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Romer
11-20-2008, 09:44 PM
Sometimes the funniest things are in real life

You guys see the CEOs from the Big 3 in the hearing to beg for money.

The flew in their Corporate private Jets. One Senator asked why the couldn't at least pool jets and come in one.

That was so stupid on their part its funny. I think they shouldn't bail them out. They wont go away, they will go into bankruptcy, restructure, cut costs and come out stronger in the end.

Hulk
11-21-2008, 12:22 AM
It will be interesting to see if GM goes belly up after a few years. I read an article somewhere online a few days ago that compared the government assistance for GM to government assistance with a British car manufacturer in the 80s. The only result of the British scenario was the company held on for a few years longer before eventually folding.

Chrysler and Ford are probably in better shape to stay in business for the long haul.

If they all go out of business, someone will buy the mfg equipment for 10 cents on the dollar, and start a new company with no unions, and maybe make some interesting vehicles again.

timmbuck2
11-21-2008, 08:59 AM
Hmm...Honda, Toyota, Nissan, etc are all doing quite well......

Nay
11-21-2008, 09:32 AM
Problem is the downstream suppliers will go down, too, and they supply more than US manufacturers. Who will buy a vehicle from a car company in bankruptcy?

Of course, who will buy a vehicle from one of these companies anyway? So much of this looks "ugly now or ugly later". In 2001 we chose "ugly later", and boy is it ugly. Will we push these problems downstream again?

You betcha :thumb::hill::lmao:

corsair23
11-21-2008, 11:00 AM
Bailout = delaying the inevitable IMO

If they don't "restructure" then nothing will change other than they will have some cash to burn...I heard a discussion the other day where a person said it was our "duty" to support these American companies and American cars. Another person asked which one? The American company that makes cars in Canada, Mexico, etc. or the foreign company that is making cars in America? :confused:

The executives from the big 3 are ding-dongs but unfortunately even if you fired all of them, that would not make a dent in the companies' financial troubles. The elephant in the room is the UAW and you can ignore it but it will not go away. I'm all for trying to insure workers make competitive wages but when you have 10K+ in the "job bank", more retirees pulling pension $$ in than workers, have avg salary and bennies for every worker in the $100K+ range, sooner or later the house of cards is going to crumble.

Hulk
11-21-2008, 11:08 AM
Hmm...Honda, Toyota, Nissan, etc are all doing quite well......

I think Honda is doing well, but it has always focused on fuel efficient small cars. Toyota and Nissan are not doing as well as you might think. They have a huge inventory of cars that the dealers don't even want. Read here (http://www.nytimes.com/2008/11/19/business/economy/19ports.html?hp).

If they don't "restructure" then nothing will change other than they will have some cash to burn.

The elephant in the room is the UAW and you can ignore it but it will not go away. I'm all for trying to insure workers make competitive wages but when you have 10K+ in the "job bank", more retirees pulling pension $$ in than workers, have avg salary and bennies for every worker in the $100K+ range, sooner or later the house of cards is going to crumble.

Exactly. The best hope GM had was its Saturn division -- new plant, new location, no union. They launched it with the best plan, but after a single generation of cars, they brought it back into the fold and killed the spark. Now it's just another division of GM with slightly different sheet metal and slightly different marketing.

Red_Chili
11-21-2008, 12:37 PM
I guess I am going left of you Matt. :lmao:
Should they be restructured? YES. Should the union excesses also be restructured? YES.

But the repercussions of them collapsing right now would be HORRENDOUS. Chapter 11 will likely result in Chapter 7. You will remember Thanksgiving 2008 as the time you should have sold your 401(k) before it lost so much value. :eek: And, as the beginning of the soup lines in Detroit. I would not wish that on anyone. Change is needed but gradual change allows the system to adapt without crushing the little guy.

DaveInDenver
11-21-2008, 12:55 PM
I guess I am going left of you Matt. :lmao:
Should they be restructured? YES. Should the union excesses also be restructured? YES.

