Living Car Free - Should we bail out the Big 3 carmakers?

Want to feel even worse?

Unemployment is still rising (http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&width=1000&height=600&preserve_ratio=true&s[1][id]=UNRATE); however, prices are are falling (http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&width=1000&height=600&preserve_ratio=true&s[1][id]=CPIAUCNS), which is great for them (not really a good thing for the nation as a whole...), unless you look at the price of food stuffs individually, which happens to rising more than before (http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&width=1000&height=600&preserve_ratio=true&s[1][id]=CPIUFDNS).

Seems to me food is pretty important for those laid off folk and it is just getting harder to have.

Deflation (http://www.nytimes.com/2008/11/20/business/economy/20econ.html?_r=1&hp=&adxnnl=1&pagewanted=2&adxnnlx=1227158082-ygZFDNVy74OoOSCxggIxbw) is the big fear right now. If prices get too low, it isn't worthwhile for companies to produce goods and services, so they lay off workers and set up a spiral into a depression.

This economy needs some big-time stimulating, and keeping manufacturers solvent is probably a good place to start.

I know deflation is bad, but I think people are overreacting as they normally do. Be that as it may, those overreacting people are the majority so it matters.

One way to counteract disinflation pressure is to boost the money supply which it seems the US is doing (http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&width=1000&height=600&preserve_ratio=true&s[1][id]=CURRENCY) and the whole bailout thing is in line with that.

However, theory seemed to fail in practice with Japan was facing similar problems when they hit a liquidity trap (http://en.wikipedia.org/wiki/Liquidity_trap) when their interest rates couldn't go down anymore.

Unfortunately, theories in economics seem to be more diverse and intricate than a football playbook.

From what I hear, there are economists out there that are really worried about that same thing happening here and that is probably reflected publicly as fear of deflation (http://gregmankiw.blogspot.com/2008/11/deflation-worries.html).

keeping manufacturers solvent is probably a good place to start.

Too bad the last sector bailed out responsible for helping prevent insolvency, even just as stop gap, seemed to not work as well as intended.

CNBC poll (http://www.cnbc.com/id/27802735), plenty of opinion there - vote to see results (keep in mind who are likely to be regulars that visit this site and this is not even a random sample of those people).

Optimistic view (http://www.cnbc.com/id/27803683/) of no bailout - kind of wrong with today's market movements (collapsed like a a CF bike vs. a bus...).

It has also been reported that Chrysler, LLC and GM might try to renew talks of merger. Probably not the best from the view of the workers.

Too bad the last sector bailed out responsible for helping prevent insolvency, even just as stop gap, seemed to not work as well as intended.

The financial sector bailout was a cash giveaway with no strings attached. They're sitting on the cash and buying each other out in order to push up their stock prices. An auto bailout should learn from this fiasco and include some reasonable conditions.

Unfortunately, I live in the Motorcity. For years due to the arrogance of the Detroit Three we do not have a public transportation system, other industries were discouraged by poor support from the governement, people who get 40.00 per hour for pushing a broom and a G.E.D. When we had a chance to develop a car that the American public could use in the 1980's The Detroit Three refused. The majority of people who live in Detroit can not afford a new car much less put gas in it. Without a plan to do something different, giving the Detroit Three 25 billion dollars will still lay off millions of people and still become bankrupt. Do I favor a bail out--well no I don't think so.

Gas, .69 cents, the price of a can of beans.

Some like to blame the automakers. When the stock market crashed, people stopped buying new cars. Are you going to keep manufacturing cars when noone believes they can afford to buy them? The more money we throw at the big three, the more money will be flushed down the drain.

Let them manufacture bicycles and windmills.

How to save the Motor City.. reasons for..
...

1....Three to fail would be catastrophic. The auto industry represents almost 4 percent of gross domestic product and 10 percent of industrial output by value. A study recently published by the Center for Automotive Research estimates that a collapse of the Big Three would eliminate nearly 3 million jobs in just the first year, as well as $21.1 billion in Social Security receipts and $24.7 billion in federal income tax payments. Bloomberg has reported that a collapse of GM alone could cost between $100 billion and $200 billion in government-funded benefits.

2. This figure greatly exceeds proposed bailout numbers.

A prepackaged Chapter 11 bankruptcy for GM is an option that has been floated consistently in op-ed pages, but it would be a risky move for the faltering auto giant. A prepackaged Chapter 11 filing in a different era would have allowed GM to restructure, protect itself from creditors and emerge leaner and more financially sound. But as The New Republic's Jonathan Cohn recently wrote, in order to become productive while in bankruptcy protection, GM would need to be able to buy materials and parts from suppliers on credit through Debtor-in-Possession loans. The current credit climate makes it unlikely that GM would find creditors willing to lend the funds necessary to continue operations. In this case, GM would be forced into a Chapter 7 situation--total liquidation.

snip..


http://www.thenation.com/doc/20081215/colon-margolies

How to save the Motor City.. reasons for..
...

1....Three to fail would be catastrophic. The auto industry represents almost 4 percent of gross domestic product and 10 percent of industrial output by value. A study recently published by the Center for Automotive Research estimates that a collapse of the Big Three would eliminate nearly 3 million jobs in just the first year, as well as $21.1 billion in Social Security receipts and $24.7 billion in federal income tax payments. Bloomberg has reported that a collapse of GM alone could cost between $100 billion and $200 billion in government-funded benefits.

2. This figure greatly exceeds proposed bailout numbers.

A prepackaged Chapter 11 bankruptcy for GM is an option that has been floated consistently in op-ed pages, but it would be a risky move for the faltering auto giant. A prepackaged Chapter 11 filing in a different era would have allowed GM to restructure, protect itself from creditors and emerge leaner and more financially sound. But as The New Republic's Jonathan Cohn recently wrote, in order to become productive while in bankruptcy protection, GM would need to be able to buy materials and parts from suppliers on credit through Debtor-in-Possession loans. The current credit climate makes it unlikely that GM would find creditors willing to lend the funds necessary to continue operations. In this case, GM would be forced into a Chapter 7 situation--total liquidation.

snip..


http://www.thenation.com/doc/20081215/colon-margolies

WHAT!!????

Who is claiming the Automobile represents 4% of USA's GROSS Domestic Product? Whoever it is is grotequely inflating numbers their benefit.

AND, if they are making that much money, shame on them for coming to the USA taxpayer for a handout.