CLICK HERE FOR AIR AMERICA INTERVIEW with DeLear, Paul Berenson and Bree Walker
I was shocked to hear a recent CNN/Opinion Research Corp. poll showing 61% of Americans opposed to bailing out U.S. automakers.
This was disturbing to me because it seems that even after the fallout of what has become a staggering $8.5 trillion dollar bailout package, some folks are still thinking along the lines of the failed free market ideology, that the markets somehow should magically sort the mess out in our auto industry. Another stated reason for opposing the auto bailout is that folks feel it will be unfair to taxpayers.
What’s happening in Washington and Wall Street today is so far beyond fair, so far beyond normal circumstances and any cited resemblance to the proverbial “marketplace” is laughable. New thinking and new perspectives are demanded.
Letting GM, Ford and Chrysler go bankrupt will send shockwaves of unemployment through an economy in triage-losing millions of good paying jobs in the midst of the worst recession since the Great Depression is unacceptable and inhumane.
In historical terms, it would be helpful to take inventory of where we are at to determine just how unprecedented of a crisis this is. Let’s put the gargantuan $8.5 trillion dollar bailout package commitments into perspective. Here are some of the massive projects our nation has embarked upon and what they cost as Western Standard reports:
The current bailout has cost more than all of these major government expenditures combined:
• Marshall Plan: Cost: $12.7 billion / Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million / Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion / Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion / Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion / Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est) / Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551 billion / Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billionTotal: US$ 3.92 trillion (inflation adjusted)
World War II in today’s dollars at $3.6 trillion is less than half what the financial bailout is now being projected to cost!
We have to accept the fact that as a nation we are practically at war to save our economy and we are all in this together.
Why We Can’t Let Ford, GM and Chrysler Go:
• Our trade deficit needs to go down-not up. Estimates put our national trade deficit at $830 billion dollars/ year, a massive transfer of wealth sucking out of our country which has to be stopped. If we let go of our U.S. automakers, we will increase this trade deficit by billions upon billions, the opposite direction of where we need to go.
• Jobs, jobs, jobs. With our economy in ravages, we cannot afford to let millions of more Americans go unemployed. We need to protect and retain employment as a priority to recover and rebuild our economy.
• National Security and Self-Determination. A healthy economy is one that is diversified, and part of that diversification should include a sizable portion of every industrial sector to be domestically produced. Wittling down our U.S. owned domestic manufacturing sector to the point of nonexistence is an existential threat to national security as it is a question of self-determination. Slowly transforming our economy into a debt-serviced service sector of wage-earning consumers, producing nothing, buying all things foreign and leveraged to the gills, will bankrupt our nation. America hollowed out into a debt shell, and letting America become a wholly-owned foreign subsidiary is not a good plan for our future.
The U.S. automakers definitely need to restructure to reduce capacity, build hybrid greener cars instead of gas guzzlers, and collaborate with unions to cut costs and create successful business models for the future. A survivable and healthy relationship with our environment necessitates this retooling. This can all be included as legislative conditions in the bailout package, after all, the Big Three are requesting to take us on as partners. But when we have suffered continual national trade deficits since the 70s compounding our country into default, for many decades the stewardship to our economy by elected officials and corporate leaders has been lame. Politicians are being paid off to not pay attention to all the behind closed door deals being made at the expense of everyday Americans. Enough is enough.
The kind of thinking and policies passed that have allowed the unregulated reckless behavior of our banks and financial sector go unchecked was not by accident; many made many millions. In the years to come, we should really reflect on what got us in this mess and take steps to prevent it from ever threatening us again. The political decision making process needs to be insulated and compartmentalized so as to prevent external manipulation that serves greedy agendas. A wall of separation needs to be erected to preserve our representative’s ability to be neutral arbiters of what should be done for the benefit of our people and our nation.
With this separation of buck and state, maybe then we could prevent fiscal opportunists from ever “Enron-izing” the American economy again.
What do you think about this crisis?
Do you see any evidence of the recession around you?
apolito said:
I’m in the majority who think that the Big 3 are bankruptcy candidates. I’m not sure that it would mean any more jobs lost than if they get bailed out. Heads will roll either way and I doubt that Ford and Chevy anyway would go out of business. They would restructure and renegotiate union contracts which are very unwieldy instruments to deal with.