But the repercussions of them collapsing right now would be HORRENDOUS. Chapter 11 will likely result in Chapter 7. You will remember Thanksgiving 2008 as the time you should have sold your 401(k) before it lost so much value. :eek: And, as the beginning of the soup lines in Detroit. I would not wish that on anyone. Change is needed but gradual change allows the system to adapt without crushing the little guy.
The system won't change until the top is changed and increased government debt isn't going to make the end any easier. The more debt the government takes on the faster the system collapses. Eventually the taxpayer won't be able to cover the interest anymore and then the loans come due. And with every bail out and government program the little guy gets hurt more. If GM is bailed out, who is protected will be CEOs, UAW leaders and banks, not the workers beyond next quarter. In the mean time we all get hurt a little more with inflation and tax burden. It's a sick game that Congress and Fed are playing right now. That $700 billion is going to financial houses like Citibank, Chase, etc., who also happen to be the primary shareholders of the Federal Reserve, where the money came from. So we borrowed money from Chase and Citi, who tacked on interest when they loaned it to the government, who turned around and gave it right back to them. They promptly held onto that money and stuck us with the bill for the interest just the same. It's horribly and obviously crooked.

I don't want to see the GM line workers get hurt, but they are just pawns in this and are going to lose their jobs either way, if not now then by the middle of next year. GM is churning through $2 billion per month and unless they make cars that people buy it won't matter. Except that we've spent good money after bad to stave off the inevitable. That they are NOT using the opportunity to show off their future cars, like the Volt or diesel Focus or whatever, is telling. They don't care to recover from this otherwise they'd be making a huge media circus showing Rick Wagoner driving from Detroit down to Washington in the car that will save them. It's that they don't have any intention of recovery or that those cars are no where near ready for prime time. Without immediately marketable cars, then whatever short term bail-out is doomed IMO. That's why they are asking for a bail-out instead of government loans like Chrysler in the 1980s. They have no plan to ever pay us back, they'll take the money, keep going for a few months while they squirrel away a nice nest egg and POOF. Gone.

Mendocino
11-21-2008, 01:07 PM
The entire "American" automotive sector needs to be restructured. Their costs are out of sync with their competition and their marketing is out of sync with customers. To bail them out is foolhardy.

I would like to know exactly what in American business will the government allow to "fail?"

SteveH
11-21-2008, 02:00 PM
>>I would like to know exactly what in American business will the government allow to "fail?"

Any of those that don't own a few senators or representatives, perhaps?


Steve

Uncle Ben
11-21-2008, 02:45 PM
>>I would like to know exactly what in American business will the government allow to "fail?"

Any of those that don't own a few senators or representatives, perhaps?


Steve

I can guarantee that if I defaulted on my business mortgages or taxes the gubment would be the first to burn me at the stake! Guess I need to fund some politicians! :rolleyes: Does seem kinda unfair that if I screw up I'm outta there but companies that fund political campains and agendas are considered more valuable and I have to bail them out too! :rant: Kinda goes back to the elections don't it? Vote for corporate sponsored parties and what a surprise.... Sooooo.....in short....if you voted for Obama or McKain quit whining about not having a say about where your hard earned money goes!

Nay
11-21-2008, 05:06 PM
Kinda goes back to the elections don't it? Vote for corporate sponsored parties and what a surprise.... Sooooo.....in short....if you voted for Obama or McKain quit whining about not having a say about where your hard earned money goes!

Goes back to the golden rule. He who owns the gold makes the rules. Otherwise you could never socialize corporate gambling losses. Don't hate the player, hate the game.

No change in political party will ever change this, money flows to power to make and keep more money, and power needs money to stay in power and become part of the monied class. Quite an efficient process, too, when you look at the bilking of the treasury over the last three months for a trillion dollars, and the last 7 years about 7 trillion.

Did you see that GM just returned two of its leased jets :D?

DaveInDenver
11-21-2008, 05:11 PM
Goes back to the golden rule. He who owns the gold makes the rules. Otherwise you could never socialize corporate gambling losses. Don't hate the player, hate the game.
They don't even need to actually have the gold anymore. The game is pretty much rigged against us and will be until enough people get upset enough to pay attention.

