The Truth About Bailouts

As the Federal bailout bonanza prepares to spread beyond the mortgage and financial sectors to fill Detroit's depleted coffers, few economic or policy analysts have spared a thought for the destitution of the U.S. government itself. Put simply, our government doesn't have enough spare cash to bailout a lemonade stand let alone a bloated and failing industry that is losing tens of billions of dollars per month. Washington can only offer funds that it has borrowed from abroad or printed. Unfortunately, the nation is in the grips of a delusion that money derived from these sources has the power to heal. But history has clearly shown that borrowed or printed money only has the power to destroy.

The argument that energizes the pro-Detroit camp is that the government should extend the same courtesy to the rank and file auto workers that it lavished upon the fat cats of Wall Street. While two wrongs certainly do not make a right, the fact remains that the Wall Street firms are still floundering despite the bailouts. What's worse, the money spent was either printed or borrowed from abroad. Both options are destructive to America.

When it comes to bailouts, the real discussions are not centered in Washington but rather in Beijing, Tokyo, and Riyadh. With no money of our own, our ability to bailout our own citizens is completely dependent on the world's willingness to foot the bill. While I am sure that Bush and Paulson are doing their best to convince the world that open ended financing of the United States is in the global interest, my guess is that, unlike Congress, our foreign creditors will see through the self-serving nature of our plea.

Like any bailout, our foreign creditors should consider the moral hazard of rewarding bad behavior, and the old investment adage of not throwing good money after bad. By continuing to "lend" us money, the world is merely delaying the necessary rebalancing of our upside down economy. By continuing to subsidize our reckless and outsized consumption, the world merely delays the inevitable re-balancing and exacerbates the underlying problem at the root of the current global financial crisis.

If Washington bails out General Motors (GM), the funds will never be recovered. GM will simply burn through the bailout money and then be back for more. Talk of designing a new fleet of "green" cars that will pave the way to profitability by spurring a new buying spree is simply delusional. Given the staggering "legacy" costs of health care and pensions for millions of current and former workers, Detroit cannot produce cars profitably. Unless these costs are seriously brought down, and there is very little chance that they will be, Detroit will remain a bottomless money pit.

Similarly any money that the world lends to America to finance more consumption will never be repaid. We will simply blow through it, and be back, hat in hand, begging for more. As we painfully learned in the housing bust, lending people money that they cannot pay back makes no sense. This applies equally to foreign central banks lending to America as it does to commercial banks lending to homeowners.

So for the same reasons that Washington should not bail out General Motors, the world should not bailout America. Like GM, our economy is in desperate need of a restructuring. Spending must be replaced with savings, and consumption with production. The service sector must shrink and manufacturing must expand to fill the void. The dollar must fall, wages in America must be brought down to a competitive level, and hopefully government spending and burdensome regulation can be reduced.

This transformation will not be fun, but it is necessary. Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base. Only by swallowing this tough medicine now will our sick economy ever recover. By accepting a lower standard of living today, we will eventually be rewarded with a higher one tomorrow.

Comments

[WhynoT:]

I applaud Mr. Schiff's ability to develop a fundamental thesis and to explain said thesis to everyone willing to listen even if they laugh and jaw at his idea's. You have to give the man credit for calling the crisis even wthen the slack jawed yokels were laughing in his face on national TV.

I agree, the boomer generation has bankrupt our country, my children, their children and I will be footing the bill for decades to come. I doubt any of our politicians or our nation as a whole will be willing to accept a "lower standard of living". Such drastic measures will have to be forced upon us by our creditors, we are in for some difficult times ahead.

2008 Nov 23 10:56 AM

[skwestorange:]

Peter:
It is great that you and a few others have been bold to call a spade a spade and prescribe the irght medicne(s) for what ails the USA. Unfortunately, it has been falling in deaf ears all along and it will cotinue to do so. In my opinion the only way to get these matters attended is to raise youth awareness to this issue and have them demand a solution usinf te 60's like movements/protests and the like. Two examples of success using this method to address a national issue are the how the vietnam war was ended and how OBAMA campaign won the election. I wish we could generate enthusiasm among today's youth for such a movement!
My idea would be to launch a nationwide campaign by folks like you and me to go and talk to grade school and high students every day at every school in our country. In a couple of years we will have that generation all excited about what their parents and grand parents have done their lives and demand action
SK

2008 Nov 23 11:56 AM

[Jack B.:]

Very good Mr. Schiff, I agree this may be the only way, however by throwing Billions at Wall Street and continuning to throw billions at wall street, the stage is set between Blue Collar workers (have nots) and the greedy,very well paid, Big Bonus White Collars.

To suggest that the autoworkers give-up their pensions, Medical and other benefits while AIG has big parties and continues to recieve $120 Billion for Bonuses , is asking for this country to have a Major revolution. This is a Classic take from the Middle-class and poor and reward the Filthly rich aka AIG. It is funny how I read all the controversy on Autoworkers, But I have a ard time finging anything on Big Oil and AIG. Who died and Made AIG god???? Oh and by the way, the Claimed $80.. an hour for Auto workes Pals in comparision to the $500 an hour the average AIG worker makes. What are they going to give up??.

I am all for pitching in, but how about doing it fairly instead of rewarding the AIG's and the stupid banks and even dumber Wall street. What are they sacrificing???

I am a Combat Vietnam Veteran and I have sacrificed for this country and will do it again, but dont expect the Auto wokers to give up everything while Wall Street and AIG continues to receive Billions and Huge Bonuses and BIg parties.(do you think we are that stupid??)

Remember this too, there are a hell of a lot more Auto workers then there are Selfish, Greedy, Self-Centered AIG and Wall Street workers and personaly, I have never wished anyone harm, but now that the lines have been drawn, I hope Wall Street and the rotten spoiled brats at AIG eat it. All of you have mistakenly underestimated the strength of Blue collar workers. So go ahead and take away our pensions and Medical while you have your big parties and see what happens.....General Motors did not cause $5.00 a gallon gas (you crooks did). They also did not cause the collapse of AIG(More Crooks).

Oh I get it, punish me and the auto workers for all of the unpunished WHite Collar CRIME at AIG.... That Makes sense. NOT

2008 Nov 23 12:00 PM

[Ramses II:]

The flippant description of the "depleted coffers" of our national automotive industry is something to which we should all take exception.

Our government so easily hands out hundreds of billions of USD to banks, insurance companies and others who basically push money around with a few keystrokes and skim a percentage - without a written "business plan" or any other apparent accountability or transparency.

Meanwhile, the backbone of our nation's ability to manufacture real products of our own is maligned and attacked for requesting assistance during a crisis that the banking and commodities (oil) sector CREATED!

I'll agree that the automotive industry has it's weaknesses and management issues. However, if you paid attention to the presentation and hard facts that the CEOs provided you would see that the Big 3 were on the path to turning their industry around prior to the economic (almost now) collapse. They are slow-moving and slow to react, however it is difficult to lay all blame in their laps given the incredibly manipulated prices of oil / gasoline (supply-and-demand, my ass!) along with unaccounted for military and reconstruction spending paid for by borrowing against our currency..do I really need to go on?

Millions of middle class people depend upon their employment - and PAY TAXES ON - their earnings through the auto industry. Not to mention small, medium and large business in all 50 states. These people buy products, homes, etc - think this might be a problem if this were removed from the economy? How much in taxes do you think this might add up to? Less or more than $25 billion??

But all of this is really not the most important point: the automotive industry is the backbone of our ability to manufacture our own goods domestically. We have already been "exporting" our manufacturing knowledge at an alarming rate; it is difficult to find qualified tool and die makers or skilled machinists in the US anymore - at least, not in the way you could 20 years ago. The loss of the domestic auto industry would put the final touches on the death of mfg in our country. How's that for a national security issue? Perhaps the Chinese could help supply us if ever we do end up in another major war; they already make our soldiers' uniforms for us, so why not?

So let's see: loss of ability to make actual products (as opposed to the "imaginary" money created in the financial sector that we are so keen to bail out - not loans as the Big 3 are asking for, but hand-outs), loss of middle class salary, which is the primary class for spending and buying in America.

Even if it were justified to let these companies fall into bankruptcy, this IS NOT the time for it. Haven't we set ourselves up well enough for economic depression??

Sure. Great idea. Just let the American auto industry tank. Then sit back and watch the world laugh...

2008 Nov 23 12:05 PM

[anarchist:]

Americans always tout their standard of living as being the best but it has been declining since the 60s. The 60s began the -two paychecks necessary to finance a family- years. At first the two paychecks meant some extras for the family but now most American families could not survive financially without two paychecks. I have lived and worked abroad many years and in other industrialized countries this is not the case.
I was actually surprised that Americans reduced their driving miles when gas hit $5.00 a gallon so I believe they are capable of change but only when it's forced upon them. The coming years could be painful for the immediate gratification Country and like the England last century, the U.S. probably will emerge from the current financial and moral crises to find itself no longer the world's financial leader. The U.S. financial policies and imperialistic foreign policy are dinosaurs of the eons past and must be discarded to make way for a new plan.

