CaptainJJack

Obama Wants a 'Better Plan'? Here's One: Bite the Bullet

There is a profound difference between today and other recessions I lived through. What we are going through right now is closer to a depression than a recession. As Ray Dalio puts it, it is a D-process.

We are going through the painful effects of de-leveraging, the painful effect of a downward spiral in globalization, and the unintended consequences that always occur when the government gets involved.

However, I see no reason to support the idea that we now should slide into a depression based on your belief system.

I am always amazed at comments that we are facing hyperinflation when the velocity of money has fallen off a cliff. YES the FED is printing money, and YES the FED is monetizing some of the debt.

But, to suggest that this automatically leads to hyperinflation when the value of EVERY asset class, other than gold, has fallen dramatically, makes no sense to me.

If anyone seriously thinks that nationalizing Citi or BofA will lead to a better outcome with the Feds running it would have to prove to me that the Feds, with all of the attendant politicization, are better at managing banks --- something I have not ever seen.

I would suggest there are PROFOUND differences between the economies of Norway and the US. For example, the politicians in Norway get very high ratings and have a high degree of credibility;i.e. people trust that the government would do a good job.

Finally, the Japan crisis was more than just "zombie" banks, as I read it. It was the fact that the banks were continuing to prop up their insolvent sister companies in their Keiretsu. They were not only holding bad loans at book value, they were loaning to insolvent entities, making the problem worse.

Let the Detroit Automakers Fail

Knowing one of the auto CEOs personally, I can tell you that the LAST thing on his mind is trying to keep his job.

Normally, I would say, "let them fail". But I had also said that AIG and Lehman should fail, and I think, in hindsight, that was very shortsighted. If we would have had an AIG failure, we would be heading for a depression, right now, and as it is, the Lehman failure took a very bad situation and made it much, much worse.

Letting the big three fail will cost this economy an enormous number of WHITE collar jobs. For all the talk of how efficient the foreign auto companies are, where are they designed and engineered?

We need to have industries that actually make something, and the one thing about a car industry is that if you can make cars, you can make just about anything.

In any event, if you see GM go under, expect a 6000 Dow because an ENORMOUS number of jobs and income will go with it. FAR more than just the big three.

$25 Billion, or even more realistically, $50 Billion is PEANUTS given the stimulus needed to get this economy going. Even Martin Feldstein is talking about $500 Billion++.

It will be a lot better to save the jobs, in the short run, until the economy gets back on its feet.

Once it does, though, I say, let them go if they cannot compete, and while I am not happy to have sent the bailout money down a rat hole, and would still be much happier than if we did not spend the money.

Ford Celebrates, GM Scratches Its Head

@Paul8756

The one thing I can assure you is that Ford understands where their future lies.

They are spending BILLIONS of dollars converting three truck plants into car operations. The WHOLE POINT of Mulally's world platform is to get more fuel efficient, competitive cars into the US.

The main problem with NGV is size and range. You either have bigger vehicles, or they do not go as far, and that is why even Boone Pickens is pushing replacing the truck fleet with natural gas, and not the car fleet.

The ultimate vision at Ford is electric vehicles, but the battery technology is not good enough yet. The batteries are too expensive and they do not have the range.

The decision to start up the truck line is a pretty simple one. You have idle capacity and elastic demand. EVERY truck they sell over their marginal cost reduces the loss.

It is a no brainer. Further, there will ALWAYS be a truck market even if it is much smaller than now. Again, Ford understands the realities.

Mulally had geared Ford for a 14% market share in a world of 14 million cars sold in the US. They now see are world of 10 to 12 million cars, at least in the short run, and they have adjusted production.

The one thing Ford did that the others did not do was go out in 2006 and 2007 and borrow as much as they could possibly borrow. This was as much due to the fact that Ford people view themselves as car people, not finance people, and they want to get the money issues out of the way so they could focus getting the cars right.

In a normal world, Ford would be thriving right now, as they were last year before the downturn.

Right now, though, the future is not as much in their hands as it is in the hands of the economy gods.