The problem is and has been management. Wasn’t it Jefferson, Einstein or some other luminary who said that you can’t solve a problem with the same mindset that created it? Those CEOs have to go. I challenge you to compare the mission statements of Detroit with the mission statements of Japan. They’re easily found on each car company’s website. You will see a very high-level or root cause of this problem.
Al Polito
http://www.alpolito.net
Honky D said:
Byron —
Thoughtful and thought-provoking, as always.
What do I think about this bailout?
Well I am not as knowledgeable as you are about the manifold workings of the American economy. But I will say this: a dear friend of mine, whose veins coarse with Native American blood, said he thinks the bailout to financial corporations, to the tune of some $700 billion, is probably an even bigger swindle than the one perpetrated on his ancestors.
That’s debatable, but one thing I agree with him on is that there should be no such thing as a corporation that is “too big to fail.” If it’s that big, it’s just plain too big. Nationalize it, protect the investors and workers, smash it into pieces and return it to the private sector. But don’t just prop it up.
Th very institutions that got our economy into this fiasco are the ones we’re supposed to save with our tax dollars? We’re being fleeced if you ask me.
I have more sympathy for the car companies, if only because we’re talking about blue collar workers there, not bankers. But I think we have to have green strings attached to that bailout.
For me, the economy is not the bottom line. My bottom line is the environment.
One possible silver lining in this maelstrom may be a kind of humbling of the American consumer, whose profligate spending and voracious habits were unsustainable anyway.
Our per capita carbon footprint is the biggest in the world, totally out of control. The REAL economy — the ecosystem — would’ve caught up with us eventually, even if Wall Street didn’t melt down (yet). I actually think this had to happen, and that if it’s managed properly, it can be a painful but necessary part of a transformation that needed to occur.
That transformation is only in its embryonic stages now. Where it goes from here is in the hands of a man I voted for. I pray he has the cojones to stand up to the status quo, the one that isn’t looking down the road to 106 years from now, as Obama asked us to in his inaugural address. They’re the ones still obsessed with the next quarterly report. And I am goddamn sick of being ruled by them.
That’s my two cents (or possibly more!)
summars said:
Byron DeLear asked: Do you see any evidence of the recession around you?
Byron,
I think the recession actually started near the end of 2006 or beginning of 2007.
I created this web-page on NOV-2006: http://one-simple-idea.com/Rec…
It appears the prediction was correct, but one doesn’t have to be a rocket scientist or clairvoyant to see what was coming.
Later, about SEP-2008, I created this web-page: http://one-simple-idea.com/Rec…
. . . which details why I think the recession really started around December 2006, or January 2007.
The news reported last week that the recession started about December 2007.
Why are we only finding this out now (a year later) ?
Why were we being told that GDP was growing, “there is no recession”, we are “a nation of whiners”, and merely suffering from a “mental recession” (http://www.youtube.com/watch?v=2NVjq2py7BA)?
Either way, I think we get lied to about a lot of economic statistics.
Is inflation really on 3.7% as of 1-NOV-2008 ?
Or is it really closer to 13.2% (based on the 1983 inflation measurement method) ?
Is unemployment really only 6.5% ?
Is GDP really $13.86 Trillion for year 2007 ?
What else are we being lied to about ?
Now $8.5 Trillion (http://www.latimes.com/news/printedition/front/la-fi-pricetag30-2008nov30,0,7501177.story) is being used to bail out banks , corporations , insurance companies , and Wall Street.
Byron DeLear asked: What do you think about this crisis?
Byron,
Here’s what I think.
Look at this graph of nation-wide debt: http://one-simple-idea.com/Deb…
It’s closer to $54 Trillion now, and if you add the $12.8 Trillion borrowed from Social Security (http://www.socialsecurity.org/reformandyou/faqs.html#2), leaving it pay-as-you-go, with a 77 Million baby-boomer bubble approaching, the total nation-wide debt is $67 Trillion.
$67 Trillion in debt is 483% of the $13.86 Trillion GDP (for year 2007).
95% of all U.S. money in existence is debt.
Only 5% all U.S. money is in the form of dollar bills and coins.
In year 1950, the M3 Money Supply was $135 Billion.
By year 2005, the M3 Money Supply was $10.15 Trillion (75.2 times larger).
