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bighead384
12-10-2008, 03:17 PM
What do you think of it?

HornyPope
12-11-2008, 10:48 AM
What do YOU think?

bighead384
12-11-2008, 11:59 AM
What do YOU think?

I don't see why it wouldn't work. If those companies went under, it would be devastating to our economy.

HornyPope
12-12-2008, 12:32 AM
I don't see why it wouldn't work. If those companies went under, it would be devastating to our economy.

But if you give them tax payers' money, you are encouraging inefficient companies. There is a reason these companies need a bailout and it's because they cannot compete with other car makers, and they cannot compete because they have an inferior product.

So why should tax money go towards helping companies who cannot produce a competitive product?

bighead384
12-12-2008, 12:48 AM
But if you give them tax payers' money, you are encouraging inefficient companies. There is a reason these companies need a bailout and it's because they cannot compete with other car makers, and they cannot compete because they have an inferior product.

So why should tax money go towards helping companies who cannot produce a competitive product?

That's a good point, but what are they consequences to letting those companies fail? They're vital to American economy.

Little_Miss_1565
12-12-2008, 08:39 AM
I think in this case the auto companies are going to have to agree to a lot of wage/benefit rollbacks and the government will need to step in and bail them out. Yes, they have been running stupidly and inefficiently for years -- just look at the wasteland that much of Michigan has become over the last few decades. Having seen the devastation firsthand, the auto companies cannot be allowed to fail or the consequences are unthinkable. Besides, there's also the issue of this being a major source of national pride. If we lose our automobile manufacturing business, that's one less durable good made on American soil, and we are one huge step closer to being owned by China.

Jesus
12-12-2008, 09:07 AM
Opposing any kind of bailout is quite crazy, unless your goal is increasing poverty and further damaging the US economy. The US has over 500k job losses a month now. Which will mean over 4 million before the stimulus will actually kick in. If you add 1 million job losses from the bankruptcy of the big 3 on top of the that you're making it way more difficult to get actually out of the recession (although depression would be a better word right now).

Is the current bailout plan the best? Obviously not, that would be some kind of chapter 11 bankruptcy which would allow for a complete reorganization of the companies and also of the mangement. It would also require the transfer of healthcare costs to the government via the introduction of universal healthcare as well as the direct assistance for pension funds and a guarantee of credit for the big 3 and their suppliers. This would allow them to be competitive again because the big 3 have legacy costs (like health care) that other carmakers in the US don't have because they haven't had manufacturing plants in the US for as long. So no need for cuts in wages or benefits. This is mostly a neo liberal and conservative lie to bash unions. Wages aren't significantly higher compared to the plants of foreigner carmakers. Legacy costs are, which is the result of a lack of social policy in the US. Anyway it's too late for the Chapter 11 option right now because it would take some time to arrange it. And it also makes too much sense so that it wouldn't have happened anyway. So you're left with the current bail out plan which is still better than doing nothing which would result in chapter 7 bankruptcy because of a lack of governement loan guarantees. Which would come at an obviously shitty time.

HornyPope
12-12-2008, 10:06 AM
That's a good point, but what are they consequences to letting those companies fail? They're vital to American economy. A large pool of unemployed people gives incentive to other efficient and competitive companies to install their factories (i.e. because there are more qualified people to hire, so the marginal product for a company is higher).


I think in this case the auto companies are going to have to agree to a lot of wage/benefit rollbacks and the government will need to step in and bail them out. Yes, they have been running stupidly and inefficiently for years -- just look at the wasteland that much of Michigan has become over the last few decades. Having seen the devastation firsthand, the auto companies cannot be allowed to fail or the consequences are unthinkable. Besides, there's also the issue of this being a major source of national pride. If we lose our automobile manufacturing business, that's one less durable good made on American soil, and we are one huge step closer to being owned by China. If they have been running stupidly and inefficiently for years, why would you encourage them? If they can't get a good product out, they will NOT BE COMPETITIVE within the auto manufacturing industry. If they are not competitive, they will not be self sufficient and they will require another bailout 7 years down the road.

