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The real reason that the Republicans are against the auto industry rescue is that they want bankruptcy so that the Big 3 corporations can get out their legal obligation to pay pensions and health-care for their retired workers (the weasel-word they use is "legacy costs")
The Big 3 made promises, now Republicans want them to break them. The unions have negotiated in good faith and agreed to accept lesser obligations so that the Big 3 can stay afloat. For the Republicans, the desire to screw the unions trumps everything, at considerable cost to the economy.
Barack Obama has the wits to structure a Big 3 rescue package that is good for the country and good for the workers. Better cars, high mileage standards, the works. Let us hope he gets a chance to influence the rescue package.
We can smooth the disruption of the automakers’ decline - but not for long. It is a hopeless cause - Detroit is dead.
The biggest problem Detroit auto makers have is their excessive compensation levels for workers and incompetent management.
It is hard to be competitive when your workers are paid about 60% more than your competitors pay their workers. You either charge much higher prices, or sell inferior goods at the same price (or a blend of the two).
A rock and a hard place comes to mind.
Cars will no longer be made by overpaid workers. The question is whose workers will build cars in the future.
Who will replace Detroit’s remaining market share?
There is nothing Obama can do to restore health to the big 3 because their cost structure is not viable. They pay their workers an average $72 per hour including benefits (about $140,000 per year).
The only thing that will keep them operating as they are now is to subsidize them like Amtrak at taxpayer expense.
Zephyr,
The workers are not overpaid, that is the lie that the propagandists are spreading.
The problem is that Big 3 management underfunded their pension plans, and count pension expenses against current worker hourly rates
Go back to the previous thread and read this comment (and the others), you will get the big picture:
Come on, anyone who is against the Wall Street bailout cannot support the automaker bailout in good conscience.
Please be consistent.
Ah, you posted the $72/hour propaganda number that Big 3 is spreading. They must be out in force all hour the wen and on conservative talk radio,
Like I said, go back to the previous thread and get the real story.
If the management has underfunded pension plans, the workers should litigate. Taxpayers should not have to intervene.
(typed to fast, trying again)
Zephyr,
Ah, you posted the $72/hour propaganda number that Big 3 is spreading. They must be out in force allover the Web, Fox and on conservative talk radio,
Like I said, go back to the previous thread and get the real story.
justme,
are you being cynical?
when you join a startup, the starup promises you many stock options, in full faith, and if it ever gets to IPO, you will reap handsome financial benefits, if everthing goes as rosy as they claim.
So now this startup is defunct, it cannot churn out anything that the customer wants and it is running out of cash flow, so if it lays you off, is it going back to its promise? Shouldn't every single employee realize there is a bankruptcy risk when they take up an employment?
Detroit workers just need to get real. Either they jump ship, move to TN or NC to work for Honda, Toyota, or they look for another job. Detroit is game over, just face it.
The last time I checked, Barrack Hoover Obama knows nothing about car manufacturing. He will probably save the big 3 by pumping money in them, just like we tried over and over again, but he will be able to do nothing to revive them.
The best way to revive the big 3 is to sell them to Toyota, if Toyota is stupid enough to take them over.
Justme, You can spin it all you like. The simple fact is that the big three have a labor cost structure equal to around $72 per hour worked. And this well above the labor cost of their competitors.
The sad irony is that GM has lost more money over the years than it would have taken to buy Toyota.
Zephyr,
oh no, if GM bought Toyota, then I don't have anything I want to buy then.
The only thing I am interested in GM is a second hand Hummer at a dirt cheap price, but I don't want it that badly.
Everything else at GM is just POS that I will never consider buying even if they give me 0% for 60 months.
If the detoit autoworkers are not overpaid then they have little to worry about. They can go work for someone else who is willing to pay them a comparable wage. They can thumb their nose at the incompetent management as they walk out.
OO,
Strawman argument. There are no startups with defined benefit pension plans, and people know full well that startups are risky. There is no comparison.
OO,
I'll bet that Barack Obama has more common sense and knowledge about building a sustainable car industry than all the Big 3 CEO s added together.
OO,
I agree. I am not suggesting that GM should have purchased TM - only that they could have with the money they lost. I too would mourn the destruction of TM by GM management.
I once bought a GM car. It was not so good. I have been very happy with Toyota cars.
I hope Obama has alot more sense than those buffoons. That is a very low standard.
The next big play is to short the Treasury.
But the problem is, when Treasury implodes, what currency do I hold? Is there any way to short the Treasury and get paid in another currency?
Wouldn't being short debt mean that the dollar was stronger?
kewp,
you believe that Treasury can implode without USD implosion at the same time? I'd like to know which country's government defaulted on their debt or had a near default event without the currency going poof?
How can we default on our debt when we own the printing press for the worlds reserve currency?
As long as your debt is issued in your own currency you can print your way out of debt. No need to outright default. But your currency would collapse in value.
More details emerging on SiPort CEO Killer:
Ex-SiPort engineer formally charged with murders; slain CEO's family gathers
http://www.mercurynews.com/ci_11023333
1. The engineer owns more than a dozen investment properties whose value has apparently diminished in the real estate crisis.