Where am I going with this?
We have a monetary system that is a dishonest, usurious, inflationary pyramid scheme that is doomed to collapse.
The collapse will occur then the federal government and Federal Reserve can not loan any more money because most people are already so deep in debt that they can’t take on any more debt.
That is happening now. Therefore, the federal government and Federal Reserve are now giving money away to banks , corporations , insurance companies , and Wall Street.
However, the U.S. Economy is 70% consumer driven.
But even if the federal government and the Federal Reserve start giving away money to tax payers (in the form of more stimulus checks), it would take massive amounts to even put a dent in $67 Trillion of nation wide debt.
Even if the federal government and the Federal Reserve start giving away money, it will cause hyperinflation, which will make a bad situation much worse, by debauching the currency, and destroying everyone’s savings, pensions, and entitlements. It won’t matter how much money they give you, because you would need a truck load of U.S. dollars to buy a cup of coffee.
Hyperinflation has happened before and it can happen again. Today, we have the perfect ingredients for hyperinflation (not only in the U.S., but in numerous nations). Hyperinflation has occurred in the following countries in the last 150 years:
Weimar Republic of Germany 1920 – 1923 (1/466 billionth of starting value),
>Zimbabwe 2003 – present (6 quadrillionth of the starting value and continuing to fall),
>Former Soviet Union 1993 – 2002 (1/14th of starting value),
>Argentina 1975 – 1983 (1/1,000th of starting value),
>Austria 1921 – 1923 (about 1/4 of starting value),
>Bolivia 1984 – 1986 (1/1,000 of starting value);
>Bosnia-Herzegovina 1992 – 1993 (1/100,000th of starting value),
>Brazil 1960 – 1994 (1 trillionth of starting value), >Chile 1971 – 1973 (1/3rd of starting value),
>China 1947 – 1955 (1/10,000th of starting value),
>Greece 1943 – 1953 (1/50 trillionth of starting value),
>Hungary 1945 – 1946 (100 quintillionth of the starting value),
>Hungary 1922 – 1923 (1/4 of starting value),
>Israel 1976 – 1986 (1/16th of starting value),
>Japan 1934 – 1951 (1/362nd of starting value),
>Poland 1990 – 94 (1/10,000th of starting value),
>U.S.A. (Confederate States of America) 1861 – 1865 (1/90th of starting value, and then, by the end of the Civil War, the Confederate Dollar depreciated to zero).
It also happened in the ancient Roman Empire, when the silver and gold coinage of that day was progressively debased with base metals, in order to fund wars, giveaways to the Plebeians, and various other adventures.
If the federal government and the Federal Reserve crash the currency (http://www.youtube.com/watch?v=4n3g5lUgkWk&feature=related), it will turn a bad recession into a bad depression. There is a fairly strong possibility of hyperinflation, because of a perfect storm of economic problems (http://one-simple-idea.com/NeverWorse.htm), and the motive to prevent defaulting on current debt by creating more money out of thin air.
The interest on that total nation-wide debt is at least another $3 or 4 Trillion per year.
The interest on the National Debt in 2007 was $429 Billion (17% of the total federal revenues of $2.5 Trillion), and the federal government had to borrow and create money out of thin air to merely pay the interest.
Anyone that doesn’t believe any of that is true, then please try to answer one simple question:
Where will the money come from to pay the interest on the $10.7 Trillion National Debt or the $67 Trillion nation-wide debt, much less the money to pay down the Principal debt so that it stops growing ever larger, when that money does not yet exist ?
The point is, the debt-pyramid is nearing the point of collapse.
Our fiat money system has been thoroughly abused for 52 consecutive years of incessant inflation and deficit spending, and it is now catching up with us.
It’s simple math.
For example, simply amortize the $10.7 Trillion National Debt and see how much interest would result (at only 4.5%) from the $10.7 Trillion of Principal debt: http://one-simple-idea.com/Nat…
IF we even had the discipline to stop borrowing , creating money out of thin air , and rampant spending, it would take 164 years to pay down that debt.
That’s not going to happen.
It’s too late now.
The debt-pyramid got out of control.
It is a mathematical certainty.
It may take a few more years before the debt is so large that it is completely unmanageable, but all of that massive debt is not simply going to disappear without massive defaults somewhere.