National pride? You are proud to subsidize an inferior product for the sake of saying "ah, this is manufactured in America" ?


Opposing any kind of bailout is quite crazy, unless your goal is increasing poverty and further damaging the US economy. The US has over 500k job losses a month now. Which will mean over 4 million before the stimulus will actually kick in. If you add 1 million job losses from the bankruptcy of the big 3 on top of the that you're making it way more difficult to get actually out of the recession (although depression would be a better word right now). I'm not against increased government expenditure which is a must in any recession, I'm only against this money going to inherently crappy companies. I think the U.S. should pump money into sectors that are actually competitive. The U.S. should identify and encourage job growth in sectors where Americans have an advantage over other foreign companies.

Little_Miss_1565
12-12-2008, 02:53 PM
If there's something we've done historically well with, i.e. automobiles, that's having issue right now due to poor management for the last 20 years, I don't understand how it makes sense to scrap the whole thing when you can much more easily and with less fuss restructure it to be competitive and well-managed, nevermind save 3 million jobs. I'm not sure why you think other companies would be willing to hire these out of work car manufacturing employees -- they've been trained in a highly specialized way, the main points of which don't translate well to other industries, and besides we have a great deal of incentives in place right now for companies to move all their manufacturing to Mexico or even farther away. If there's something that is even partially made on American soil and the industry is in some way salvageable, I say it's worth the effort to do it.

bighead384
12-12-2008, 02:57 PM
I'm not against increased government expenditure which is a must in any recession, I'm only against this money going to inherently crappy companies. I think the U.S. should pump money into sectors that are actually competitive. The U.S. should identify and encourage job growth in sectors where Americans have an advantage over other foreign companies.

See, I've conversed with some conservative minded people who think that ALL bailouts only cause more inflation, and devalue our dollar, and ultimately cause our economy to get worse. They think that "ups and downs" are a normal part of the free market and we should just let it run it's course. Is there any validity to that idea? I tend to think that government aid programs can help in situations like this. Isn't that what happened with the New Deal programs during the Great Depression? I guess I'll learn more about this kinda stuff when I take my first economics course next semester.

OffspringHead
12-12-2008, 09:01 PM
I don't see why it wouldn't work. If those companies went under, it would be devastating to our economy.

No matter what, it's devastating to our economy.

- Bill is passed= More money that are coming out of the pockets of tax payers. That is less money people will be spending on luxury and possibly to some even necessities. Taxes are going to go way up from the Mortgage bailout. Another few billion will not help either. People already aren't spending. Spending is the only way to fix an economy. Putting your money away with thoughts of a depression coming will CAUSE the depression to come. How can an economy work without money being pumped into it?

- Bill is not passed= GM, Ford and Chrysler all go out of business. That is millions upon millions of jobs lost. That is a million cups of coffee that won't be purchased in the morning, a million bagels that won't be sold, a million lunches that won't be eaten, etc. Businesses all over the country will suffer. It's a domino effect.

These businesses have fucked us all over. The auto industry and the mortgage industries. They have played their dirty games in attempts to make more of a profit and look where it has gotten them. It has gotten them to a terrifying point in American History. Frozen markets, inflation, bankruptcies and unemployment.

You can't blame the government completely for this one. You CAN blame them for not taking action early but this is SUPPOSED to be a capitalist nation. The businesses should have done what needed to be done to stay in business without government aid. THEY took the risks so THEY shouldn't get a bailout. And then again some can say fuck that idea, we should have done something sooner to prevent this from happening.

I personally don't think we should bail them out. But i also think the opposite too. I'm mixed on the situation. These car companies didn't really do too much to stay in business. Like my economics teacher told us: He bought a Honda Odyssey 2 weeks ago instead of a Ford, GM, or Chrysler van because they weren't as cheap as the Honda was. If you're really going bankrupt, you really need to do EVERYTHING to stay in business. That means dropping prices to beat out your competitors. And I know that if we don't give them this bailout it will be disastrous for America and parts of the world but if we did bail them out, it would be disastrous as well. I think this is just something the world is going to have to sit through and learn from. No matter what, the outcomes will suck. Badly. All this is is a matter of which choice won't suck more.