Just saw: "Citigroup May Get Government Rescue, Investors Say"
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3ArjWNoRSKw&refer=worldwide

OK, let's get this straight. The U.S. Government is going to bail out Citigroup. Citigroup has it's roots in the robber baron era and is among the first investors in the Federal Reserve system (primary ownership of the Federal Reserve of New York is between Citigroup and JP Morgan Chase Bank and the Fed of NY owns the controlling stake in the Federal Reserve). So the government is going to borrow money from Citi, Morgan, Rothschild, etc. (at interest) and give it back to Citi? Yeah, we are seriously getting screwed. The U.S. Government collects taxes to pay the interest on the money loaned to the Treasury by the Federal Reserve, so we're paying a nice premium in taxes to allow Citi to keep it's own money.

Red_Chili
11-21-2008, 05:19 PM
The system won't change until the top is changed and increased government debt isn't going to make the end any easier. The more debt the government takes on the faster the system collapses. Eventually the taxpayer won't be able to cover the interest anymore and then the loans come due. And with every bail out and government program the little guy gets hurt more.
I can give you a clear example where that is exactly untrue. Harley Davidson was in very much the same position in the 80s (80s I think. The mind is too full of software rollout issues to remember). They asked for a government bailout, for loans IIRC, and for temporary tariffs. They got what they asked for for a LIMITED time with conditions.

It led to H-D reinventing itself as a company. They outgrew the need for bailouts by complete restructuring, by changing EVERYTHING including their own perception of just what it was they were selling (not motorcycles - but a lifestyle, an alter ego, with a motorcycle stage). Say what you want about the results, but financially they came out on top because
1) they got a little breathing room on the brink of death
2) they used it to full advantage, making the changes they needed to in order to
3) sell the public what they wanted.

If well structured for accountability, there is no reason this approach or a similar one cannot work, and it has been shown to work in recent history. It can even be draconian in requirements. Nothing 'free' or 'handout' about it.

Let them fold? Sure, lose even MORE manufacturing base in the US. Count the cost folks. The impacts are far reaching. There is no compelling reason anyone will buy up GM, maybe just a bit here and a bit there. Toyhondasubabishi will find itself breathing easier in a contracted market, able to sell what they can't now.

(What a strange feeling to find myself agreeing with Nancy Pelosi....) :lmao::lmao::lmao::rolleyes:
It must be my inner Democrat. That is what I meant, Romer, when a few months ago I described myself as a pro-labor conservative Democrat at heart.

Red_Chili
11-21-2008, 05:25 PM
I completely agree though that current management leaving WITHOUT parachutes would be a reasonable requirement. Flew in on private jets... sheesh... :lmao:

Hulk
11-21-2008, 05:35 PM
It led to H-D reinventing itself as a company. They outgrew the need for bailouts by complete restructuring, by changing EVERYTHING including their own perception of just what it was they were selling (not motorcycles - but a lifestyle, an alter ego, with a motorcycle stage). Say what you want about the results, but financially they came out on top because
1) they got a little breathing room on the brink of death
2) they used it to full advantage, making the changes they needed to in order to
3) sell the public what they wanted.

I would agree with you if I thought GM could reinvent itself. I don't think it's possible for them. Ford and Chrysler, sure. But GM is just too big and filled with people who have learned to do things the GM way.

Red_Chili
11-21-2008, 05:36 PM
Some substantive discussion (though a tad dated, still relevant. I think I heard of Wharton somewhere...:)). Far better than going with your gut:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=446

The background of apparently stupid moves, but even with this background they have to stop:
http://blogs.moneycentral.msn.com/topstocks/archive/2008/11/14/chrysler-gives-bonuses-asks-for-bailout.aspx

DaveInDenver
11-21-2008, 05:39 PM
Let them fold? Sure, lose even MORE manufacturing base in the US. Count the cost folks. The impacts are far reaching. There is no compelling reason anyone will buy up GM, maybe just a bit here and a bit there. Toyhondasubabishi will find itself breathing easier in a contracted market, able to sell what they can't now.
The assumption that GM would liquidate is a tough nugget to swallow. There are obviously customers for their cars and a lot their manufacturing has already left for Canada and Mexico. So by restructuring to eliminate contracts that make their position not competitive it's possible that (like Honda, Toyota, Nissan, BMW, etc. are doing) jobs would be brought back into the U.S. Anyway, maybe it's possible that the market is over served and needs to contract. People are naturally spending money on cars that they think are more valuable because they are buying fewer cars. Can't help but notice that very few of us are driving American cars. The model that the Big 3 work on is that people replace their car every few years regardless, just like the 1950s thru the 1980s. That is not realistic and hasn't been for a decade or two. If GM is artificially propped up, then the market can't force the necessary correction to that model.