Regarding GM, FORD, and Chrysler . . .
Chrysler is a private company, so I’m not sure anything should be done for them.
For GM and Ford, I’m not sure throwing billions at them will change anything.
They have been severely mismanaged for decades.
And where do we draw the line on these bail-outs?
Already, $8.5 Trillion is earmarked for bail-outs?
Should we bail out the Big 3 auto makers?
Sure, why not toss in another $34 Billion at the Big 3, because it probably doesn’t matter at this point.
That is, it’s most likely too late to avoid the collapse of the debt-pyramid.
It took 52 consecutive years of incessant inflation and deficit spending (both in government and the private sector) to create our $67 Trillion nation-wide debt-pyramid.
$67 Trillion amounts to $219,672 per man, woman, and child in the U.S. (population = 305 Million).
However, 20% of Americans have a negative net worth (i.e. in debt).
40% of Americans (on average) have zero net worth.
80% of Americans own only 17% of all wealth in the U.S.
1% of the wealthiest Americans own 40% of all wealth (doubled from 20% since 1976).
It’s going to get worse before it gets better.
However, if the federal government and Federal Reserve cause hyperinflation, it will make a bad situation much worse.
And that looks exactly like what it going to happen.
The Federal Reserve and FDIC are essentially broke and the Federal Reserve is now creating money out of thin air.
There will be painful consequences for pumping $8.5 Trillion (or more) of money created out of thin air into the system.
That may sound like a lot of dooms day rhetoric, but it’s closer to the truth than most realize.
I believe we are headed for another Great Depression.
Despite what some in D.C. think, creating tens or hundred of trillions of new money out of thin won’t stop it.
I think we’re going to have to learn the hard way again.
That’s not merely a feeling, but an opinion based on numerous abuses (http://one-simple-idea.com/DisparityTrend.htm) and deteriorating economic conditions (http://one-simple-idea.com/NeverWorse.htm) that have never been worse ever , and/or since the Great Depression.
At any rate, the voters have the government (http://one-simple-idea.com/Links1.htm) that the voters elect (and re-elect, and re-elect, and re-elect (http://one-simple-idea.com/CongressMakeUp_1855_2011.htm) , . . . , at least until that finally becomes too painful).
http://One-Simple-Idea.com/Deb…
http://One-Simple-Idea.com/M3M…
http://One-Simple-Idea.com/Rec…
http://One-Simple-Idea.com/Nev…
http://One-Simple-Idea.com/Dis…
http://One-Simple-Idea.com/Con…
http://One-Simple-Idea.com/Sce…
http://One-Simple-Idea.com/Lin…
http://One-Simple-Idea.com/Ill…
http://One-Simple-Idea.com/Con…
http://One-Simple-Idea.com/Sol…
Haint said:
Byron,
If DC lets the Big 3 fail there are no words to describe the harm that will do to the US.
I understand people are upset with the US car manufacturers but let’s get real. The people who will pay the price for the legacy brats’ failures in mismanaging the companies into dissolution will not be the upper managers who had fleets of cared for cars at their disposal. Those people have already stashed away their small and large fortunes. They will simply step out of their cushy jobs and walk away.
No, the people who will suffer will be the union workers at the factories, the waitresses at the cafes near those factories, the drivers who deliver parts to those factories, the small stores near the factories where the workers used to shop, and well, you get the picture. These are not the people responsible for running the car companies in the ground over the past thirty or so years. No, you have to check the lists of Harvard MBAs to find the real screw-ups.
So how about, as you mentioned Byron, looking at the roots of the problems and make a reality check? Instead of blindly playing the game the way we’ve all been told to play it, how about taking a good, long look at the Emperor with no clothes? In short, let’s stop treating capitalism like its some sacred belief system handed down on two tablets. Maybe we need to make some serious changes to the way we do business and what we expect from business.
In the meantime, let’s remember that those thousands of people working at the Big 3 are people just like us with families, mortgages and dreams. We wouldn’t want our lives to be torn apart due to another person’s stupidity or evil. Therefore, it is only right that we should try to prevent that from happening to them. We must bail out the Big 3 but when we do let’s take the opportunity to make the companies better, not just help them stay afloat to keep repeating their mistakes.