2. Karen Cai, a professional ping-pong player and a member of the San Jose-based Silicon Valley Chinese Engineers Association, who tried to shed light on a possible motive for the shootings. Cai, who first met Wu at a party ten years ago, said a mutual friend recently told her that Wu had often complained about his boss.
"Before, his boss was good,'' said Cai, apologizing for her English. "His current boss, no good for him.''
3. One coment in the forum states:
Initially, I felt some sympathy for the guy...after all, his wife was laid off by Sun a few months prior, and now the whole family was deprived of the only source of income a month before Christmas in a crashed economy. The reason and the circumstances under which he was fired also seemed kind of questionable. Well...that was before I found that he was just another scumbag real estate flipper who flipped out due to no gov't bailout and house values no longer doubling in value every 2-3 years. Realistically, this guy was probably in the hole by anywhere from $500K to over a mil. With 19 underwater properties, I can certainly see how his job performance would have suffered to the point where the management found it unacceptable. I totally feel the victim's family the and the perp's family who will have to deal with what he did as well as creditors pounding on the door day and night.
P.S. I hope he gets death penalty!
http://www.scea.org/web/index.asp
SCEA
Silicon Valley Chinese Engineers Association (SCEA) is a non-profit professional organization founded in 1989. Today, SCEA has over 6000 members, located in US, Europe and Asia. It has become the largest, the most prestigious and influential Chinese professional organization in the Silicon Valley as well as in US.
As long as your debt is issued in your own currency you can print your way out of debt. No need to outright default. But your currency would collapse in value.
Why? I think a more likely situation is foreigners use all those strong dollars they are holding to make us work for them.
http://www.fbi.gov/page2/may07/bank_robberies051607.htm
Wow 2 year old stats and stories. Here in Chicago, what is going on now with this??? I just went to the bank and they had the door locked until they could identify that they knew me and would then let me in. They said there have been over 7 bank hold ups in the last couple weeks. Where is this news?!?
http://www.fbi.gov/publications/bcs/bcs2006/bank_crime_2006.htm
Here is the last specific bank heist stats - glad its up to date!!
"Why? I think a more likely situation is foreigners use all those strong dollars they are holding to make us work for them."
If you run the printing press sufficiently to print your way out of debt you will get significant inflation. That is the point of the printing - to devalue the debt. And inflation is a decline in the value of the currency. So the holders of that debt end up with nearly worthless paper.
Yes, but aren't we issuing new debt as we are printing?
As long as people keep buying the debt we should be ok, right?
If you borrow, then you do not need to print. You are borrowing money that already exists.
The whole point of printing your way out of debt is that you don't have to borrow the money - you just print it. You can use your newly printed currency to directly pay off the debt.
This flood of currency diminishes or destroys the value of the money.
Alternatively you can use the printing press to fund the government. The amount printed will be equal to the amount spent by the government. If the government spends 20% of GDP and uses new money to fund this spending, then the value of each dollar will decline by 20%. Prices would rise by 25% (inflation of 25%).
Paul,
I live about 80 miles from Detroit. How nervous do you think I am about the Big 3 workers suddenly not having an income? I don't want any bailouts, but I also am now getting nervous.
Neutron,
Agreed. Potentially millions of people out of work is a recipe for unrest and violence.
This is getting ugly. The bad news is turning into a cacophony.
So much for a slow flog into a depression. Welcome to the digital age, where we can go from paradise to hell in 3 short months.
http://www.dqnews.com/News/California/Bay-Area/RRBay081119.aspx
Bay Area median price tumbles to $375K; sales reach high for '08
from that article...
"What happens next to housing will be determined by the fate of the economy, and especially the job market, as well as the outcome of recently announced efforts to curb foreclosures."
it's fucked for sure.
I think housing would be bottoming right now if they could have held the economy together. But then again, how do you hold the economy together when housing drops 40%?
The spiral is going to take this thing much farther than it should have. While I think it is worth cheering for a return for sound lending, reasonable prices, etc (good things), I still get the feeling that no one realizes how bad things are going to get.
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Perhaps the entire credit crunch could be fixed with very high interest rates. Currently, banks and other institutions have to compete with the suicidally low interest rates of the Fed and the Treasury bailout programs.
Say you're a bank and you know that a new mortgage loan has a 10% risk of default. Then you have to charge at least 10% to compensate for this risk before you can even begin to make a profit. But you can't charge 10%, because you're competing with the Fed's 2% rates, and the Fed is lending without regard to default risk. So you would be committing bank suicide to make loans in a market poisoned by the Fed's rates, knowing such loans will generate a large loss on average.
OK, the bank can get something from the defaulted loans by foreclosing and selling off the houses, but still, the point holds: the Fed is ruining the market for credit. It's kind of like American manufacturers being ruined by cheap Chinese imports, only it's American banks and savers being ruined from within our own country, by the Fed.
The directors of the Bank of England once bragged that a 10% interest rate could "draw gold from the moon". If it's credit we lack, let rates rise, and watch credit problems disappear.
Patrick
#housing