RickyCrack
12-12-2008, 10:35 PM
I just dont care to see another michael Moore documentary

HornyPope
12-12-2008, 10:39 PM
If there's something we've done historically well with, i.e. automobiles, that's having issue right now due to poor management for the last 20 years, I don't understand how it makes sense to scrap the whole thing when you can much more easily and with less fuss restructure it to be competitive and well-managed, nevermind save 3 million jobs. It used to be the geographical positioning and access to huge American market, the relative skill of American workers and the relative abundance of capital were all major factors that gave American automakers a competitive advantage. A lot has changed since... today, consumers have easier access to foreign vehicles and parts thanks to much lower shipping costs (i think it's gone down to something like a 1/5th of its cost since 1980s!) and due to lower duty collected to imports. Also, due to technological advances in developing countries, there are many more automakers than before (more competition means lower profits).

People talk about how the car manufacturers can re-structure this business, but I don't know what makes them think so. Like I said, the U.S. simply doesn't have any advantages anymore. Even if they lowered their costs to that of Japanese makers by lowering wagers or suspending pension and medical plans, they still have an inferior product on their hands. So unless the Americans have some secret break-through in technology, the Americans will have to contend with a lower market share and this means closing redundant factories and shedding redundant jobs... it's life.


I'm not sure why you think other companies would be willing to hire these out of work car manufacturing employees -- they've been trained in a highly specialized way, the main points of which don't translate well to other industries, and besides we have a great deal of incentives in place right now for companies to move all their manufacturing to Mexico or even farther away. It'll be harder on the older folks, but the good and the young workers will get hired, don't you worry about them.


If there's something that is even partially made on American soil and the industry is in some way salvageable, I say it's worth the effort to do it. Do you even own a car? What I don't understand is why the hell do you volunteer to pay hundreds of dollars out of your pocket for the pride of having an American auto industry!? It's nationalism at its dumbest.


See, I've conversed with some conservative minded people who think that ALL bailouts only cause more inflation, and devalue our dollar, and ultimately cause our economy to get worse. They think that "ups and downs" are a normal part of the free market and we should just let it run it's course. Is there any validity to that idea? I tend to think that government aid programs can help in situations like this. Isn't that what happened with the New Deal programs during the Great Depression? I guess I'll learn more about this kinda stuff when I take my first economics course next semester. I think there are a number of school of thoughts but I don't think there is a consensus.... this is beyond my scope of knowledge. I know that in classic economics an increase in government expenditure is generally positive for two reasons: 1) it creates demand for goods and services and encourages production which creates employment 2) the taxes imposed on the consumers to finance the expenditure reduce the consumers' overall wealth and so the consumers choose to work longer hours, thereby increasing output in the economy

On the other hand, inflation and devaluation are not entirely bad either.

The only thing I can tell you with a certainty is that people who deal in absolutes are highly probable to be talking out of their ass. Unless they refer to a specific and limited economic model, the variables are too many to account for for such absolutist conclusions (such as 'ALL BAILOUTS ARE BAD'). Economics as a study of human behavior is a social science first and foremost, and there can be no facts in social science. There can be facts in economic MODELS, but these models don't necessarily translate in the Real world.

Good luck in your economics class!

Little_Miss_1565
12-12-2008, 11:09 PM
Do you even own a car? What I don't understand is why the hell do you volunteer to pay hundreds of dollars out of your pocket for the pride of having an American auto industry!? It's nationalism at its dumbest.

Used to. I live in New York now. And it's not simply a matter of pride, though that is part of it. I'm paying even more money out of my pocket for the privilege of having a bunch of coked-up Wall St financiers not think through ahead of time that shortselling stock and artificially inflating the securities funds would completely backfire and cause a global recession. If that is somehow excuseable, why shouldn't I back a bailout of something I actually care about?

