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Welcome All! I'm a dreamer, I hope you are too! A Posse ad Esse, or From possibility to reality, is a general state of mind. I hope you'll share your possibilities with me as I will with you. Namaste~

December 4, 2008

What do you think?

I was thinking to myself yesterday, as I checked in on the news about the potential bailout...err credit availability and liquidity security measures (my words, not theirs.) that are pending approval of the Congress currently, what would happen if they didn't bail them out?

Let me first say that this is a thought process, not an opinion piece. I haven't made up my mind on this whole thing yet, whether I think it's a good idea or not that is. My first instinct tells me to say no, don't do it. I believe in the power of the free-market and that it can correct itself and fill a vacuum when it exists. If a business doesn't manage itself well or provide a product that is in demand, it goes away. But can a single industry be so integral to a nation's survival that allowing it to dissolve would surely doom the nation itself to mass economic suffering or would it's failure merely set the nation on a new and different path - one that could benefit it in the long run?

As I said, I don't have the answers, I won't even pretend that I do, but I do have some ideas that I'm trying to weigh as I come to grips with things. For instance, let's say the big 3 don't get the billions they are asking for. Now we have potentially a million people out of work, what do they do? What did people in that part of the country do before cars came along? Could they potentially fill the labor shortage we keep hearing about? You know, the one that warrants all of the undocumented laborers coming into the country because "no-one else will do these jobs." Maybe. And maybe with that kind of mass labor pool available to us, we could start to get some of our farms in that part of the world producing actual food, since one of the big arguments against sustainable agriculture is that it takes too much labor to do.

But would they be able to live in such a way? Are we headed for a deflationary spiral, that's what the Great Depression was thought of as, where the cost of goods will "reset" itself to a low enough level that a person could live respectably on less? Or perhaps the changes and challenges facing us will bring us through to a new place, where we don't think we need as much to feel like we're living respectably?

Another thought, the one that really ruffles my feathers, is that even though I, as previously mentioned, believe in the free-market I don't know how long I can continue it? Is it still free? I mean have we gotten to a point where politicians need so much money to get into position that the only way they can get it is by getting in bed with big corporations which by default makes them beholden to them later? How skewed are the rules when the bigger a corporation is, the more it is potentially able to get bailed out by the gov? Mom and pop don't get bailed out if they can't compete with Big box "X". How is that free market?

What's your opinion of these bailouts, both past and potential? I'm still agnostic on them. There's too much to take into consideration. I guess I'm just glad to have a good job, and to have a great bunch of "sounding boards" like you all out there...

I guess I've rambled on enough for one night... till next time.

9 comments:

Eric said...

Chrysler was in this same position in 1979/1980...They received the bailout which amounted to a quasi-bankruptcy. They saw a resurgence, but have never been accused of thriving. Now they've been sold twice (recently) and the new owners are holding out their hat because they're about to lose their investment. I personally don't see that the 1979/1980 bailout remedied their underlying problem.

Congressional Leaders recently asked the Big 3 to present plans to prove that they have a viable plan to achieve profitability. I find this interesting because if they actually had a good chance at profitability, they would be able to raise the needed funds from private equity groups. Perhaps the government is just an easier mark.

I (very) reluctantly supported the initial bailout (700B) this fall but I have grown increasingly skeptical of the continued spasms of all the king’s horses and all the king’s men.

I admire the efforts of those who see this effort as staving off another Great Depression. I also wonder whether the cure for rampant, impulsive debt is more of the same?

Garden4Life said...

I think with this whole situation, the American people lose either way in the long run. This is just a matter of "how" we are going to lose.
I watched the hearing yesterday with the Big 3 and I was surprisingly pleased with some of the questions Congress was asking like, "If we give you the money and people aren't buying, then what?" That doesn't solve anything and is part of the reason they are in the situation they are in now. Sales are horrible and probably will be for a long time. Restructuring or not, they will fail if there are no customers.

I think in any crisis we expect something needs to be done to "fix" it. I'm not sure if this one really can be fixed. But, I do believe in the talent and strength of Americans. Compared to the last Depression, we have many resources for the individual to rebuild their lives. Entrepreneurship, access to knowledge and material around the world, and the basic skills of being better educated than those who lived through the first Depression will be a huge boost to starting over.

It's definitely going to be a long haul and really don't think the bailout is going to help the auto industry. It's just really really scary to imagine millions of people out of work all at once.

farm mom said...

