Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Congress Votes to Bailout Big Three Automakers with $15 Billion Cash Injection

Companies / US Auto's Dec 11, 2008 - 10:41 AM GMT

By: John_Browne

Companies

Best Financial Markets Analysis ArticleToday, Congress signaled its intention to use $15 billion in public money to bail out the "Big Three" automakers with a so-called "bridging" loan. You would think that after becoming a major issue during the presidential campaign, politicians would have become wary of "bridges to nowhere."

GM, Chrysler and Ford are all operating at losses. They have failed business models. Sadly, they do not employ people in a profit-making enterprise. Rather, they "misemploy" people to manufacture losses, and have been doing so for decades.


The "Big Three" represent all that is bad in American industry. They may be past the point where even radical surgery can help. However, like an organ donor, many of the resources now poorly utilized by these companies could offer tremendous value to more vibrant manufacturers.

For years, the Big Three have rolled over in the face of trade union threats. On a per car basis, these companies today endure costs that are on average $600 higher than those faced by foreign competitors for cars that they manufacture in the United States. How is it possible for any bailout to counter this acute competitive disadvantage?

GM already owes debts of some $42 billion and Ford some $32 billion. How is it that an injection of a mere $15 billion of public money will succeed? It won't. The Big Three are a financial "Black Hole."

If that were not so, why is it that Cerberus, the private equity company that owns Chrysler, will not put in another penny? These financial and business "wizards" clearly see that the Big Three cannot survive without massive and long-term public subsidies. Clearly, they also see a "Black Hole."

Despite its promotion as a "bridging loan", the Congressional plan is a bail-out, pure and simple. It will likely be the first of a series of continuing subsidies to privileged, misemployed workers whose sense of entitlement and blindness to the changing economic conditions around the world has broken their companies. Having bled their parent companies to death, the UAW now wants to bleed the American public.

The problems with the Big Three are emblematic of very serious challenges that confront America. But the crisis also is a once in a lifetime opportunity. Restructuring the American economy is long overdue and is now urgent. It will be painful and difficult. It will require leadership of an extraordinary quality. It will also require political conditions that will allow for stringency. Finally, it will require money: bucket loads of it.

At long last, the recession we have been long predicting is being officially recognized. The public is becoming aware of the magnitude of the crisis, and I feel that they are psychologically prepared for tough remedies. Given the mandate for change that propelled Barack Obama into office, President-elect's impressive rhetorical abilities, the public could be inspired to accept the necessary pain that would accompany a meaningful restructuring of the American economy.

The polls indicate that the American public clearly opposes any public bail out. The public has it right. Why should other workers, including employees of other profitable American auto plants, fighting for their jobs, approve of the public financing of their privileged competitors?

If allowed to unfold along lines dictated by the marketplace, the current recession will unwind the excesses of the past. The entire auto industry will suffer, but it will die if all the attention is showered on the terminal cases rather than setting the conditions for the healthy companies to produce automobiles profitably.

To prop up our failures is to succumb to the politics of Socialism, which has proved countless times to be the politics of economic decay. Why would an American Congress agree to essentially nationalize the Big Three in face of opposition from the majority of Americans? The answer is fear.

It is clear that Congress is scared stiff of the pain required to achieve the restructuring that is vital to the regeneration of American wealth and power. Unabashed, it appears likely to pour massive amounts of dollars into the failed sectors of the U.S. economy. They are not choosing to create new employment, but to continue misemployment.

Should President-Elect Obama fail to use his great skills and his considerable grass roots support to inject some backbone into Congress, all holders of U.S. dollars and U.S. equities should beware. They stand to be robbed by Congress.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read Peter Schiff's new book For an updated look at his investment strategy order a copy of his just released book " The Little Book of Bull Moves in Bear Markets ." Click here to order your copy now .

For a look back at how Peter predicted our current problems read the 2007 bestseller " Crash Proof: How to Profit from the Coming Economic Collapse ." Click here to order a copy today .

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in