is a very tough subject for me personally, as I look at GM's situation, being a libertarian at heart.

GM does not operate in a free economy. We have been regulated in the extreme by interventionists in the government in very costly ways. Cafe, safety standards, compliance reporting, and much more than can fit in a posting. Government tells us what we can build by regulating what comes out the tailpipe and how many miles to the gallon each vehicle needs to get.

The Federal government enacted pension funding rules after the pensions were established for the employees in both the union and salaried workers. Ex-post-facto they changed the pension and accounting rules requiring GM to FULLY FUND pensions when they don't require it themselves for Social Security. There is over $90B in the GM pension funds right now. This was siphoned out of operations. Sarbanes-Oxly compliance was a huge cost to us - gyrations in regulations ALWAYS causes huge compliance costs by business. As (once) the largest corporation in the world ... radical change has a high cost. Government ex-post-facto change is even worse because you now have to get yourself out of a hole.

The financial crisis was NOT created by GM, it has happened in the larger economy, and has absolutely slammed both GM and our independent dealers. The financing arm GMAC was so polluted by the mortgage business that they stopped lending to borrowers with a credit score of less than 700 in the fall. We lost 40% of sales due to this lack of financing. The financial mess hit us hard - after mortgages - as the second largest purchase people make after their home -- which was not GM's doing (read on).

Yes we made deals with the unions to pay wages and benefits, which in the last 3 contracts (and contract renegotiations) have been reduced and the gaps to Asian/Eurpoean transplants has been eliminated. It was told to me that repackaging mortgages as debt securities was pioneered by GMAC mortgage 10 years ago ... and I don't know if that's true (I've been trying to find out), but if it is ... I'd like to apologize to every American right now.

Yes, we were making money on trucks, then oil goes to $4 per gallon in under 1 year. Our business engineers new products over a 3 year period (down from 5 year cycle 10 years ago) and updated products in 18 months ... but these periods are too long for these kinds of "impulse functions" in the greater economy. When we can work in between all this we make some great cars and truskc (Solstice, Enclave, Corvette ... and so on, take a look at the CTS - nice).

To say GM doesn't innovate of make cars Americans want, is not true. OnStar. Volt. EV1. Hybrid Tahoe (I drove one for a few weeks and it purrs). We win quality, durability, and reliability awards (J.D. Power, Consumer Reports, J.D. Polk et. al - had car of the year and truck of the year in 2008, green vehicle of the year in 2009 ... and the list is long ...) but we have the sins of 20 years of horrible cars ... from 1975-1995.

Now we are going to shed Pontiac, SAAB, Hummer, Saturn ... and go down to 2M cars per year in North America. The government task force is requiring us to do this directly now -- this was not our prefered plan.

BTW: We sell a lot of GMC Yukons and Chevy Suburbans in UAE (and the whole middle east for that matter) ... they are the Texas-Oilman's Cadillac. Now they are Sheik-Transport machines.

I have a great deal of angst personally for where we are, on the dole, and I work hard each day toward the day we pay off each $ we've borrowed, but we have not come to this point in a free market, of only our own doing. I know I've rambled here - but a coming pay cut (May 1st) and having 30 people in our team of 200 let go last week, it's difficult at best to rationalize what I know is some great product with the interventions and sins of the past with the poitential for the future.

Known by my computer as nzsvz9

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#7) On April 27, 2009 at 2:46 PM, whereaminow (< 20) wrote:

nzsvz9,

Awesome insight. Thanks so much for sharing.  I wish you the best. 

David in Qatar 

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#8) On April 29, 2009 at 3:38 PM, dbjella (< 20) wrote:

Does anyone else think it is ironic that the "gov't" is "helping" GM and at the same time encouraging mass transit?  My head hurts everyday. 

I really wish I knew how much debt this country could take on before it collapses?  I am not a doomsayer by anymeans, but if individuals overextended themselves into our current crisis, then how is it ok that we do it at a federal level? 

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