2008 Nov 23 12:06 PM

[dennis san ...:]

peter,maybe you should try a new approach.why don't you first learn about a subject before you make comments that are not true.first legacy cost at g.m..did you know that both the hourly and salaried pension funds are fully funded.second,did you know that as of 1992 any one hired to the salaried work force is not entitled to a pension or medical when they decide to retire from g.m..third,did you know that current salaried retirees lose there medical when they are eligible for medicare.fourth did you know that as of the last UAW contract any hourly employees are not entitled to a pension or medical when they retire and last did you that all new hires pay is a lot less than the current employees. i don't even want to get in to the subject of how great g.m.'s line up of product go because it apparent that you don't really give a dame or else you would have been better prepared to write your article.it's a lot easier to write the thought of others that don't know what they are talking about and to tell people what they want to hear so that they have some one to blame there problems on.and oh by the way the viba money that was to be given to the UAW by g.m. for the medical for the currant hourly work force is mostly paid off.so in closing i can only assume that if the segment on g.m. is so wrong i can only assume that the rest of your article is just as bogus.

2008 Nov 23 12:16 PM

[Ray Lopez:]

Oh I get it. You didn't get yours, and you want the taxpayers to give it to you.

We'll see about the revolution you ask for. Don't be surprised if you end up in jail.

RL


On Nov 23 12:00 PM The GM kid wrote:

> Very good Mr. Schiff, I agree this may be the only way, however by
> throwing Billions at Wall Street and continuning to throw billions
> at wall street, the stage is set between Blue Collar workers (have
> nots) and the greedy,very well paid, Big Bonus White Collars.

> Oh I get it, punish me and the auto workers for all of the unpunished
> WHite Collar CRIME at AIG.... That Makes sense. NOT
>

2008 Nov 23 12:25 PM

[socrateazz:]

I agreed almost 100% with what he said until that last statement of accepting a lower standard now for a higher one in the future. We have gone through a period which probably will be concidered unequaled for a millinea as a utopian life. Even at that. People had things to complain about. The future will probably bring hardships concidered conquered in the past. There will be times of great wonders ahead. There also will be a society moving toward Socialism which will morph into a feudal society. In case you do not know it Socialism was undoubtedly the original intent of European communities. Serfdom or slavery (both are similar) is the likely result of the direction The US is heading. What goes around comes around. Contrary to most beliefs, most slavery was a situation where the slave helped the owner and the owner helped the slave. The punish to force labor was an exception not a rule. Serfism is the same

2008 Nov 23 12:26 PM

[Michael John:]

If I read his article correctly, Mr. Schriff advocates restructuring our economy by shrinking the service sector and expanding manufacturing "... to fill the void". Unfortunately, Mr. Schriff also suggests destroying one of the largest American manufacturing high tech centers, namely the American Automotive manufacturing complex, through denial of emergency bridge loan funding.

Rarely have I encountered such colossal and insanely stupid expressions of illogical reasoning from a professional columnist. Allowing the Big Three to fail would not expand the manufacturing base of this country "... to fill the void", either in the short term or the long term.
Mr. Schriff also suggests or reasons that granting emergency bridge loan aid to the American Automotive Companies would not be repaid and that this action would be akin to "throwing good money after bad". However, the only relevant historical precedent regarding Government back loans to an American Car Company proved otherwise when the Chrysler Corporation repaid their emergency Government loan (with interest) a few years after being granted such aid. History showed that the Chrysler Corporation went on to produce innovative products for the next twenty plus years while sustaining a local and national tax base in the process. History also proved Mr. Schriff's 1980 colleges were wrong in their arguments advocating a ban on government back loans to private companies and history stands a fairly good chance of proving Mr. Schriff's similar arguments equally wrong for this current crisis.

I wonder if Mr. Schriff ever heard of the expression "... throwing the baby out with the bath water". His arguments advocating loan denial to the American Automative companies would amount to doing exactly that.

2008 Nov 23 12:28 PM

[Ramses II:]

Very articulate but unbalanced view of the serious situation that our country is in at this time.

Letting the auto industry go at ANY given time is debatable, but with our economy in the state it is now it would foolhardy - at best!

Over the long term, we will continue to lose our ability as a nation to engineer and manufacture our own goods. It is already happening at a alarming rate. The Big 3 need some oversight - this may be true, and if so, this is the time to do it. However to let them go..... This is unspeakable foolishness on many levels.

Respectfully..


On Nov 23 12:01 PM HowDan wrote:

> Once again, a fascinating, well-articulated and insightful article
> which extrapolates many key points about why these ridiculous,endless
> bailouts do not work.
> Like Peter, I have also been trying to explain to people that GM
> and the automakers should not be bailed out, partially due to the
> fact that if they are handed $50bn on a plate, they will just burn
> through it in a matter of weeks and then be back begging for more
> - why on earth should we (the taxpayers) pay for the sickening greed
> and utter incompetence of the automakers CEOs?
> Additionally a question which raises serious concerns is :-
> What happens if, due to the massive increase in US debt levels and
> rapid detirioration of the US economy, the major purchasers of US
> Goverment debt (i.e China, Japan and the MIddle East) decide to stop
> buying and even sell their $900 TRILLION worth? Then what?

2008 Nov 23 12:29 PM

[Ramses II:]

RL,

Don't take someone's passion as fact.

Your comments are pretentious and you are missing the point by a mile+


On Nov 23 12:25 PM Ray Lopez wrote:

> Oh I get it. You didn't get yours, and you want the taxpayers to
> give it to you.
>
> We'll see about the revolution you ask for. Don't be surprised if
> you end up in jail.
>
> RL

2008 Nov 23 12:33 PM

[PBones:]

I couldn't agree with Mr. Schiff's points more that we shouldn't bailout the Big Three- in principal and, more importantly, because of the long-term ramifications.

I was reluctant to endorse the bail out of Wall Street, and the only reason why I found it justifiable is because,arguably, it staved off another great depression- by treating a vital organ that was infected. These businesses failed to adapt to a changing economic climate - and in capitalism - the strong companies survive and the weak ones fail. This is largely analogous to natural selection - how a species can get wiped out by an unforeseeable epidemic - but in the long run the survivors are successful because they are able to adapt to their new environment.

If we do bailout the Big Three, one must invariably wonder whether or not they will be responsible in how they spend the funds - particularly after seeing Big Three execs spare no expense to travel to Washington to implore for a savior.


Furthermore, many of our financial institutions who have received a bailouts (albeit some of them unwillingly) are sitting on the sidelines trying to ride out the recession. While self-preservation is the normal beat of the drum that drives capitalism- if the Federal government is going to take this course of action, then it needs to ensure that these financial institutions are on the same page - regardless of whether or not their participation is voluntary. Albeit, such strong-arming, if necessary, should be exercised with the utmost care and should have an expiration date or at least a concrete timetable.

Mr. Schiff's is correct in that the system needs to clean itself out and treating the symptoms will not cure the disease. Unfortunately, there will always be players who are unwitting and arguably undeserving victims of the abyss.

Most Alarmingly, he points out the obvious truth that the majority of people seem to forget- that if we continue to borrow money to save these firms then we go into further debt. I worry that future children and grandchildren of this nation will have to foot the bill and more tangibly- their quality of life may suffer dramatically in the coming decades- particularly with the rapid economic growth of countries like China in the East.

I don't know about you, but I don't like to be in someone else's pocket.

(And if you're wondering, I'm in no way, shape, or form affiliated with Mr. Schiff, this website, or any other entity that might have a vested interest on this issue.

I'm just calling it how I see it).

2008 Nov 23 12:42 PM

[mailman who...:]

"... wages in America must be brought down to a competitive level ..." Holy krap. Thank God I belong to a union, instead of working at Wal-Mart. I have a middle class wage, and benefits like vacation leave, sick leave, and protection from over-the-top supervisors. You MUST be anti-union. You have go to be, otherwise you would never make a statement such as the one above.

2008 Nov 23 12:49 PM

[emca:]

A clear and well written article. But the posts also argue a valid point.

You state - "The service sector must shrink and manufacturing must expand to fill the void" - in total agreement. How is is the that goal going to be served by letting the auto industry fail? These are hard times (or shortly to be hard times) and the auto industry and respective unions need to restructure. But financial Capitalism needs to go. It is based on promises, iou's, wagers, unrealistic concentration of wealth, corruption and fitfully provides what's needed in this country, investment in production and infrastructure.

Productive Capitalism is the way. It was proved in this country and its now being proved in China other emerging economies. It may be a long shot, but I hope the domestic auto industry, or what remains of it, will be part of a creeping resurgence of industry in the U.S. at large. Give the wealth to something that has or can produce tangible, real value.

2008 Nov 23 01:10 PM

[Geodude:]

Mr. Schiff along with most of the economic talking heads are missing a very important point and do not address it in there predictions or prescriptions. This is simply that growth can not be sustained indefinitely on a finite planet. We need to find a way to reduce consumption across the board. If we are to maintain a good standard of living and raise others to a good standard of living this means only one thing. We must reduce the population of the planet. We can not sustain the projected increases of population, not just world wide but also in the U.S. A good example is California. The State is already short on water and power and there are projections of an additional 20 million people in the next few years. How is this sustainable? Worldwide the problem is more acute with energy, clean water, and other resources creating or poised to create major conflicts. Population is at the core of these problems and if this issue is not addressed then we really will have a reckoning that none of us really wants to see.

2008 Nov 23 01:50 PM

[Robert Nabloid:]

HAHAHA, I just wrote an article about Peter Schiff's "The Truth About Bailouts." It also got published on Seeking Alpha. No need to read my article, but the second link in the top of the article goes to a site where there is a video of Peter Schiff on Fast Money talking about the whole situation! I recommend watching the video. seekingalpha.com/artic...