I'm not quite sure how I feel about it either. You'd think my position would be more solidified considering my husband's profession and how this waining economy has affected us personally in these last few months, but I'm afraid I'm just not sure how to sort through it all either. I get the argument that we just bailed out Wall St fat cats, we should bail out the guys who employ millions as well. But at the same time, I do not appreciate how complacent these companies have become in the making of their product or the strongarm approach that has been used to squash any environmental progress. Foreign companies are doing so much better at advancing their product in a positive direction, why can't our large companies do the same? I really hope that with or without the bailout, things will change for these companies, because I know many of their own workers would appreciate the ability to have a bit of pride in the product.

Chicago Mike said...

Hey P~,

I disagree with the financial sector bailout entirely. Notice that they escaped with almost NO scrutiny like the Big 3 are getting and got 10 TIMES the money. There is no oversight. So much of the money in the financial sector bailout was theoretical anyways. There are (again) 10 TIMES the GLOBAL GDP in value in derivatives out there. Get rid of derivatives, then let them sink.

Did people at AIG or Bear Stearns get pay cuts and reductions in their pensions or benefits?

With that said, the auto bailout is painful, but at least average people (a LOT of them) will benefit. So look at who benefits versus the costs and the auto bailout looks a lot better.

A screaming misnomer is "free market". We have not had a free market since 1929, or earlier. Farm subsidies, entitlements, corporate tax loopholes, unions, etc. All of these are minor forms of socialism, just ones we accept. If we had a real free market food would be many times more expensive, among many other things. Some things would be cheaper, and some things would simply be inaccesible. No insurance? No money? No healthcare. Not even emergency care. So truly free markets simply don't exist, and neither do we want them too.

One amusing example of this, most Fire Departments were not originally run by governments, but were a service you subscribed too. You put a little plaque on front of your house and if your dues were paid they saved your house. Now governments run fire protection, and nobody seems to mind. At the time government run fire protection was what we would call "a socialist proposal".

spelled with a K said...

methinks chicago mike might also be a Thom Hartmann listener. I'm inclined to agree.

And lest the name of the source of this idea should cause a stir, it has been suggested that should we bail out the automakers, it should come with a directive from we the people, i.e. the govt. You want the money? Fine, but you are going to put all those factories to work on making modern mass transit and other elements of the new green economy, and oh by the way, no moving your factories to foreign countries, and no cutting benefits to workers, you've been doing that for close to 30 years, and guess what? It aint workin.

Chicago Mike said...

Hello Spelled with a K,

I haven't heard of Thom Hartmann, I am an iPod/NPR guy, but I will check him out. Maybe he has a podcast?

And I totally agree with you on those conditions for the auto companies.

What seems bizarre, but possible, couldn't you actually buy those companies with less money based on their stock price? Maybe "We The People" should buy them target them to our will, and resell them.

Eric - Didn't Chrysler pay that back? And after almost thirty years I am willing to bet that the US Govt has gotten many times their money back in taxes, etc.

Marianna said...

My personal opinion of all of it is that we are delaying the inevitable and in the process accruing (sp?) debt on the backs of future generations that will deeply affect their lives.

I have no doubt that the failure of GM or Ford or Chrysler would be devastating to the middle section of our country-Michigan, Indiana and Ohio in particular. The simple fact of it is poor decisions have consequences and those consequences must be paid.

P~ said...

So many ideas...I'm glad to get the input. It's one of those things that has so many repercussions either way that it's hard to decide which is more important. I guess I would say I lean toward the let them be as they may be, but I just don't know. The workers are really the ones that would end up suffering as most of them (read: none of them) have millions set aside to cushion the fall.
Thanks again for the input. And for all being so civil about it. It's one of those issues that is easy to get heated about.
P~

Anonymous said...

I am very late in commenting on this post, but here goes. While earning my business admin. degree, I took a few different classes on economics. While I am no where near an expert on the subject, I do understand the basics. While in one of these classes, the question was raised as to why the government subsidizes farms instead of just letting them succeed or fail on thier own. The answer is national security. If we were to go to war with countries that we import food from, we would obviously not be able to import that food anymore, and if we hadn't kept farms going by subsidizing them, then we would lose the ability to produce food for ourselves if we had to. The same goes for vehicles. If we were to go to war with countries that we import vwhicles from, we would be in a bad position without the means to produce vehicles for ourselves. I am sure that this isn't the *only* reason the bailout has been proposed, but it is something to take into consideration.