Global Warming Examiner

Why GM's Wagoner and Not BofA's Lewis?

Wagoner has always stated that bankruptcy was not an option. This was not a good negotiating position to get concessions from the UAW or the bond holders. What reason do they have to make concessions. Let the other guy make the concessions or get the government to bail out the company. Gee, bondholder might bet 100% back on their debt if they just wait.

Wagoner has been doing everything he can for the shareholders to keep the game going. Making high margin cars was the only game that had any chance of paying all the costs. That game is finally over. Serious concessions and restructuring are the only way to get the company back to being a viable and profitable enterprise.

The new CEO, Fritz Henderson, has stated that bankruptcy is a possibility and maybe sooner rather than later. Much better negotiating position that is being backed up by the government. One more chance for the UAW and bondholders to make a deal. If they don;t then Obama and the bankruptcy judge will make the deal. Likely cuts will be to any worker payments that are not for current car production. Bond holders might receive equity for debt to cut debt payments.

In either case, the result will be a company that can survive and prosper on its own with its new cost structure. The new GM will likely make better quality cars. We need GM to produce energy efficient cars as global warming and oil shortages haven't gone away. Hopefully the new GM will have little debt and lots of equity to fund the new car designs we will need.

How Ivory Tower Economists Created the Housing Bubble

The Fed is printing money and the government is going to start pumping large amounts of cash into the economy in May. This and low interest rates will cause an expansion of credit and inflate our economy. Prices for all fixed assets (like houses) will rise and bail out homeowners and the banks.

The question is: Who will the losers be? The simple answer is all the people that own debt like money market funds, bonds, annuities, and people on fixed incomes like retirees. BTW - this includes all of the foreign holders of US debt, who have been keeping their currencies artificially low to promote exports to us. They also hold a lot of the paper backed by mortgages as this was a way they could recirculate their dollars and earn returns higher than the low US government rates.