Peter, you are right on. I've had the same beliefs for a long time. I thought I was alone until I started discovering a few "experts" that are saying the same thing. Thank you.

2008 Nov 23 02:03 PM

[Thegra:]

It is very difficult to extend any notion of credibility to this writer. This author can not write, punctuate, spell or deliver a clear message.
One of the things we have lost recently is the idea that one should learn to communicate in a reasonably comprehensible manner if one expects to be listened to or read with any belief.
So go back to school. learn to express yourself in a way that lends itself to understanding and people may then consider what you have to say.

As it is, it is nearly impossible to decipher what the hell you are rambling on about, leading the reader to believe that you probably have no idea of what you speak.

On Nov 23 12:16 PM dennis san andres wrote:

> peter,maybe you should try a new approach.why don't you first learn
> about a subject before you make comments that are not true.first
> legacy cost at g.m..did you know that both the hourly and salaried
> pension funds are fully funded.second,did you know that as of 1992
> any one hired to the salaried work force is not entitled to a pension
> or medical when they decide to retire from g.m..third,did you know
> that current salaried retirees lose there medical when they are eligible
> for medicare.fourth did you know that as of the last UAW contract
> any hourly employees are not entitled to a pension or medical when
> they retire and last did you that all new hires pay is a lot less
> than the current employees. i don't even want to get in to the subject
> of how great g.m.'s line up of product go because it apparent that
> you don't really give a dame or else you would have been better prepared
> to write your article.it's a lot easier to write the thought of others
> that don't know what they are talking about and to tell people what
> they want to hear so that they have some one to blame there problems
> on.and oh by the way the viba money that was to be given to the UAW
> by g.m. for the medical for the currant hourly work force is mostly
> paid off.so in closing i can only assume that if the segment on g.m.
> is so wrong i can only assume that the rest of your article is just
> as bogus.

2008 Nov 23 02:03 PM

[Jettzen:]

Why are you all complaining about the bailing out the auto industry. Didn't you read the article we don't have the money to bail out anybody. Come on people we are out of money our wonderful government spent it all. If you want to get mad at someone get mad at the politicians they are the ones that did whatever they wanted with our money. To get things back to being in the black I would suggest getting rid of them all. Obama doesn't stand a chance he can't bring the economy back we don't have anymore money. In another year everybody will be blaming him for our problems. It is time the American people looked in the mirror if they want to know the problem. We didn't reel our government in and look what we got for it. All the manufacturing jobs went over seas everything was outsourced all in the name of greed. I have a feeling we will get just what we deserve if we keep on the same course we have been on for the last 40 yrs. Our country need a re-boot in the worst way. The malware in Washington has taken over our operating system and we are looking down the barrel of the ultimate Blue Screen. Vote them out of office is our only chance and then take care we elect only those who willing serve the people instead of themselves. If you think it was someone else's fault then you are part of the problem. We are all in this together and it can be fixed but not by blaming each other. 535 men put us in this position and we let them do it. This mess started back in about 1917 in the Woodrow Wilson administration, the creation of the Federal Reserve, with the power to arbitrarily manipulate the value of money, the institution of the Federal Income Tax, giving the government the power to redistribute the wealth, the direct election of senators thereby negating the sovereignty of states, FDR's confiscation of this nation's wealth by making the ownership of gold illegal, unlinking the dollar to gold...and on an on and on. Our founding fathers learned the lessons of fiat money and warned us against it. The buffoons we continually elect to office, who think they know more than anybody else by virtue of their election, did this to this nation over a period of 60-70 years because they refuse to abide by Constitutional government. Ron Paul was right.

2008 Nov 23 02:21 PM

[winemaster2:]

Mr. Schiff has some very valid and forthright truthful points and issues. However, he fails to address the basics that the current economic system is flawed and flawed schemes to fix it have no real chance to succeed. The basic equation of credit Vs debit is ignored and all these theories, formulas, variable, options, adjustments control of money supply, rate fixes other manipulations, three teared banking system with middlemen private bankers, their greed are all a failure. The system is not only abuse, but exploits and leads to a chaos that is finally upon us. The Government considers is right to collect taxes directly from the people, but then turn around and abdicates its responsibility to help
the taxpayers, instead the Government and its own hierarchy use, abuse, exploit, mismanage and
misappropriate the taxpayers money. Hence totally ignoring the inherent defect in the first place.

2008 Nov 23 02:31 PM

[Paul Bogdanich:]

The man says it himself, "The dollar must fall." So as long as that is the case and every paniced person in the World, which is most of them right now, are buying US treasuries the thing to do is borrow short term to generate the "manufacturing jobs" that are to "fill the void" from lost service sector jobs and then monetize a large part of the debt. This would have the effect of holding the nominal value of the debt and overpriced assets like homes steady while the real value of the currency falls making the inflated home price not so unmanagable. The problem with the man's arguement if done directly is he has suggested is I believe he overestimates and puts way too much faith in the private sector. He assumes that these manufacturing jobs are going to magically appear in short order to fill the void from the millions oj jobs lost in the busted service sector. In fact left to market devices that process would most likely take multiple decades (like 30 to 50 years) and those interveining decades would be full of misery, incredible hardfship, despair and untimely death. Please don't get me wrong I fundamentally agree with him but the time to have done all these things was eight years ago. We didn't. Instead we did the exact opposite and doubled the debt, waged a bunch of wars while doling out tax cuts and generally raping the treasury. So now we are between a rock and a hard spot and in that situation it is no time to show virtue. It is time to push against the hard spot and see if it gives. If it does not (the lenders fail to lend) then we have lost nothing as at that point we can all accept whatever fate awaits us which will almost assuredly not be pleasant.

2008 Nov 23 02:46 PM

[Zetetic:]

If the US lowers its standard of living the rest of the world will follow by lowering theirs. The boom times weren't just in the US, they were worldwide. Housing, credit and equity bubbles are found everywhere. The worldwide bubble is deflating.

The US government has always repaid its debt and will continue to do so. A stimulus package and another TARP rescue may add another $1.5 trillion dollars of debt, but when US income is $15 trillion (GDP) the debt burden is relatively light. The national debt - total debt obligations - of the US will still be less than GDP. Hardly a cause for concern.

2008 Nov 23 02:48 PM

[Jackson Cash:]

Anyone who supports bailing out Detroit is an incompetent fool. They've had their countless chances, and their protectionism - both labor and garbage products landed them squarely where they are now.

HISTORY!

LET THEM ROT, IT SERVES ABSOLUTELY THE CONTRARY PRESERVING THEIR BAD BEHAVIOR.

2008 Nov 23 02:53 PM

[Mark Coatsw...:]

BRILLIANT!

Kudos!

2008 Nov 23 02:56 PM

[Eddie Brown:]

I get it. That is why I could never understand why the cities and states got involved in helping people by houses. They would offer $50k to first time home byers in hopes that when they sell the property they would get there tax free money back. Surprise the morgages went down and now the cities and states are strugling. Let the econonmy fall were it may. Let the dow drop to were it will say 3 to 5 thousand. We will be ok. I was against the $700 billion dollar bailout. I wrote my senators and congress people to no avail. So I give up. I will just pay my bills and continue to go to school till this mess passes over. ;-) Lots of Love Eddie

2008 Nov 23 03:00 PM

[leoejr:]

this comment is for WhynoT and his statement; I agree, the boomer generation has bankrupt our country, my children, their children and I will be footing the bill for decades to come.
that statment shows just how Ignorant and uninformed you are. Every dam dollar spent on war, welfare, Medicare, and on and on has been taken from the Social Security fund. The last count (and I doubt it was close to what is owed) is 1.7 Trillion dollars is owed to Social Security fund. The blame for the problems that are sinking this country lay on the shoulders of the greedy elite politicians, bankers, oil companies excreta, and Wall Street brokers.
Rather than set on your lazy uninformed a^% and watching stupidly overpaid multimillion dollar football players, or playing you xBox360, Playstation, and listening to the Rush Limbaugh’s or whatever. Try using the internet for something other than playing stupid and look up the facts.
The only reason that this country has made it as far as it has is because of the baby boomer’s you are blaming. If they had not supported your greedy unthankful parents and their kids you would be living in a third world country.

2008 Nov 23 03:06 PM

[girlsforsci...:]

Revamp the machine. If America were a factory, it's past time for an upgrade. Investing in America is promising if it keeps its workforce productive, and it produces products that the world needs. The current situation is not just an American predictament, but part of a bigger, global question. It's time to put American innovation to work for the world, which will benefit our markets in the long term. The global market does have expectations of us. Global investors will expect positive returns. We should deliver what the world needs. The bigger the need, the better.

2008 Nov 23 03:17 PM

[maxmulvey:]

I recommend that we, who have not, exercise our right to keep and bear arms. The day is coming when the filthy, dirty, stinking, foul rich have to answer up to the reason that they needed so very, very, very much.
I recall the fund raising dinner of President George W. Bush where he adressed the people there as the "haves and have mores." Eat the rich, time to start over.