Red_Chili
11-21-2008, 05:39 PM
I would agree with you if I thought GM could reinvent itself. I don't think it's possible for them. Ford and Chrysler, sure. But GM is just too big and filled with people who have learned to do things the GM way.
And that is why they must be shown the door. That would be the good part of Chapter 11 but by that time it just might flip to Chapter 7, game over. Just imagine it is YOUR job being debated (and no, I am not primarily talking about 100K UAW line workers - though I think I would have to see that supported somewhere to believe it - but the whole auto support industry).

Not to mention what is left of your 401(k). And the economy. Just ad another T attack and watch what happens. :eek:

Red_Chili
11-21-2008, 05:42 PM
If GM is artificially propped up, then the market can't force the necessary correction to that model.
You missed my caveats.

You are willing to bet a lot of other peoples' money on them not going Chapter 7...
None of us here believe in a completely, ruthlessly free market. Read Colorado history in the late 1800s. That was a simple, and non-intertwined economy. 'Tain't now.

The choice between 'bail out' and no action is not $25B vs. $0. You have to figure the total cost of both choices. I'd be willing to bet the do-nothing choice will cost the taxpayer well north of $25B.

DaveInDenver
11-21-2008, 05:46 PM
Some substantive discussion (though a tad dated, still relevant. I think I heard of Wharton somewhere...:)). Far better than going with your gut:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=446
I think after 9/11/2001 the airlines faced a slightly different problem that was not completely their own. Yes, they shouldn't have leveraged themselves so badly to make their position tenuous, but when a major hiccup to a total cash-flow business happens, not much they can do about it. Getting them through a tough spot is a legitimate thing to discuss. The Big 3 are in this position because of their own arrogance of their market and ineptitude to make good decisions.

DaveInDenver
11-21-2008, 06:11 PM
You are willing to bet a lot of other peoples' money on them not going Chapter 7...
The market move money into investments it thinks are wise and it moves money away from bad investments. People were not willing to buy GM stock for the last year or two because they knew it was an unwise company to put money into. Normally that means they fail and that is exactly what is happening. But since GM could not convince investors or investment banks to take the risk, now they are using their leverage to get the taxpayer to do it. No thanks, I didn't put money into it for a reason.
None of us here believe in a completely, ruthlessly free market. Read Colorado history in the late 1800s. That was a simple, and non-intertwined economy. 'Tain't now.
What are you referring to? We were certainly much more of a frontier economy, but the persistent depression of the late 1870s following the politics in Europe and more so here the banker's forced constriction of the money supply (that deepened after Garfield's assassination) as they were trying to eliminate Lincoln's Greenback. Certainly the railroads here were running roughshod over people, want for a lack of regulation. It was the results of that time that led to the Guilded Age, when the bankers finally rammed a permanent central bank into our system, which has pretty landed us squarely in the mess we're in now. Or are you talking about the labor disputes between the unions (wasn't Leadville where it turned really ugly)?

Jenny Cruiser
11-21-2008, 08:23 PM
Hmm...Honda, Toyota, Nissan, etc are all doing quite well......

No they're not...

DaveInDenver
11-22-2008, 08:37 AM
No they're not...
Honda market capitalization: $36.85 billion (@ $20.31 based on 11/2108 closing)
Toyota market cap: $99.83 billion (@ $63.68)

GM market cap: $1.87 billion (@ $3.06)
Ford market cap: $3.42 billion (@ $1.43)

Honda gross profit for third quarter ending 9/08: +768,642,000 yen ($8.2 billion)
Toyota gross profit for third quarter: +814,158,000 yen ($8.6 billion)

GM gross profit for third quarter: $3 billion
Ford gross profit for third quart: $4.7 billion

Honda net income for quarter: +123,316 million yen ($1.3 billion)
Toyota net income: +139,810 million yen ($1.5 billion)

GM net income: (-$2.5 billion)
Ford net income: (-$129 million)

Honda total equity for quarter: +4,762,110 million yen ($50 billion)
Toyota total equity: +11,926,992 million yen ($125 billion)

