Wednesday, December 10, 2008

We are to blame

he main purpose of chapter 11 bankruptcies is to renegotiate contracts, refinance debts, and to restructure and downsize a company. The UAW has been forcing the hand of the Big 3 by threatening strikes. The UAW only adds another business to the equation and contracts out its employees. I put the blame of the failure of the Big 3 squarely on the shoulders of the US government and the American consumers. The EU has kept prices artrificially high by imposing a severe gas tax. To the princely sum of nearly $10 a gallon. The result? Small vehicles, with small engines, with small emissions exhaust but very high mileage. Because of the lack of an American gas tax that is equally as high, we (American consumers) have craved and demanded big vehicles, with big dirty engines, that you must refill twice on the way to work. Americans like power. Americans like comfort. Americans like security and peace of mind. But at what cost. Money is the ultimate incentive. It can make devout husbands cheat on their wives. Tight-wallet families splurge on unnecessities. Until we are tired of paying high gas bills, we will NEVER compromise luxury for cost.

The Big 3 must pay for their lack of insight and intuition to move towards smaller vehicles. Nevertheless, they are only meeting the high demands of us the American public. We got them into this mess, and we must pay to pull them out. Or to let them drown in their sea of debts. We cannot blame big oil, the big 3 or the big Fed. They are only doing what we demand of them. Why is it that we attack Big Oil for making money? For doing everything they can to make a profit. They hold no guns to our collective heads. In fact it is we that hold the symbolic gun, demanding that they do as we say even if it runs them into the ground.

Tuesday, November 25, 2008

Back to Basics

I never thought I would ever say this about a socialist, but I agree with President-elect Barack Obama when he says we need to trim the fat off the national budget. Most if not all politicians have made this claim upon election but how realistic is this claim. Can we really eliminate the programs that get politicians elected.

I will start with the well known federal government programs. Welfare benefits the chronically poor and the lazy. I included lazy because while there are citizens and families who struggle to get by and work two, even three jobs in addition to Welfare there are many more who know that they can work just enough to receive aid but if they worked anymore they would be ineligible.

The IRS is another wasteful entity. Why do we need dozens of volumes of tax code that God himself can only understand? Lets reset the scales to a flat tax rate where everyone pays the same tax be it sales or income.

Lets get back to basics and cut everything but the bare necessities. From there we will start from the ground up adding programs as needed. And for the agencies like NASA that have no obvious social affect but still has millions if not billions of dollars in assets, research, and property be auctioned off to the highest bidder. I am sure some bored entrepreneur with a couple billion laying around for his fancy will find his new rockets to be really cool toys.

If an agency has the potential to earn a profit, Let It. There is no reason Non-profit has to mean Money-Losing. We should let the credit markets get freeze-dried, let the Big Global 3 (Toyota, Mercedes-Benz and BMW) buy the Big US 3 (General Motors, Ford, and Chrysler). MB once bought Chrysler but after a series of dismal failures they practical had to pay someone to take it.

If we let the banks fail and insurance companies go under we will have a massive cut back that will force all companies that are unable to compete to shutdown or declare bankruptcy. Modern bureaucrats are unwilling to accept that its time to return to basics.

Thursday, October 30, 2008

Are we Bailing CEOs?

In light of the recent credit crunch resulting from sub-prime mortgages, the federal government has agreed on a $700 billion bailout plan for these financing institutions. The idea was that when there is a credit freeze in the market, banks stop lending, businesses quit borrowing, and the economy does not grow. The fed hopes that by pumping more than $700 billion in liquidity into lending institutions the banks will ease their lending requirements and begin lending funds again.

Banks are notorious for their generous annual bonuses paid out to their CEOs and other top advisers. This bonus is thousands of times larger than the average annual American income and is on top of their overly bloated salary.

Why do CEOs of failing banks continue to be hoisted to their relaxed and cushioned seats at a steep cost to the taxpayer? Should we reward these obese fat cats of failing businesses for running their corporation into the ground?

There are easily thousands of state and local banks that are not begging for a bailout. Why not direct investors, employers, and businessmen to these smaller more stable banks? Banks screwed up big time. Why are we not demanding that they be held responsible for their inept lending practices by letting them fall helplessly to their knees and experience first hand the damage to the global economy that they have done. Instead we let them roll by in their Mercedes and BMWs while we try and put bumpers back on the Junker cars that they so generously give us.

Thursday, October 2, 2008

Restraining the Beast

Basic capitalism economics state that government regulation can at times improve market outcomes. What about the rest of the time? Does government intervention really help the economy? John Stossel is an Emmy award winning author and journalist who writes mainly on consumer issues. In this editorial concerning the Federal Trade Commission (FTC) and their attempted stonewalling of the merger between Whole Foods and Wild Oats both organic supermarkets.


The FTC claims that the merger will create an unnecessary monopoly that will mean quote “higher prices, reduced quality and fewer choices for consumers.” Trade happens in a capitalistic system when two or more parties meet to exchange goods or services that will result in a mutual benefit. Why would a merger be any different?


Even a single producer in a system cannot charge what ever he wishes, he is limited by the demand of the consumers that decreases as price increases. If price is raised high enough, eventually a new producer will enter the market because of the enticing profit to be made. Once he enters, prices drop and quality goes up.


How many tens of millions of dollars taxpayer and consumer alike have been squandered away fighting the merger? Could that money not be used to increase workforce, product quality or be used to lower taxes and funnel more money into the economy? Why is the federal government wasting everyone’s money fighting a merger that would, in all likelihood, benefit the market?


Outside the FTC building is a heroic masculine male figure (government) restraining a wild mustang that as the statue describes would wreck havoc and destruction if not regulated. As far as I am concerned, government regulation and limitation to the free-market only hinder its growth and expansion. Government cannot guarantee competition and growth but it can guarantee a market that stalls and shrinks if regulations and rules choke it too tightly.

Monday, September 15, 2008

Sub-Prime Fuzz

After the recent failure from the mortgage banking industry, both presidential candidates Barack Obama and John McCain made statements in vain attempts to inform voters of their respective stance. In the statements made Monday, both candidates had little to say aside from reiterating their vague stance is on government oversight of private industries.


The so-called crisis resulted after a number of large mortgage banks wrote many sub-prime loans. A sub-prime loan is one given to a person or family who does not qualify for a normal mortgage.


Obama hails this as the “the most serious financial crisis since the Great Depression,” and continuing to highlight that McCain's policies will be the same as President Bush’s to “stick our heads in the sand and ignore economic problems until they spiral into crises,” Obama claimed.


This article is worth reading because it demonstrates and highlights that neither candidate has a clear picture of what their financial policy will be once in office