On Nov 23 12:00 PM The GM kid wrote:

> Very good Mr. Schiff, I agree this may be the only way, however by
> throwing Billions at Wall Street and continuning to throw billions
> at wall street, the stage is set between Blue Collar workers (have
> nots) and the greedy,very well paid, Big Bonus White Collars. <br/>
>
> To suggest that the autoworkers give-up their pensions, Medical and
> other benefits while AIG has big parties and continues to recieve
> $120 Billion for Bonuses , is asking for this country to have a Major
> revolution. This is a Classic take from the Middle-class and poor
> and reward the Filthly rich aka AIG. It is funny how I read all the
> controversy on Autoworkers, But I have a ard time finging anything
> on Big Oil and AIG. Who died and Made AIG god???? Oh and by the way,
> the Claimed $80.. an hour for Auto workes Pals in comparision to
> the $500 an hour the average AIG worker makes. What are they going
> to give up??.
>
> I am all for pitching in, but how about doing it fairly instead of
> rewarding the AIG's and the stupid banks and even dumber Wall street.
> What are they sacrificing???
>
> I am a Combat Vietnam Veteran and I have sacrificed for this country
> and will do it again, but dont expect the Auto wokers to give up
> everything while Wall Street and AIG continues to receive Billions
> and Huge Bonuses and BIg parties.(do you think we are that stupid??)
>
>
> Remember this too, there are a hell of a lot more Auto workers then
> there are Selfish, Greedy, Self-Centered AIG and Wall Street workers
> and personaly, I have never wished anyone harm, but now that the
> lines have been drawn, I hope Wall Street and the rotten spoiled
> brats at AIG eat it. All of you have mistakenly underestimated the
> strength of Blue collar workers. So go ahead and take away our pensions
> and Medical while you have your big parties and see what happens.....General
> Motors did not cause $5.00 a gallon gas (you crooks did). They also
> did not cause the collapse of AIG(More Crooks).
>
> Oh I get it, punish me and the auto workers for all of the unpunished
> WHite Collar CRIME at AIG.... That Makes sense. NOT
>

2008 Nov 23 03:24 PM

[Chris9105:]

@GM Kid

I just broke out a calculator and by my calculations, the avg American auto worker makes well over $100,000 a year, and that's just pay. The only reason they are "blue collar" is the fact they don't work in an office, not because they don't make some pretty big money. If the avg American can't live and save off of $75,000, they are in deep trouble, especially those stupid, arrogant CEO's and directors who laughed at the other automakers for leading the charge with green vehicles. The government should buy out the automakers, and run it themselves, in the process cutting out the predatory dealers as well.

2008 Nov 23 03:45 PM

[Grant of Ph...:]

I read with some puzzlement the comments about how well GM's product line is doing. I have purchased 14 new Oldsmobiles in my 50 years and GM decided they would remove that product line because it contained the word "Old" in its name, or so they said. In the mid-90s I also leased a GM EV1 fully electric car for just over 5 years. There was a several month waiting list for the car. You had to produce income tax docs to prove you were "worthy" of the car AND you had to agree to also maintain a conventional gasoline car for each primary driver in your household. Even with these rather onerous requirements they had more people wanting EV1s than they cared to produce. There solution, quite simple, take all of them back and crush them. Instead of being years ahead of the competition by refining and reducing the cost of building electric cars, Mr. Wagner (in his own words) would prefer to devote our manufacturing resources to building larger SUVs and trucks that make a higher margin. Lest anyone forget, when Chrysler got a loan during the Carter years, the top management was let go and Lee Iacoca (sorry for the spelling) worked for $1 dollar a year until the loans were fully paid AND the company was profitable. He also flew to and from DC commercial while begging for money. I did not hear any of the three stooges that went to Congress offer to work for $1, and of course they had their private jets to ferry them around. The Wall Street bailout has not done any good, the banks are taking the money and using it to finance things like the Belgium brewer's purchase of AB (JP Morgan/Chase) or to purchase stock in the Chinese Construction Bank (Bank of America). I don't think one massively stupid idea that Congress was bullied into by Paulsen should automatically mean we should make more massively bad decisions "to be fair". Since both the UAW and GM say they need to get relaxed rules for funding the pensions and medical for retirees because they are in their words "substantially under funded" I don't know where the info they are fully funded came from but it is at least questionable based on what Wagner and the head of the UAW said to Congress, unless they are fibbing by saying they are worse managers than they really are to Congress.

Based on GM canceling my preferred brand (Oldsmobile) and forcing me (with threat of law suit) to give up my EV1 I am now purchasing Acuras. They are better built, have not had a single problem, get better mileage, and here's the really embarrassing thing, they have a higher percentage of domestic content than the last two Oldsmobiles I bought. Sadly the best thing that could happen to GM would be for them to be split up and the pieces sold to people who are actually interested in building cars, instead of financing, home mortgages, commercial lending, and all of the other things GM seems focused on these last few years. They started their downhill slide in the eighties when they made the "prudent business decision" to allow defects to leave the factory because it was cheaper to fix the few defects when customers brought them into the dealer than to have tight quality control at the factory, that is what the previous GM CEO Roger Smith told Wall Street back then. Of course GM had a complete disregard for the time and inconvenience to their customers, whom they were converting to Honda/Toyota/Datsun (now Nissan) customers of the future.

2008 Nov 23 04:10 PM

[Homer II:]

On Nov 23 at 2:03 PM, Thegra wrote (in response to dennis san andres):
>
> It is very difficult to extend any notion of credibility to this
> writer. This author can not write, punctuate, spell or deliver a
> clear message.
> One of the things we have lost recently is the idea that one should
> learn to communicate in a reasonably comprehensible manner if one
> expects to be listened to or read with any belief.
> So go back to school. learn to express yourself in a way that lends
> itself to understanding and people may then consider what you have
> to say.
>
> As it is, it is nearly impossible to decipher what the hell you are
> rambling on about, leading the reader to believe that you probably
> have no idea of what you speak.

AMEN!

I too have become very weary of reading, and THEN RE-READING, replies to the articles being posted. Re-reading, because the grammer, spelling, punctuation and composition are such a jumbled mish-mash, one can hardly understand the reply, without.

Where are these ILLITERATE responders coming from in ever-increasing numbers? I thought they were all happy over in their little corner, watching NASCAR, drag-racing, jetboat-racing and all the other high-powered, fuel-consuming, motor-driven pastimes!

2008 Nov 23 04:11 PM

[Putz:]

I can tell that many of the angry people commenting haven't even had a high school course in Economics. The government should not operate every failed industry Chris9105 we already have a massive deficit, and maxmulvey and the GM Kid, study some economics before you spout off spiteful marxist rhetoric. It's an inconvenient truth, accept that humans for the same reason they are illogical and superstitious, cannot maintain a marxist society. We are psychologically different from ants, there will always be leaders, followers, and the oppressed, no matter how socialistic or communist an economy strives to be. The free market may not be benevolent, but any step in the other direction is a step toward slavery, a government with an inch of control to take from you and provide for you is an inch toward slavery, a forced existence.

2008 Nov 23 04:13 PM

[John Lounsbury:]

Dennis - - -

You make some good points, but that does not diminish the value of Peter's points. The health care legacy still exists for current retirees. That is a big financial overhang. In addition, executive and administrative overhead is obscene. I recently learned that the CEO compensation packages for Wagner and Nardelli combined is comparable to the entire executive compensation for all Toyota, Honda and Nissan management.

There are many inefficiencies in the Big Three that need to be wrung out. The private jet fleets are just another example. A few hundred million here and a few hundred million there and pretty soon it adds up to real money.

Peter correctly describes an austere process for American society to come through this crisis. This austerity must include the highly compensated barons of finance and industry. It is quite likely that the average American does not understand how painful the next few years will be. It is even more likely that the above mentioned barons are completely clueless.




On Nov 23 12:16 PM dennis san andres wrote:

> peter,maybe you should try a new approach.why don't you first learn
> about a subject before you make comments that are not true.first
> legacy cost at g.m..did you know that both the hourly and salaried
> pension funds are fully funded.second,did you know that as of 1992
> any one hired to the salaried work force is not entitled to a pension
> or medical when they decide to retire from g.m..third,did you know
> that current salaried retirees lose there medical when they are eligible
> for medicare.fourth did you know that as of the last UAW contract
> any hourly employees are not entitled to a pension or medical when
> they retire and last did you that all new hires pay is a lot less
> than the current employees. i don't even want to get in to the subject
> of how great g.m.'s line up of product go because it apparent that
> you don't really give a dame or else you would have been better prepared
> to write your article.it's a lot easier to write the thought of others
> that don't know what they are talking about and to tell people what
> they want to hear so that they have some one to blame there problems
> on.and oh by the way the viba money that was to be given to the UAW
> by g.m. for the medical for the currant hourly work force is mostly
> paid off.so in closing i can only assume that if the segment on g.m.
> is so wrong i can only assume that the rest of your article is just
> as bogus.

2008 Nov 23 04:50 PM

[John Lounsbury:]

Grant of Phoenix - - -

Thank-you for a well written and informative comment. I hope to read more high quality comments from you in the future.

2008 Nov 23 04:56 PM

[Zetetic:]

Um, you need to reread Schiff's piece. Most college economics courses cover Marx and his thoughts such as Capitalism causes booms and busts, depresses wages and lowers living standards. This is exactly what Schiff is arguing for.

The only large industrial nation not going through a recesssion right now is China. IIRC, they are a Communist nation and mostly centrally planned. China has lifted over 400 million people out of poverty in the last 20 years. Why hasn't it failed if marxism is unstainable?

Spare me the BS about free markets - the US government has had a hand in the economy since the dawn of the Republic. A Keynsian fiscal stimulus and bailout is necessary when the private sector can't or won't increase aggregate demand. Ideology is worthless in crises.