GM total equity: (-$60 billion)
Ford total equity: (-$2 billion)

"Toyota Motor Corp. said this week it would stop production at all of its Canadian and U.S. factories for two days next month."
http://www.canada.com/theprovince/cars/story.html?id=23f22834-2418-4176-96d6-ff03b0dc9d6a

"Toyota will cut the number of temporary workers to 3,000 from 6,000 by the end of March"
http://www.bloomberg.com/apps/news?pid=20601087&sid=as7PoAA5Oe5k&refer=home

"A top Toyota executive said U.S. auto sales likely improved in November compared with last month, but cautioned that it's too early to offer any firm predictions."
http://www.forbes.com/feeds/ap/2008/11/19/ap5718198.html

"Toyota Motor Corp. to reduce production in U.S. to cope with slowing sales"
http://mdn.mainichi.jp/mdnnews/news/20081120p2g00m0dm003000c.html

Red_Chili
11-22-2008, 12:44 PM
The market move money into investments it thinks are wise and it moves money away from bad investments. People were not willing to buy GM stock for the last year or two because they knew it was an unwise company to put money into. Normally that means they fail and that is exactly what is happening. But since GM could not convince investors or investment banks to take the risk, now they are using their leverage to get the taxpayer to do it. No thanks, I didn't put money into it for a reason.
Talking about those who rely on GM and the support network of small businesses who rely on it, not investors.

What are you referring to? We were certainly much more of a frontier economy, but the persistent depression of the late 1870s following the politics in Europe and more so here the banker's forced constriction of the money supply (that deepened after Garfield's assassination) as they were trying to eliminate Lincoln's Greenback. Certainly the railroads here were running roughshod over people, want for a lack of regulation. It was the results of that time that led to the Guilded Age, when the bankers finally rammed a permanent central bank into our system, which has pretty landed us squarely in the mess we're in now. Or are you talking about the labor disputes between the unions (wasn't Leadville where it turned really ugly)?
All of that plus the panics, with no safety rails. I could debate you on whether the central bank causes crashes or softens them. The swings of a truly free market are ruthless indeed. It is the little guy who gets creamed; as you note investors generally can move light on their feet while someone dependent on the infrastructure for a livelihood cannot.

Red_Chili
11-22-2008, 03:32 PM
I think it's the Trilateral Commission...
http://afgen.com/trilateral.html








11218
;)

DaveInDenver
11-22-2008, 03:47 PM
I think it's the Trilateral Commission
More like Jekyll Island and the Aldrich Plan.

http://www.jekyllislandhistory.com/federalreserve.shtml

http://www.strike-the-root.com/4/smith/smith5.html

http://books.google.com/books?id=5rgJI0ya0JcC&pg=PA116&lpg=PA116&dq=Jekyll+Island+Club+aldrich&source=web&ots=CqJMfvOYzK&sig=2FeY6S3B32J6heSM3XVf8KbKSlQ&hl=en&sa=X&oi=book_result&resnum=3&ct=result#PPP2,M1

Jenny Cruiser
11-22-2008, 04:07 PM
Honda market capitalization: $36.85 billion (@ $20.31 based on 11/2108 closing)
Toyota market cap: $99.83 billion (@ $63.68)

GM market cap: $1.87 billion (@ $3.06)
Ford market cap: $3.42 billion (@ $1.43)

Honda gross profit for third quarter ending 9/08: +768,642,000 yen ($8.2 billion)
Toyota gross profit for third quarter: +814,158,000 yen ($8.6 billion)

GM gross profit for third quarter: $3 billion
Ford gross profit for third quart: $4.7 billion

Honda net income for quarter: +123,316 million yen ($1.3 billion)
Toyota net income: +139,810 million yen ($1.5 billion)

GM net income: (-$2.5 billion)
Ford net income: (-$129 million)

Honda total equity for quarter: +4,762,110 million yen ($50 billion)
Toyota total equity: +11,926,992 million yen ($125 billion)

GM total equity: (-$60 billion)
Ford total equity: (-$2 billion)



What do you have on Nissan?