HornyPope
12-12-2008, 11:15 PM
But see, Finance is actually an industry where Americans enjoy a competitive advantage and is sustainable on the long run. Furthermore, that money was necessary to prevent a run on the banks which would have led to a downfall in the entire American banking system... which is not necessary a bad thing cause... ANARKY... but yeah, the repercussions are somewhat more serious than the three million manufacturing jobs.

Little_Miss_1565
12-13-2008, 08:13 AM
The bailout was to create credit, not to stop a run on the banks. The FDIC exists to prevent runs on banks, so that point doesn't make sense. But for the rest of the finance industry, anything that causes a global depression does not strike me as a business model that is at all sustainable in the long run. The finance sector is restructuring and picking a new model to follow right now. That's why the market is having such incredible mood swings and erased the last 10 years of gains. Why not do the same for something that entire states have been built around supporting? My hometown economy will die without AM General/GM. The problem is there was no real reason for them in the past to innovate. Gas was less than half the price here than it was in Europe. People were still buying enormous SUVs. Now that this worldwide crisis has struck, it's given everyone a lot of the same immediate pressures to get with the times, as it were.

sKratch
12-13-2008, 09:57 AM
I don't understand why the bank bailout went like "lolz oops we made a booboo $700 billion plz?" and as I understand it, the auto bailout--which is a much, much smaller sum of money--comes with strict regulation and large concessions.

Also, I find it rather silly in principle that in the case of the banks we're bailing out companies for doing what they make all their money off of: people not being able to pay for shit. This isn't meant to be taken as too serious of a point.

I would love to see this problem solved in the manner we always force small countries to solve their economic crises with the IMF and world bank. Open up your trade! Remove tariffs! facepalm.

T-6005
12-13-2008, 10:45 AM
I would love to see this problem solved in the manner we always force small countries to solve their economic crises with the IMF and world bank. Open up your trade! Remove tariffs! facepalm.
Thank you for that. It's a fantastic image.

"But we can't payyyyy."
"Free Trade Zones FTW."

See, I've conversed with some conservative minded people who think that ALL bailouts only cause more inflation, and devalue our dollar, and ultimately cause our economy to get worse. They think that "ups and downs" are a normal part of the free market and we should just let it run it's course. Is there any validity to that idea? I tend to think that government aid programs can help in situations like this. Isn't that what happened with the New Deal programs during the Great Depression? I guess I'll learn more about this kinda stuff when I take my first economics course next semester.
Ups and downs are a normal part of the business cycle. After you go down a certain amount, however, it starts to become more than that - not to mention that I'm of the mind that it goes up and down specifically because of the way people react to it.

In any case, I doubt you'll learn all that much about this in your first class. Learning about inflation and credit and their effect on the monetary system and economy at large is without a doubt the single most frustrating thing I had to go through in my brief foray into Economics. It's part of the reason why I quit (but to be honest it's the only thing I secretly wished I'd learned more about out of all my Economics-oriented classes).

Simply put, almost everyone agrees that when more money is put into the economic system, there's more money to spend, so people will buy more and business will pick up again since they have money coming in. After that you have divergent schools of thought - the neoliberal school of thought is particularly frustrating, as they believe that without a completely free market the economy cannot be properly regulated. And yet their viewpoint is pretty much the dominant one in much of the corporate world right now.

I'd go into a long-winded rant about Milton Friedman, Argentina and the failure of neoliberalism at large, but it's a largely irrelevant rant - the point here is that it is theoretically a valid proposal that the government inject money into the economy. It allows businesses to have money coming in, it helps them pay their employees which increases the amount of disposable income people have, allowing them to spend more and kickstart the upswing of the business cycle. The truth, generally, is that the injection of money into the economy is being horribly mismanaged. Giving the money to companies whose policies first brought about this turn of events seems pretty crazy.