On Nov 23 04:13 PM Putz wrote:

> I can tell that many of the angry people commenting haven't even
> had a high school course in Economics. The government should not
> operate every failed industry Chris9105 we already have a massive
> deficit, and maxmulvey and the GM Kid, study some economics before
> you spout off spiteful marxist rhetoric. It's an inconvenient truth,
> accept that humans for the same reason they are illogical and superstitious,
> cannot maintain a marxist society. We are psychologically different
> from ants, there will always be leaders, followers, and the oppressed,
> no matter how socialistic or communist an economy strives to be.
> The free market may not be benevolent, but any step in the other
> direction is a step toward slavery, a government with an inch of
> control to take from you and provide for you is an inch toward slavery,
> a forced existence.

2008 Nov 23 05:04 PM

[jay1945:]

how come no on ever comments on the 25 bil the big three already received from the last energy bill- sept 08 ? what was their "plan" for that bailout ? now they want more money to retool. just plain foolish to bail these companies out, just as it was foolish to bial out AIG, etc.

2008 Nov 23 05:07 PM

[User 305084:]

The notion that our economy will not experience tremendous damage from an auto industry bankruptcy is simply stupidity. Adding 3 + million people to an already bulging unemployment line is tragic. To do so cavalierly is an outright crime. The costs in the immediate term will dwarf the 50 billion in loans even if they go bust 2 years down the line.
The thought that our manufacturing base will "grow to fill the void is another piece of stupidity spoken from a clueless moron. Once the auto industry goes, so will many other manufacturers.
If people think Japanese manufacturers will not raise prices in the face of American stupidity, and take full advantage of the lack of competition, then I must ask what other stupid ideas will come from the likes of Schiff.

Yep, the auto industry needs change. They have come a long way, and still have more to go, but they are all we have, so suck it up and stabilize them. Mandate additional changes for sure, but we can ill afford to lose them now.

As for revolution and the slaughter of idiots and pigs, I can only imagine that history offers some insight into such events. As my degree is not in history, I'll let someone else speak to that eventuality. Does anybody know what happens in a society when people have had their fill of their government?

2008 Nov 23 05:35 PM

[TauDallas:]

I could not agree more. I have felt for many years that more people means less resources for each of us. So far we have been able to mine manufacture and farm with greater efficiency. But there is a limit to all this.
The problem is politicians and big corporations are of the opposite opinion. For them more people = more consumers = more buying and more votes. This is the short term thinking that has gotten us to this stage.


On Nov 23 01:50 PM Geodude wrote:

> Mr. Schiff along with most of the economic talking heads are missing
> a very important point and do not address it in there predictions
> or prescriptions. This is simply that growth can not be sustained
> indefinitely on a finite planet. We need to find a way to reduce
> consumption across the board. If we are to maintain a good standard
> of living and raise others to a good standard of living this means
> only one thing. We must reduce the population of the planet. We
> can not sustain the projected increases of population, not just world
> wide but also in the U.S. A good example is California. The State
> is already short on water and power and there are projections of
> an additional 20 million people in the next few years. How is this
> sustainable? Worldwide the problem is more acute with energy, clean
> water, and other resources creating or poised to create major conflicts.
> Population is at the core of these problems and if this issue is
> not addressed then we really will have a reckoning that none of us
> really wants to see.

2008 Nov 23 05:45 PM

[E Nuff Sed:]

Have we learned nothing from the past century?

Another totally non-sense article which could be written by Andrew Mellon whose advice to President Hoover about how to solve the Depression. "Liquidate labor, liquidate stocks, liquidate the farmer, liquidate real estate" was Mellon's prescription, according to Hoover's memoir. That's a way of saying do nothing; let the system correct itself. We know what happened.

Fortunate for us we don't have this idiot in charge.

2008 Nov 23 05:45 PM

[Justavgguy:]

Here are a few very random and unorganized thoughts

The consumption continues. We develop a product and immediately sell the rights for the quick grab. The Auto industry is one of the true producers of a tangible good left in the US, but the lack of vision for the future by management and the unions have bankrupt these companies. Unless the union is willing to cut back (step on the little guy) then there is no way for these companies to survive given the current market and decrease in consumer spending, which will last for some time.

People mock trickle down economics, but the theory hold water. As seen from a reverse perspective. As the company stocks continue to drop, you also see those at the bottom of the rung being dropped. which means along comes the credit crunch. My brother-in-law and his wife ave multiple credit cards at 29% interest. Given the new doubling for minimum payments from 2% to 4%, and their lack of ability to increase income, means the matters will only get worse. (side rant)

The gov. has proven over and over and over to be poor managers of money. Our money especially. Why do we as a people believe we can trust a group of people with a 17% approval rating so in bed with the lobbyist. My goodness the 2 main Presidential candidates spent $866 million dollars McCain 293 million, and Obama 573 million for a job that pays 400k a year with amenities up to 2 million a year.

Mr. Schiff is correct, but we as a people are to blame as we have sat idly by and allowed our government to be taken over at an exponential rate by money. We need true campaign finance reform to reestablish a true republic.

2008 Nov 23 06:36 PM

[Jack B.:]

No, actually, I have mine and I do not want anything from the taxpayers. I want to know why AIG gets $120 Billion in less then 2 months. And we have a Hornets nest when it comes to the American Auto makers.

Also maybe someone can explain to me how $5.00 a gallon gas was NOT contrived. I have been a conservative free market person all of my life until now. Big Oil manipulating the market through Monopoly and Price fixing is not a free market. Aig getting getting billions to hold weekend parties isn't a Free Market. I do not advocate a revolution, I saw enough damage in Viet Nam. However, I do feel even in a free market, Govt has a resposibility to make sure that Price fixing and Monopoly does not occur. They have obviously failed at that..

Again I will state that I find it ironic that we will spend billions on AIG and Citibank and etc. The list goes on. But we refuse to LEND to the american auto makers.......How ironic, what does that look like to you???

I guess you are not concerned about all of the TAXPAYERS money that has gone to AIG???


On Nov 23 12:25 PM Ray Lopez wrote:

> Oh I get it. You didn't get yours, and you want the taxpayers to
> give it to you.
>
> We'll see about the revolution you ask for. Don't be surprised if
> you end up in jail.
>
> RL

2008 Nov 23 06:55 PM

[DisFisCon:]

I found Mr. Schiff's basic thesis right on the money. That would be that we need to rein in our excessive consumption over the medium term if we want to survive as a credible nation. A few sidebars seem relevant, though.

It may be too late. We all knew that the national debt would have a tipping point, but I believe that none of us credibly knew where that tipping point was. We know that it's somewhere this side of the point where the entire GDP goes into interest payments on the national debt. We may have passed this point already.

Unless they change their attitudes, the elderly, in general, do not appear willing to give back any portion of their unreasonable standards of living. I think it will be necessary to convince them that the good of their own children (not just the ability of the country to stupidly spend the money elsewhere) depends on them reducing the level of their take from the federal government.

I see in several comments the idea that the unions should stand together and try to protect the generous union compensation at G.M.. I'd like the unions stand together and try to protect the concept of fair compensation. The UAW has lost the moral high ground that they once occupied by demanding wages that are far out of the mainstream and by allowing a 2 tier wage system to be adopted (telling young workers that their output is somehow worth less than half the output of an older worker in an identical job). There's a lot of ground in between the $75 per hour compensation that GM pays and the $7 per hour compensation that WalMart pays. Let's not assume that there's no reasonable middle ground.

Schiff also strikes a clunker with me in excusing the Wall Street bailout at the same time he damns any automotive bailout. Neither bailout is okay. Both bailouts are designed to help industry leaders who have already demonstrated an inability to sufficiently understand concepts of risk, hedging bets, strategic planning, and connections between markets. Rather than Congress considering whether to bail out the automotives, they should first be figuring out how to stop Paulson from giving away the second several hundred billion dollar chunk of change to Wall Street.

2008 Nov 23 08:34 PM

[welder:]

Seems to me that a lot of uninformed and misguided people comment on here. There are also some people that wouldn`t know the knife from the wound. In context to we need to accept lower wages, why is that? Perhaps workers in other countries should demand more. The whole problem with our economic crash is evident. We no longer have a manufacturing base, that is, we have nothing left to sell besides corn and natural resources to the rest of the world. The same "let it collapse, i.e. outsource it" arguement was used for textiles. Many of the factories here couldnt buy the materials as cheap as the materials and labor combined overseas. The result? Much lower wages. The past few years have seen Americans( most middle class) rack up debt just trying to stay afloat, not necessarily living lavish lifestyles. There is only so low we can go before bankruptcy. On the other hand we have investors and the ultra-rich simply using so called "free trade" laws to rape the working class. There is no more money to spend. The unions may actually have forestalled this crisis by keeping a small amount of purchasing power in the hands of the working class. My suggestion? Limit executive compensation of CEO`s and put the proceeds in investors hands. Secondly, institute tariffs on all imports based on the valuation of currency, i.e. one dollar=one yuan=one euro, etc. Get rid of the trade distortion that prohibits Americans from ever competing in price terms. Let`s compete in productivity and quality and may the best win. Third, stop importing cheap labor with H1B visas and showing foriegners how to do our jobs, then sending the jobs overseas to a trained workforce(Stop giving everything we have away!!) that has the advantage of a currency distortion. Lastly, stop putting our food in our gas tanks. We have done nothing more than allow our food prices to be driven up by using our food for a less efficient fuel. There are other crops that are better suited for biofuels which we don`t eat. Geez, install a hydrogen gas generator on your car and get 50% better fuel economy like I did.