Red_Chili
11-22-2008, 06:09 PM
More like Jekyll Island and the Aldrich Plan.

http://www.jekyllislandhistory.com/federalreserve.shtml

http://www.strike-the-root.com/4/smith/smith5.html

http://books.google.com/books?id=5rgJI0ya0JcC&pg=PA116&lpg=PA116&dq=Jekyll+Island+Club+aldrich&source=web&ots=CqJMfvOYzK&sig=2FeY6S3B32J6heSM3XVf8KbKSlQ&hl=en&sa=X&oi=book_result&resnum=3&ct=result#PPP2,M1
Interesting reading.

No sale though. Business cycles (in far greater extremes) predate central banking, as the first link alludes.

DaveInDenver
11-23-2008, 10:11 AM
No sale though. Business cycles (in far greater extremes) predate central banking, as the first link alludes.
Never said that they didn't exist. No economy is always stable and perfectly fair. The point that von Mises initially asserted and that Hayek, Fertig, Hazlitt and Rothbard have since is that with a private central bank the boom/bust cycle is much more violent and designed specifically to tip the balance towards the elite shareholders and thus transfer and consolidate wealth upward. Even Jefferson, Franklin and Washington recognized the problems with private central banks, seeing how the Bank of England had created economic havoc designed to crush us into subservience and it did, until we revolted.

That is why they wrote the Constitution the way they did. They didn't expect that we would never have a central bank, in fact we did have the Bank of North America while they were drafting the Constitution and then chartered Hamilton's Bank of the United States in 1790, signed into law by Washington. FWIW, when the 1st B of the US was dissolved in 1811 Jefferson was proved right, 75% of the investment in this private bank was foreign money that we'd tried to boot out in the 1770s. They worked their way back into influence through our money. It's also not a coincidence that the charter expired in 1811 and when Congress refused to renew the application the War of 1812 was started. Nathan Rothschild so much as told us that is exactly what would happen. He is quoted in 1811 as saying "Either the application for renewal of the charter is granted, or the United States will find itself involved in a most disastrous war." It's happened other times, Lincoln would not take the Rothschild's money for the Civil War and the Rothschild-backed Confederacy was a dickens to take on despite not having much infrastructure or industry at the start of the war. We were dragged into WWI because of European bankers wanting to bankrupt us.

I would also suggest that economic cycles have coincided with the rise and fall of the power of central banks. From 1790 through 1913, we had two defined depressions. One was in 1807 which lines up with the end of the first Bank of the United States charter (ran from 1791 to 1811). We had a recession in 1837 that coincides with the end of the 2nd Bank of the United States charter which ran from 1816 to 1836. We had a prolonged economic slowdown in the 1870s through the 1890s (probably depression in 1890 or so). This started probably due to feuding over reinstatement of a private central bank during the Civil War (Lincoln rejected the Bank of England money for the war and issued government Greenbacks to finance it). And lasted through the 1880s and 1890s. This was a painful economic time in our history. The Guilded Age was very, very good for the robber barons even though economically the people struggled. Garfield flatly rejected a central bank in 1880, but there was almost no regulation of the market by the government. The Rockefellers, Carnegies, Morgans and Rothschilds used that to consolidate their power such that by the turn of the century people wanted government to level the playing field. I agree that laissez-faire in that case probably played right into the hands of the elite. When we put the Fed in place in 1913 all we did was guarantee that they would never be threatened in that position.

Since 1913 and the control of our economy by the Fed we've had 8 definable recessions (7) or depressions (1) in 1918, 1929-1939, 1953, 1957, 1973, 1980, 1991, 2002. Add 2008 to that, which could be either at this point. So it seems to me that using the U.S. as an example that strong private central banking has done anything but stabilize the economy. Two of our earlier (pre-Fed) periods of recession/depression were under central banks and the the third was when government didn't do anything to stop rampant corruption and exploitation. A central bank in the Guilded Age probably wouldn't have changed anything for the workers, the national and state banks were plenty strong during that time just the same despite not directly controlling the money.

The Founding Fathers did not want private banks charging interest for our money, which was the reason behind the Revolution. The colonies were forced in 1764 by Parliament to use borrowed British money instead of the money issued here by existing local state banks. The Bank of England had taken over money issuance from the King and they didn't want the productive colonies thriving without taking their cut. So they forced us to use British money, which at that time was gold. That drove us into a depression since we did not have any specie (this was before the U.S. had it's own gold and silver) and no way to pay the interest on the borrowed money. It was a move that showed the Founding Fathers that private banking cartels were dangerous, since they can artificially hold and control an economy separate from the will and common good of the people.