What I mean is Vlad is pretty much right in asking "why would you reward a company run inefficiently with more money, especially since it's more than likely that the company is run by neoliberals with a corporate mindset based on lowering costs, minimal government intervention and paying people as little as possible?"

Llamas
12-13-2008, 10:19 PM
The biggest reason I support the auto industry is because, if it fails, the cost of foreign cars is going to go wayyyy up because they won't have competition of low american car costs.

OffspringHead
12-13-2008, 10:34 PM
The biggest reason I support the auto industry is because, if it fails, the cost of foreign cars is going to go wayyyy up because they won't have competition of low american car costs.
Along with taxes and consumer goods.

HornyPope
12-13-2008, 11:52 PM
The bailout was to create credit, not to stop a run on the banks. The FDIC exists to prevent runs on banks, so that point doesn't make sense. The credit provided under the bailout was necessary for the banks to maintain their minimum deposit reserve. If that minimum wasn't met, not only couldn't the banks make any loans thereby dooming everybody to bankruptcy everyone who depended on the last-resort loan, but also the consumers would have rushed to withdraw their moneys and the financial system would have collapsed. The FDIC can cover one or two bank bankruptcies, it cannot handle a simultaneous collapse of most major American banks.


But for the rest of the finance industry, anything that causes a global depression does not strike me as a business model that is at all sustainable in the long run. The finance sector is restructuring and picking a new model to follow right now. That's why the market is having such incredible mood swings and erased the last 10 years of gains. The business model was bad, yes. The executives made terrible gambles and everybody suffered as a result. This is a classic case of piss-poor management. However, the financial industry as a whole--namely the stock exchange, investment, the loans and credit market, mergers and acquisitions etc.--has a very solid base. I mean, it's the foundation of our entire economic system. And the American banks and financial institutions are unambiguously the world-leaders in that field. So unless the entire financial system as we know it crushes to hell, which is not impossible actually, the Americans will continue making a lot of profit in that industry.


My hometown economy will die without AM General/GM. From an economic point of view, a government ought to take decisions that are best for the welfare of a nation as a whole and then it should worry about how to best distribute this welfare. Now subsidizing losing companies does NOT increase a nation's welfare (I can reference you an economic model if you like). Instead, they should invest money in hometowns such as yours to encourage the growth of industries with potential to succeed.

Edit:


I don't understand why the bank bailout went like "lolz oops we made a booboo $700 billion plz?" and as I understand it, the auto bailout--which is a much, much smaller sum of money--comes with strict regulation and large concessions. Because it's not always about size, Stephan. Sometimes it's also how you use it....

Jesus
12-14-2008, 03:20 PM
I'm not against increased government expenditure which is a must in any recession, I'm only against this money going to inherently crappy companies. I think the U.S. should pump money into sectors that are actually competitive. The U.S. should identify and encourage job growth in sectors where Americans have an advantage over other foreign companies.

I agree with that, in normal circumstances. Given the recession and there also being lag effect between the time a stimulus package is lauched and it to have any effect (give or take 10 months) it is wiser to do both. If you let the big 3 go bankrupt you wipe out any effect an Obama stimulus package might have for the next 2 years (which what most Republicans want, it makes sense for them politically).
I don't mind the big 3 going bankrupt in like 5-6 years or so then it won't matter that much anyway if a transition has been arranged. Chrysler more than likely will go bust anyway, regardless of a bailout. GM and Ford can be made competitive again, they have quite successful European divisions (especially Ford). They just need time to adjust technology used in those cars to models that fit American safety and environmental standards and also American taste. Another crucial factor is whether the Obama administration makes sure health care etc is provided by the government because that's a huge burden they carry compared to foreign manufactures with plants in the US who haven't been around for so long.


From an economic point of view, a government ought to take decisions that are best for the welfare of a nation as a whole and then it should worry about how to best distribute this welfare. Now subsidizing losing companies does NOT increase a nation's welfare (I can reference you an economic model if you like). Instead, they should invest money in hometowns such as yours to encourage the growth of industries with potential to succeed.
That's one economic point of view, not the economic point of view. It's difficult to escape the paradox of not subsidizing losing companies and at the same time supporting potential successful industries. Toyota is the most famous example which received a massive amount of state support and subsidies.