2008 Nov 23 11:43 PM

[welder:]

BTW as additional information, the big 3 automakers expressed that they had the technology to increase fuel economy nearly 30% back in 2000 when the CAFE standards were up for evaluation. George W more or less told them no! Why? Big oil, Wall St. and the gov`t wouldn`t allow it. (profits and fuel tax revenues!)

2008 Nov 23 11:47 PM

[woodsey:]

Let's wait and see what Mr. Obama has to offer Monday. I'm still hopeful despite the grandstanding of Mr. Axelrod. That performance could indicate a direction, or it could be an aberration.

2008 Nov 23 11:50 PM

[anu21v:]

Well.... this has nothin to do with auto union,,, its the general salary levels of Americans as opposed to other parts of the world.

Wouldn't it be easier to outsource the jobs , especially in this globalized world, than paying the higer salary levels in Wallstreet,Manufacturi... , Research and so on so forth..... If one can get the same job done in some other part of the at roughly the same quality with 1/10th of the cost.... he would definitely go for it....

Mark my words either the Dollar has to be weekend or the salary levels has to be dropped. Also looking at the world economics, Salary level drop Across the board (Management to Worker to Healthcar to Services to wallstreet to bankers) will find a faster rescue than anything else.



On Nov 23 11:50 PM woodsey wrote:

> Let's wait and see what Mr. Obama has to offer Monday. I'm still
> hopeful despite the grandstanding of Mr. Axelrod. That performance
> could indicate a direction, or it could be an aberration.

2008 Nov 24 12:05 AM

[welder:]

Like I said, why not simply use tariffs to equalize the currency discrepancy? No need to use them excessively, but enough to let us compete in terms of quality and productivity? There is no need to lower wages or the dollar and make it even more difficult just to eat. Lowering the dollar is inflation, and that only helps Wall Street and Big Gov`t.

2008 Nov 24 01:23 AM

[Homer II:]

On Nov 23 11:43 PM welder wrote:

>> wages. The past few years have seen Americans( most middle class)
> rack up debt just trying to stay afloat, not necessarily living lavish
> lifestyles.

Thats a crock.. you don't go into debt trying to stay afloat! You balance your outgo to fit your income... you get "smaller". If you are going into debt, then you are living beyond your means. Maybe you need to cut down your "gotta have this" and practice "delayed gratification" as in, save for it first and then, if you still "gotta have it", pay CASH.

2008 Nov 24 02:06 AM

[overtaxed42...:]

So true- The people of this nation have been taken for aride and getting it in the rear. These jackasses in DC need to be forcefully removed and put in the stocks and have rotten vegetables thrown at them. Not a single one of them has done anything to help our country without it benefitting themselves on a personal level. All of the lobbyist, special interests, committees, study groups, panels, sub-committees etc. need to be immediately stopped. Real legislation put into effect that puts value back into our currency and stabilizes the country and brings the jobs back to the US. Implementation of a consumers tax (Ie. The FairTax), is the only way to do this. It would end most tax corruption, abolish the IRS and allow those folks to actually provide a sevice this country needs in whatever they end up doing. The prospect of jobs would be no problem due to the fact that with a consumption tax, the coporate tax is eliminated thereby making the atmosphere for business so good, every business on the planet will want to come here to do the business of being in business. This means everyone who wants a job gets one with benefits because without corporate tax those companies could now afford to give benefits like medical, quarterly bonuses, profit sharing and all that extra $$$ in the consumers pocket will be spent in the stores where that tax is collected. So the govt keeps receiving plenty of cash and then some multiplied astronomically from all the new and returning businesses from abroad hiring and paying employees who will spend (and save). Ron Paul was the correct choice and the best choice and the right choice. Not one of the other candidates even knew one thing about the crisis we are now in the grips of. None of them even cared a bit about the people except for Dr. Paul. Watch some of the Youtube videos of Ron Paul questioning Bernanke and Paulson and Barney Frank and the rest of those of the committes for banking and finance. Ron Paul is right and knows how the money centers work and how they have been systematically failing for years now and have finally come to such a head that our once strong and much sought after fiat currency is now worthless because of ridiculous politicians who proclaim themselves to be experts at all the goings on in businesses across the globe and yet all of them are there in DC because they could not make it in their chosen profession of being a lawyer. All of them flunkies in charge running the show for too long now has brought us to this position of downfall. It really sucks watching them keep on doing the same things that made the mess inthe first place and saying it should help fix the problem. I got news flash here that says this is the gov't attempt to finally call a force majuere in the Federal Reserve Money due to the value being less than what is on its face. If thtat happens the Amero will be forced upon us at a price to rival the Bear Sterns deal Morgan Stanley got. 10 cents on the dollar maybe? Hal Jay says 650 billion Ameros minted in Denver have been sent to China to replace their trillions of worthless greenbacks. I hope this is not true about what Hal Jay has said.
You should have written in Ron Paul for president. He would have done so much for this country and the people it would make you cry with tears of joy. If only the public knew the truth about what the pliticians do and how the media has has a profound affect upon the views of the people and how that manipulation should be declared illegal.


On Nov 23 02:21 PM Jettzen wrote:

> Why are you all complaining about the bailing out the auto industry.
> Didn't you read the article we don't have the money to bail out anybody.
> Come on people we are out of money our wonderful government spent
> it all. If you want to get mad at someone get mad at the politicians
> they are the ones that did whatever they wanted with our money. To
> get things back to being in the black I would suggest getting rid
> of them all. Obama doesn't stand a chance he can't bring the economy
> back we don't have anymore money. In another year everybody will
> be blaming him for our problems. It is time the American people looked
> in the mirror if they want to know the problem. We didn't reel our
> government in and look what we got for it. All the manufacturing
> jobs went over seas everything was outsourced all in the name of
> greed. I have a feeling we will get just what we deserve if we keep
> on the same course we have been on for the last 40 yrs. Our country
> need a re-boot in the worst way. The malware in Washington has taken
> over our operating system and we are looking down the barrel of the
> ultimate Blue Screen. Vote them out of office is our only chance
> and then take care we elect only those who willing serve the people
> instead of themselves. If you think it was someone else's fault then
> you are part of the problem. We are all in this together and it can
> be fixed but not by blaming each other. 535 men put us in this position
> and we let them do it. This mess started back in about 1917 in the
> Woodrow Wilson administration, the creation of the Federal Reserve,
> with the power to arbitrarily manipulate the value of money, the
> institution of the Federal Income Tax, giving the government the
> power to redistribute the wealth, the direct election of senators
> thereby negating the sovereignty of states, FDR's confiscation of
> this nation's wealth by making the ownership of gold illegal, unlinking
> the dollar to gold...and on an on and on. Our founding fathers learned
> the lessons of fiat money and warned us against it. The buffoons
> we continually elect to office, who think they know more than anybody
> else by virtue of their election, did this to this nation over a
> period of 60-70 years because they refuse to abide by Constitutional
> government. Ron Paul was right.

2008 Nov 24 03:46 AM

[anu21v:]

Tarrifs will solve less of problem but would create many more. Just a mention of protectionism policies by obama and China is already crying out foul. US has long supported free markets to be able to sell more of their products outside, but they have been on receiving end of the free markets. How else can Japan with such a small population has such a high share of Global Trade if not for this.

Better way would have been to depreciate the US currency to atual PPP levels and simultaneously put the same level of import duties as the Exporting country is putting on the same product.

This way US citizens won't have to face the Pains of Salary Lowering or job losses


On Nov 24 01:23 AM welder wrote:

> Like I said, why not simply use tariffs to equalize the currency
> discrepancy? No need to use them excessively, but enough to let us
> compete in terms of quality and productivity? There is no need to
> lower wages or the dollar and make it even more difficult just to
> eat. Lowering the dollar is inflation, and that only helps Wall Street
> and Big Gov`t.

2008 Nov 24 05:26 AM

[welder:]

The tariffs need not be prohibitive. We need only enough to equalize the pegged currencies and possibly float other tariffs on traded currencies. This would in essence equalize costs between countries, saying that if raw materials, transport, etc involved in production were similar, then we could all compete in productivity, quality, and innovation. As I said earlier, our textile mills couldn`t even buy raw materials as cheap as China could buy the materials, pay labor, and ship it, and this is due to the currency being unequal. Why do you think China pegs its yuan to the dollar? So the currency advantage keeps them exporting cheap goods and us trying to sell them expensive goods! Let China moan and wail and cry foul. There is no way we can absorb the goods from a country with five times our population and five times as much production capacity. And yes, you`re right--- these free trade deals are nothing more than governmental regulations, not free market based trade, otherwise, the balance could have been struck long ago.

2008 Nov 24 06:48 AM

[welder:]

Homer II 30 Comments Nov 24 02:06 AM


On Nov 23 11:43 PM welder wrote:

>> wages. The past few years have seen Americans( most middle class)
> rack up debt just trying to stay afloat, not necessarily living lavish
> lifestyles.

