Must Read Note
The wonderful site Housing Panic was one of the first real voices that tried to warn us all about the coming home bubble bust. The author named Keith did a great job and was an inspiration for me to start my own site. Housing Panic has decided to move on from the "all housing all the time" theme and who could blame him? Keith has a new site titled aptly "Soot and Ashes" which carries a ton of economic info as well as social commentary and political type stuff. While I cannot advise on the site for social/political stuff the economic content is still top notch and the new site is available on the blogroll. If anyone has a really great site that they visit every day, leave the name in the comments as I want to add 2-3 more sites to the roll.
GM's Fate Now in the Hands of the Congress; You Always Wanted to Own an Auto Maker, Yes?
Today GM came out with what can only be termed a bomb of an earnings statement. They basically lost 2 times more than the company market cap. And no, do not ask me how that is possible, I have no idea! The leaders of GM at least were fair and honest about their future prospects, which I can paraphrase here:
"If we do not get a government bailout by the end of January, we are done. Can you let that happen? Do you feel lucky? Punks!?"
That about sums it up. Management has damaged the firm so badly that they are not even pretending they can go on without being backed by the government. Sad times indeed.
Instead of A needed debate about IF GM should be saved, it seems most are already planning out HOW they will be saved. It is my strongest wish that the new president Obama will have good advisers and instead of running around like chickens without heads throwing money at everything, they take a minute or two to think.
We can get cars, GM is not unique in that field. The workers they employ are screwed. No way around that. The screwing can commence immediately, or be delayed 1,2 maybe 5 years. Pensions (as discussed last night), medical costs, and inflated wages are too much for the auto maker to overcome, and thus will not. Add in all the financing problems they have (GMAC made mortgages? Oh man) and GM cannot survive.
So do you want to own a car manufacturer? No? Too bad. Soon we will get the old "What is good for GM is good for America" line. Too bad BANKRUPTCY is the best case for both GM and the US. GM will get it's bailout, and it will be a long and never ending one. Look at GM's (or Ford's) operation and no one time cash injection will work. We are about to be subjected to an open ended money operation (Iraq anyone?) with no "exit" strategy. I really cannot say anything else about this as I will puke.
Getting Stimulus Under a TARP
I do appreciate the resolve of our government. After sending out stimulus checks a while back that had no effect on anything, they have decided that "This time it's different" and are ready to go at it again. Following the advice of Krugman et al (it has been so useful thus far) the new plan is the old plan: send out checks of $300-$600 so you look like you have a clue about what to do. I cannot wrap my head around this logic: Tax cuts = BAD; Stimulus Checks where you get your own money back = GOOD. Maybe they will send out a brochure with the explanation.
We have a TARP to buy bad assets, buy homes, pay Wall Street Bonuses, and give cash to insolvent banks. We have Fannie and Freddie buying every mortgage under the sun. We have the FED expanding it's balance sheet by 150% to make cash loans to banks. We are going to have a stimulus check sent out. We are going to give GM and Ford lifelong money infusions. We are guaranteeing everything under the sun.
And what is the driving force for all this?
-Unemployment has gone from 5.5% to 6.5% in a year
-Consumer spending has gone down by 3.1% annualized
-The stock markets are off around 25-35% from the highs
-Bank closures, while elevated, are nowhere near the last banking collapse number
-GDP may have contracted 0.3-1%
I mean faced with those kind of Depression Era stats, it is easy to see why all the panic is flying around!
Maybe I am missing something, I fully admit I am not an expert, but the current state of things does not seem so dire, so desperate that the powers that be need pull out all the stops and bail out the universe. Seriously, if all this is done now, what happens if unemployment goes to 10% What if GDP goes negative 2%-3%? Is there anything they could do?
Maybe that is why there is this mad rush. The economy is so fragile that even a slight hiccup can be terminal. You may want to ask yourself if our economy is that easily broken, how long until that happens?
Friday Night Entertainment
It is Friday, and here at Economic Disconnect we believe in getting excited over raking leaves, I mean over the weekend!
"I don't like you very much, Tom, as you have probably realized, but up to now you haven't had to give much of a rip how I felt. But I'm out of your filing cabinet now, Tom. Have you got it? I'm not just a record you can lock up at three in the afternoon. Have you got it?" My voice was rising into a scream. "HAVE YOU GOT THAT, TOM? HAVE YOU INTERNALIZED THAT PARTICULAR FACT OF LIFE?"
"Yes, Charlie," he said with a deadly voice. ""I have it."
"No you don't, Tom. But you will. Before the day's over, we are going to understand all about the difference between people and pieces of paper in a file, and the difference between doing your job and getting jobbed. What do you think of that, Tommy, my man?"
-From the short story "Rage" by Stephen King, as Richard Bachman.
Found a YouTube clip of another great "Highlander" series fight. This one is between Duncan McCloud and his hated enemy Xavier St. Cloud, played by musician Roland Gift:
Music, Sweet Music
I love classic rock, but some of the older stuff can be, how shall I say it, in need of a little speeding up. Take the Buddy Holly song "Crying". For the film "La Bamba" a new mix was made and it is just right:
Hey, 1 Billion Elvis fans cannot be wrong! Take a listen to the cover of "My Way":
How about a bit of Golden Earring and "Radar Love":
Have a good night.