Little_Miss_1565
12-14-2008, 03:51 PM
Jesus is the new Mota Boy in that he comes along and says things I agree with without the trouble of having to actually get around to forming words and putting them in order of a coherent statement.

The auto industry collapse would rather be just another domino in an economy already on the verge of collapse. And seriously, Vlad, my hometown was an example and not the thrust of the argument itself.

Jesus
12-14-2008, 04:16 PM
See, I've conversed with some conservative minded people who think that ALL bailouts only cause more inflation, and devalue our dollar, and ultimately cause our economy to get worse. They think that "ups and downs" are a normal part of the free market and we should just let it run it's course. Is there any validity to that idea?

First of all there is no such a thing as a free market, whenever someone says something like that always get skeptic. You have a regulated market economy. But anyway yeah like people already the business cycles consists of ups and downs and this isn't a normal down swing, and yup government spending is the answer. You're all correct about that.

But anyway onto more interesting stuff, namely inflation. That's tricky. Actually there is more talk about deflation right now than inflation. Due to the collapse of the housing bubble which has made houses more affordable (if you have money). Also commodity prices are more or less down because of a drop in oil prices and a stronger dollar (which is the result of a low supply of the dollar and a higher demand due to a change in regulations of US banks). So it isn't all that clear that the bail outs will cause inflation or merely slow down deflation. But then there is also the question of whether inflation is bad or not... that also depends on conditions and who you have in mind. For people who have money it's bad. If you get a job because of actions that cause inflation it's good. If you're in debt, it's more or less good (you're debt becomes relatively smaller). If your wage goes up more than inflation you won't care.

Will it devalue the dollar? First of all I would hope so, because that would make the trade deficit smaller and would make exports more competitive and make imports far less attractive. But will it? It depends, bail outs will more than likely be financed via a budget deficit which might lead to higher interest rates which would make the dollar attractive and prop up it's value.

Jesus
12-14-2008, 04:28 PM
Jesus is the new Mota Boy in that he comes along and says things I agree with without the trouble of having to actually get around to forming words and putting them in order of a coherent statement.


Haha thanks, taking advantage of my labor you free rider :(.
Happens more or less all the time though, cause I do this stuff part time (trying to transfer boring econ stuff in more or less a populist message for a left wing party) while doing post grad economics.

HornyPope
12-15-2008, 12:07 AM
I agree with that, in normal circumstances. Given the recession and there also being lag effect between the time a stimulus package is lauched and it to have any effect (give or take 10 months) it is wiser to do both. If you let the big 3 go bankrupt you wipe out any effect an Obama stimulus package might have for the next 2 years (which what most Republicans want, it makes sense for them politically).

I'd like to think there is a way to raise government expenditure and have it impact the targeted industries very soon... I don't think bailing out the U.S. auto industry is the only way to inject money into economy right now.

Also, we're talking about a recession here which means that the consumer demand is at a minimum. Bailout or not, there is going to be a slowdown in manufacturing because nobody is buying cars anymore.


GM and Ford can be made competitive again, they have quite successful European divisions (especially Ford). They just need time to adjust technology used in those cars to models that fit American safety and environmental standards and also American taste.

The bailout just buys them time, there is absolutely no guarantee they will be competitive again. I think the best case scenario is they will have to contend with a lower market share, which means shedding a lot of jobs or moving them elsewhere.


That's one economic point of view, not the economic point of view. It's difficult to escape the paradox of not subsidizing losing companies and at the same time supporting potential successful industries. Toyota is the most famous example which received a massive amount of state support and subsidies.

What other point(s) of view are you referring to?


The auto industry collapse would rather be just another domino in an economy already on the verge of collapse. And seriously, Vlad, my hometown was an example and not the thrust of the argument itself.

I'm sorry, I only responded to arguments which you brought up. Did I miss anything that you wanted me to address?