Thats a crock.. you don't go into debt trying to stay afloat! You balance your outgo to fit your income... you get "smaller". If you are going into debt, then you are living beyond your means. Maybe you need to cut down your "gotta have this" and practice "delayed gratification" as in, save for it first and then, if you still "gotta have it", pay CASH. Reply |Report abuse No it isn`t a crock. Many people resorted to borrowing money just to make it to the next paycheck when investor driven oil prices skyrocketed. Everything from fuel, food, clothes, etc. went on a steep price incline. I personally went from $75 a week in gas for 1100 miles in commuting to over $210 a week. I watched people downgrade their car trying to get better fuel economy and it still wasn`t enough. They went from a small surplus of income to a defecit after food and fuel, not even counting utilities, insurance, and taxes. These were not people living outside their means, but hey, I guess they needed to miraculously save money to pay cash for gas and food when they couldn`t afford to get to their jobs. There are people out there that do overextend themselves out of stupidity, but many more just scrape by on the necessities.

2008 Nov 24 07:05 AM

[daniel3582:]

You fail to understand the broader point he is making. He wants to expand manufacturing in America. At the same time, he does not want to expand a manufacturing business that is only going to fail because of poor managerial policies.

I think he summed it up nicely when he said that you don't reward bad behavior. Why spend $25 billion on a bad manufacturing business, when you could spend $25 billion rewarding a good one?


On Nov 23 12:28 PM Michael John wrote:

> If I read his article correctly, Mr. Schriff advocates restructuring
> our economy by shrinking the service sector and expanding manufacturing
> "... to fill the void". Unfortunately, Mr. Schriff also suggests
> destroying one of the largest American manufacturing high tech centers,
> namely the American Automotive manufacturing complex, through denial
> of emergency bridge loan funding.
>
> Rarely have I encountered such colossal and insanely stupid expressions
> of illogical reasoning from a professional columnist. Allowing the
> Big Three to fail would not expand the manufacturing base of this
> country "... to fill the void", either in the short term or the long
> term.
> Mr. Schriff also suggests or reasons that granting emergency bridge
> loan aid to the American Automotive Companies would not be repaid
> and that this action would be akin to "throwing good money after
> bad". However, the only relevant historical precedent regarding
> Government back loans to an American Car Company proved otherwise
> when the Chrysler Corporation repaid their emergency Government loan
> (with interest) a few years after being granted such aid. History
> showed that the Chrysler Corporation went on to produce innovative
> products for the next twenty plus years while sustaining a local
> and national tax base in the process. History also proved Mr. Schriff's
> 1980 colleges were wrong in their arguments advocating a ban on government
> back loans to private companies and history stands a fairly good
> chance of proving Mr. Schriff's similar arguments equally wrong for
> this current crisis.
>
> I wonder if Mr. Schriff ever heard of the expression "... throwing
> the baby out with the bath water". His arguments advocating loan
> denial to the American Automative companies would amount to doing
> exactly that.
>

2008 Nov 24 07:50 AM

[RiKo:]

Pay attention! The big picture is, the borrowing must end. The choice over who gets cut off when the music stops will necessarily be a painful one, but unheeded warnings raised in the past having been ignored, the choices must still be made. take some measure of comfort in that we still appear to have choices. To save the forest, there are trees that will be lost. Our entire financial system (that's everyone who works for, or owns anything valued in greenbacks) is only held up by outsiders' confidence in our ability to repay their loans. The US government doesn't go broke, people. When outsiders stop buying the bonds, the government will still print greenbacks to pay for the borrowing. When you are filling your wheelbarrows with cash to buy bread for your children, the choices we face today won't seem to have been so bad. As harsh and unfair as these choices feel now, as the borrowing continues the penalties will only grow worse. It's all in your history books.

2008 Nov 24 07:53 AM

[Confused Sheep:]

Then the only option the US government will have is to print more bills. The end result is like Mr. Schiff described: "The dollar [will] fall, wages in America [will] be brought down to a competitive level."

Please tell me it ain't so.


On Nov 23 12:01 PM HowDan wrote:

> Once again, a fascinating, well-articulated and insightful article
> which extrapolates many key points about why these ridiculous,endless
> bailouts do not work.
> Like Peter, I have also been trying to explain to people that GM
> and the automakers should not be bailed out, partially due to the
> fact that if they are handed $50bn on a plate, they will just burn
> through it in a matter of weeks and then be back begging for more
> - why on earth should we (the taxpayers) pay for the sickening greed
> and utter incompetence of the automakers CEOs?
> Additionally a question which raises serious concerns is :-
> What happens if, due to the massive increase in US debt levels and
> rapid detirioration of the US economy, the major purchasers of US
> Goverment debt (i.e China, Japan and the MIddle East) decide to stop
> buying and even sell their $900 TRILLION worth? Then what?

2008 Nov 24 09:20 AM

[31October:]

Re: Zetetic wrote:
> The only large industrial nation not going through a recesssion right
> now is China. IIRC, they are a Communist nation and mostly centrally
> planned. China has lifted over 400 million people out of poverty
> in the last 20 years. Why hasn't it failed if marxism is unstainable?

Easy: they have totally embraced capitalism powered by slave labor. It is extremely similar to the rise of Rome. The aqueducts were not built in a worker's paradise, and neither was your Wii.
Centrally planned economies often work for a few decades before decay. If "being lifted from poverty" means living in a 10X10 dorm (slave quarters) with 10,000 other slaves, I choose the individual right to freely strive, save, and assume the risk of poverty.

Back to the topic: "If Washington bails out General Motors (GM), the funds will never be recovered. GM will simply burn through the bailout money and then be back for more." Quite a statement. Elegant in simplicity, supported by historic precedent, and poignant in its inevitability.

2008 Nov 24 10:53 AM

[bosun.j:]

Of course the author makes his case against bailouts after 2.1 TRILLION dollars have been created in a computer and thrown at the Banksters like confetti!

Down down down, to be like flying machines lying in pieces on the ground.

2008 Nov 24 11:43 AM

[continually...:]

So now all the guru's are saying we are in dire straits. Wow, how enlightening! Okay, I will buy that. What I want to know is who is going to be accountable for helping create this fiasco. How about Mr Schiff and othe economic talking heads? How about some "experienced" CEO's? How about some of newest genius teen MBA's? How about consumers that wanted Mc houses and cars?
It seems that it all ends up in the lap of the average w-2 holders and small business guys like me who happen to pay a boat load of taxes.
It seems that the ones who did the damage should have to pay. But I suspect that once this mess gets clear up in two years, we will be hearing Mr. Schiff change his tune and the teen MBA who is now ten years older will be working for AIG and will again receive the bonus. Meanwhile, I will just keep paying my taxes to the politicians and CEO's who take from the public coffers.
I want their businesses to fail. They took the risk, they should pay. Nobody is going to bail me out if I fail. Happy Thanksgiving.


On Nov 24 10:53 AM 31October wrote:

> Re: Zetetic wrote:

2008 Nov 24 11:57 AM

[DaveW:]

100% agree Peter, thanks for your post. I for one, am willing to incur a pay cut if it will help our nation be great again. In these dark time I just may not have a choice anyway...

2008 Nov 24 01:08 PM

[bobbobwhite:]

Obama is busy putting new clothes on the emperor, while the emperor keeps taking them off. Nothing will change. After reading that now the homebuilders want a bailout after Detroit gets its bailout, I am sure GE will be next in line with its hand out as "crucial to the heritage of America", or some other malarkey.

Inherent in Capitalism is the doctrine that says that companies must make it or not on their own qualities as.a business. What is this new one we have now, neo-Capitalism? Now that neo-cons are gone, I can only assume that it must be replaced in the human mind and heart with another "neo" for all to be comfortable that "something is being done".

2008 Nov 24 01:35 PM

[welder:]

If the automakers were not unionized, I believe there would be no qualms about a bailout. Seems that the answer from the investor and corporate side is always to cut the workers` pay rather than their own. The airlines were there once too--- they said they needed to shed 126 million in union wages to become profitable, yet the first thing they did was to hire a new CEO for roughly the same amount and declared the crisis was over, they were now profitable. Strange how "profitable" depends on who is getting the money. 25 billion to help the automakers is peanuts compared to the 2 trillion already dumped on the banksters with more to come. Wall St. has become a slot machine with guaranteed payouts.

2008 Nov 24 03:34 PM

[welder:]

From the news--- The advance comes even after the markets anticipated last week that some sort of rescue for Citigroup could occur. But investors nonetheless appeared emboldened by the U.S. government's decision late Sunday to invest $20 billion in Citigroup and guarantee $306 billion in risky assets.

Wall Street's enthusiasm surged not only because the bailout answered questions about Citigroup but also because many observers saw the move as offering a template for how the government might carry out other bank stabilizations.

The market rallied following announcement of the plan by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. to stabilize Citigroup. It's only the latest effort this year to support a banking system troubled by bad debt and flagging confidence. Besides implementing its $700 billion bailout plan for the overall financial industry, the government has bailed out insurance giant American International Group Inc. and taken over lenders Fannie Mae and Freddie Mac.

Like I said--depends on who is getting the money. Oh heck no we can`t bail out the working class, but we can surely help the black tie elite.

2008 Nov 24 03:58 PM

[welder:]

Treasury, Fed continue extensive bailout efforts
Monday November 24, 2:33 pm ET
By Christopher S. Rugaber, AP Business Writer
Nothing a few more billion can't cure: Treasury, Fed take more steps to fight meltdown


WASHINGTON (AP) -- The government's latest effort to address the financial crisis is a $20 billion investment in banking giant Citigroup Inc., along with an agreement to guarantee hundreds of billions of dollars in possible losses.



