Many Canadians view the USA as a bastion of capitalism compared to Canada and European countries. Just remember, and this most recent bailout of a long terminally ill corporate giant emphasizes the fact, that the United States of America is just as deeply embedded in socialism as other western nations. If the founding fathers can see what has happened to their country since the days of Jefferson they must surely be sick with grief.
The American Fed is even more broke than than GM! The only things that the Fed has over GM are better cash flow and more remaining credit. The nanny state is sacrificing the the present and future purchasing power of its taxpayers by borrowing trillions, YES TRILLIONS of dollars to bail out companies that are no longer viable. Yet the Fed is barely viable itself! Neither GM's $170,000,000,000.00 plus debt will ever be paid nor will the Fed's...are you ready for this $11,000,000,000,000.00 that's eleven trillion by the way, plus debt ever be paid off.
Probably the key reason why this tragedy, this crime, this gross disregard for the constitution and what's worse, common sense, must surely be the abandonment of tangible wealth in the the currency of the nation. It's the same around the world. While no system is perfect, here it is succinctly. This is a quote from another article I wrote years ago called “Once Silver Now Steel”. As we watch the decline of the American empire that began in the latter part of the 20th century, this final dramatic crash of GM reminds me to pay attention because when the end comes it comes with uncanny speed and power.
In the days when was currency was valuable rather than token, the folks who owned it were rich because the hard currency itself in the form of high carat gold or silver held its value in the tangible asset, not in the promise of purchasing power and backed by the government of the day. Today if you have a million dollars in hand it will be worth less tomorrow than today due to inflation. If you keep it under your mattress it will be worthless in a few years. If our money was still valuable, wealth would be in the hands of citizens rather than governments. The mint would be forced to purchase precious metal from the mines and related industries instead of just making base metal tokens. Actual wealth would be placed in the hands of the people instead of virtually worthless paper and steel tokens and it would hold its value!...workers could save money without being forced to invest it. Governments couldn't print money to pay debts because it would have to buy gold and silver to do it.........Accountability would be required.
So after all these years, some would say decades, General Motors is so close to filing for chapter eleven in the US that the Fed is rumored to be planning a twenty seven BILLION dollar bailout package for the giant failing automaker. Perhaps the buzz phrase "GM's too big to fail" will become a self fulfilling prophesy. Needless to say, the ramifications of GM actually going bankrupt would be wide reaching, no doubt touching deep into the hearts of communities far and wide and affecting millions of people who in one way or another make a living or who's incomes are supported by the manufacturing of automobiles.
The water cooler, on line, talk radio and tavern talk runs the gamut from comments like "it's only because of the global economic slowdown that GM has run into tough times". And, " GM has shot itself in the foot by building huge, lousy cars that use too much fuel and that nobody wants to buy. These are urban myths.
Of course, the real reasons why GM is going broke are complex and GM has been going broke for a long time. Some of the reasons are the result of bad management decisions, like buying Hummer for example, but many are the result of market conditions that are and have been out of control of even a market player as big as GM. Like, for example, the fact that the import/export market has been a one way street for a long, long time. Japanese cars go to America, American cars don't go to Japan. And to complicate matters further, there's GMAC. GMAC lost big time in the subprime mortgage debacle. Then there are the high union wage collective agreements, crushing pension and other benefit obligations and changing demographics.
For an eye opening account of just how long GM has been bleeding to death I urge you to read Porter Stansbury's articles "Letters from the Chairman of GM". Reading these articles will crystallize just how dire GM's situation is and how the current situation is NOT a result of the most recent and dramatic economic conditions.
http://www.growthstockwire.com/archive/2008/sep/2008_sep_20.asp
http://www.dailywealth.com/archive/2007/nov/2007_nov_10.asp
Mr Stansbury's ( http://www.stansberryresearch.com/ ) letters were controversial at the time of his writings because so many people were unaware or disbelieving of just how dire the situation was and is at GM and based on my observations, THEY STILL ARE.
So given this long preamble about how GM came to find itself at the "end of the world as we know it" I must ask the following questions, " should GM be allowed to fail" and " can GM really be saved anyway. Well my answers are yes to the former and no to the latter.
Here's why. I'm philosophically opposed to pumping taxpayers money into specific companies.
That only amounts to a subsidy for a failing company that gives it an edge over its competitors. How can a market work effectively for its participants when the the government is subsidizing some companies and not others.
It's far better to let those affected by changing conditions in the market take advantage of social support systems already in place as they need them. As examples, employee pensions are insured, unemployment insurance is there for displaced workers.
Workers with skills and drive will be picked up by the remaining market players. Others will move on to other industries.
And GM as a viable business cannot be saved anyway. Because GM itself with all of the tools and resources available to it for the last twenty years has not been able to turn a profit. Providing a massive bailout package for a huge, long failing company simply postpones the inevitable at taxpayer's expense and in a very inequitable way.
The elephant has been shot a hundred times already...it just hasn't fallen down yet. GM should be allowed to fail in the normal course of business and its assets and debts absorbed by the remaining investors in the marketplace
Regards,
Julian.
Copyright JulianOnePlanet Publications 2008
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