The step, announced late Sunday, is the latest in a long list of government moves to counter the financial meltdown:

--March 11: The Federal Reserve announces a rescue package to provide up to $200 billion in loans to banks and investment houses and let them put up risky mortgage-backed securities as collateral.

--March 16: The Fed provides a $29 billion loan to JPMorgan Chase & Co. as part of its purchase of investment bank Bear Stearns.

--May 2: The Fed increases the size of its loans to banks and lets them put up less-secure collateral.

--July 11: Federal regulators seize Pasadena, Calif.-based IndyMac, costing the Federal Deposit Insurance Corp. billions to compensate deposit-holders.

--July 30: President Bush signs a housing bill including $300 billion in new loan authority for the government to back cheaper mortgages for troubled homeowners.

--Sept. 7: The Treasury takes over mortgage giants Fannie Mae and Freddie Mac, putting them into a conservatorship and pledging up to $200 billion to back their assets.

--Sept. 16: The Fed injects $85 billion into the failing American International Group, one of the world's largest insurance companies.

--Sept. 16: The Fed pumps $70 billion more into the nation's financial system to help ease credit stresses.

--Sept. 19: The Treasury temporarily guarantees money market funds against losses up to $50 billion.

--Sept. 29: The Fed makes an extra $330 billion available to other central banks, boosting to $620 billion the amount available to the Fed through currency "swap" arrangements, where dollars are traded for foreign currencies. It also triples to $225 billion the amount available for short-term loans to U.S. financial institutions.

--Oct. 3: President Bush signs the $700 billion economic bailout package. Treasury Secretary Henry Paulson says the money will be used to buy distressed mortgage-related securities from banks.

--Oct. 6: The Fed increases a short-term loan program, saying it is boosting short-term lending to banks to $150 billion. It says that by year's end, $900 billion in potential overall credit will be outstanding. It also says it will begin paying interest on reserves that banks keep with the Fed in hopes of coaxing banks into keeping more money on deposit at the central bank.

--Oct. 7: The Fed says it will start buying unsecured short-term debt, so-called "commercial paper," from companies.

--Oct. 8: The Fed cuts its benchmark interest rate a half percentage point, to 1.5 percent. It follows a one-quarter point cut on April 30 and a three-quarter-point reduction on March 18.

--Oct. 8: The Fed agrees to lend AIG $37.8 billion more, bringing total to about $123 billion.

--Oct. 14: The Treasury says it will use $250 billion of the $700 billion bailout to inject capital into the banks, with $125 billion provided to nine of the largest: Bank of America Corp., which received $15 billion; Bank of New York Mellon Corp., $3 billion; Citigroup Inc., $25 billion; Goldman Sachs Group Inc., $10 billion; JPMorgan Chase & Co., $25 billion; Merrill Lynch & Co. Inc., $10 billion; Morgan Stanley, $10 billion; State Street Corp., $2 billion; and Wells Fargo & Co., $25 billion. The $10 billion for Merrill has been deferred until its purchase by Bank of America closes.

--Oct. 14: The FDIC says it will temporarily guarantee up to a total of $1.4 trillion in loans between banks.

--Oct. 21: The Fed says it will provide up to $540 billion in financing to provide liquidity for money market mutual funds.

--Oct. 29: The Fed cuts its benchmark interest rate to 1 percent, matching the low point reached in 2003. The rate hasn't been lower since 1958.

--Nov. 10: The Treasury and Fed replace the two previous loans provided to AIG with a new $150 billion aid package that includes an infusion of $40 billion from the government's bailout fund.

--Nov. 12: Paulson says the government will no longer buy distressed mortgage-related assets, formerly the centerpiece of the bailout, and instead will concentrate on injecting capital into banks.

--Nov. 17: Treasury says it has provided $33.6 billion in capital to another 21 banks, with the largest stake being $6.6 billion to Minneapolis, Minn.-based U.S. Bancorp. So far, the government has invested $158.6 billion in 30 banks.

--Nov. 23: The Treasury says it will invest another $20 billion in Citigroup Inc., on top of $25 billion provided Oct. 14. The Treasury, Fed and FDIC also pledge to backstop large losses Citigroup might absorb on $306 billion in real estate-related assets.

Citigroup will assume the first $29 billion in losses, and after that the government will absorb 90 percent of losses and the company 10 percent. In return, the government will receive $7 billion in preferred shares and warrants for more than 250 million additional shares.
----------------------...

WOW! Helicopter Ben and Paulson are dumping the money on their buddies not just once, but continually. Investors and CEO`s have settled in to feed at the trough full of taxpayer money. What was that about a failed business model with the automakers?? That`s the pot calling the kettle black. I guess it repulses the black tie elite to handle money that was touched by someone that gets their hands dirty building cars!

2008 Nov 24 04:32 PM

[PeteK:]

For automakers, chapter 11 is the best way out.
No need to save face. There's no more face to save.
Michigan is such a failed State, GM should not stay there.
GM should move to the Southern States and start anew.

2008 Nov 24 05:10 PM

[welder:]

www.bloomberg.com/apps... Now THIS is startling! 7.4 TRILLION to the banksters with no accountability! Think the automaker bailout may be a diversion in the right pocket while we are robbed out of the left pocket?

2008 Nov 24 05:37 PM

[sheople:]

We would be much better off with Peter running things.

Some of the commenters that evidently are in the auto industry don't seem to realize that the auto industry is going to fail along with the rest of us. That can't be stopped. It's too late. We are all in the same boat. The fed/treasury/wall street crowd have screwed us all, & are still enjoying their graft. It will end when the bottom drops out of the dollar and the sheople are mad enough to put a stop to it.

2008 Nov 24 05:40 PM

[Strangewalk:]

I agree with those who say that assisting the automotive companies at this time is a unique issue, separate from bailing out the slippery, oily crooks on Wall St. and financial industry. GM and Ford especially have been getting their act together in terms of world beating quality improvements, dealing with the unions and restructuring in a serious, responsible way to compete as 21st century industrial powers, and their management now is top rate. The desperate situation they face is a result to some large degree of the general economic collapse and subsequent commodities bubble (high gas prices) caused by the slick con artists at Lehman, Countrywide, AIG etc. Peter Schiff is advocating throwing the the baby out with the bath water, and he missed it on this one.

2008 Nov 25 02:22 AM

[Richard wicks:]

On Nov 23 12:25 PM Ray Lopez wrote:

> Oh I get it. You didn't get yours, and you want the taxpayers to
> give it to you.

Schiff isn't asking for government handouts.

It's bizarre that people think that because Schiff is properly criticizing handouts to GM that he's in support of the bailouts of AIG, Citibank, and wallstreet in general.

He doesn't support any bailouts for anybody. He's a free market economist. It's shocking how few people in the United States have any concept of what that means.

Companies that are unprofitable have to go bankrupt. GM is just ONE of these companies. They have made garbage for years, and shock of shocks, nobody is buying their garbage. If they go under, they will be replaced with profitable companies that will be forced to meet market demands. This will hurt GM employees true, but it in the long run, it will benefit everybody. This is pretty simple.

Likewise, if AIG and Citibank are allowed to fail, it will hurt the entire country, but in the long run, it will benefit everybody. Andrew Mozillo needs to go to jail, along with Franklin Raines, and Dick Fuld - they don't need bailouts. They need to be prosecuted, they have to be stripped of all their assets, and this sort of criminal behavior needs to be stopped - OR we can just throw YOUR money at them since they are holding a gun to the head of the entire country demanding money - it's extortion, plain and simple - and it needs to stop.

2008 Nov 25 07:59 AM

[Richard wicks:]

On Nov 25 02:22 AM Strangewalk wrote:

> I agree with those who say that assisting the automotive companies
> at this time is a unique issue,

Then you don't know what GMAC is - it's the mortgage arm of GM.

What? You didn't know that GM was in the mortgage business and engaging in the same criminal behavior Countrywide was? Schiff knows this. I think his problem is that he assumes that people reading and listening to him are more educated than they actually are.

2008 Nov 25 08:01 AM

[john1:]

Just more unpatriotic negativity from liberals who question authority, and hate the troops.

2008 Nov 25 01:27 PM

[De Graaf:]

In response to commenter Ramses II;

He states that just before the crisis, GM was turning the tides by developing green cars basically. Well I can assure you, that the oil and automotive lobby in America is one of the strongest around and have never favoured to pursue a true green car.
How are you in your sane mind (I hope) to state that GM has been on the right path. They have a history of 20 years of mismanagement. Union contracts liabilities reaching into space and Medicare obligations every other Wal-Mart worker would be crying for to have.

Now when the shit has hit the Van (instead of an F), they must restructure and in the wake of an unavoidable crisis, they beg on their knees for 'the green to back' them up for restructuring, survival and sooner or later they ask for Medicare bailouts.... Come on! Wake up.

When Toyata and BMW came to the US manufacturing market, the GM's of America gave up instantly. They were not capable or patriotically enough to put their shoulders to work and become competitive. All to blame on their management. The workes just follow orders. Respect to all American workers though.

The backbone that Ramses II talkes about, is a crippled one. One that has lost the competitive advantages long time ago. It's unable to walk up straight. We actually have a safety-net for that issue. Chapter 11 or bankruptcy. Restructuring some bones with surgery.

Wake up son. And loose that credit card of yours.

2008 Dec 02 10:29 AM