The danger is the interest charged on the money, not who's issuing the money. Interest charged on the money can never be paid back unless we run zero liability government (i.e. absolutely no government spending) and continue to collect taxes. Even then it would be decades before we become debt free. But the total sum of the economy's value is only the amount of money in circulation, so interest charged on that money can't be paid. It's above and beyond the amount you ever generate. The banks recognized this and so they structured it so that we never have to pay principle, just interest. That's fine up to a point but eventually the interest compounds to the point where growth in productivity is slower than the growth in the interest and we can't pay that back anymore, either. We're approaching that point very quickly.

My conclusion in all of this (and I'm still just starting to understand a little) is that we've almost never had the system stable like the Founding Fathers I think intended. I happen to believe very strongly that laissez-faire works just fine for the markets as long as access to money is not controlled by the market itself. How the capital gets distributed in the market must be free and fair. If the capital providers also are in the market to make money, then the whole game is stilted from the get-go. There are other advantages to the government solely issuing the money in that they can charge the interest and fund its operation without burdening taxes. It's the primary mechanism that I believe the Founding Fathers envisioned, for if the people felt the government became too burdensome they could chose not to fund it just by not taking loans from it. We now have a coerced system that you are not-so-gently persuaded to support the government no matter how you feel about it. The only way left to protest is by being thrown in jail or an uprising against the government. You can't silently or passively reject support of the system by cutting off it's finances.

"If the American people ever allow private banks to control the issue of their currency, first by inflation then by deflation, the banks and the corporations will grow up around them, will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." -- Thomas Jefferson

Nay
11-23-2008, 09:15 PM
designed specifically to tip the balance towards the elite shareholders and thus transfer and consolidate wealth upward

As the wise man said "My constituents are the haves and have-mores".

Red_Chili
11-24-2008, 09:12 AM
Never said that they didn't exist. No economy is always stable and perfectly fair. The point that von Mises initially asserted and that Hayek, Fertig, Hazlitt and Rothbard have since is that ...
And your proposed alternative is... ?
The pragmatics would be-
Step 1:
Step 2:
Step 3:

DaveInDenver
11-24-2008, 10:35 AM
Step 1:Freeze all government spending immediately at the current level. Not one dime more for any reason, inflation or not. The government can run on a $3.1 trillion for a while, particularly when it's considered that 1/3 of the budget is lost to waste and inefficiency in the government. Plus, that $3.1 trillion was before the current round of bail outs. Ideally I'd like to see major cuts (i.e. cuts with the term billion behind them), but I know politically that eliminating all non-Constitutional government spending is difficult (speaking generously). We are talking pragmatically afterall. If we could just hold it at the current level for 5 years, that would be a major step.
Step 2:Make the government abide by and enforce Executive Order 11,110 (has not to my knowledge ever been repealed), which would result in the Treasury printing Treasury Notes and not Federal Reserve Notes. E.O 11,110 was written by JFK and made it mandatory that the Fed loan the government money interest-free. That is not a radical concept, if the government is not going to generate the money, then who ever does should have be charging interest to us to provide our money.
Step 3:Repeal the 16th Amendment and repeal the Federal Reserve Act. This is a primary step, but one I know is difficult to do for a lot of reasons. We could go down this rabbit path as to why, but suffice to say I think too many people right now believe the Federal Reserve is part of the government to make meaningful changes (i.e. Constitutional amendments) in the next couple of years. I do think it's vital that this happens, but I'm afraid the misinformation and misunderstood system is entrenched.

Steps 1 and 2 would stabilize the government so that it does not keep growing. In fact step 2 was already done for 5 months in 1963. Step two would require political will to do the right thing. I think enforcing E.O. 11,110 needs to be done immediately no matter what.


As a pre-step 1, I would quite giving money to every damn company. No reason Citi should be getting $300 billion. Any company who is a shareholder in a Federal Reserve bank does not get interest bearing money. Ever. If the government gives them money it has to come interest-free from the Federal Reserve. Otherwise make the Fed loan the money to its member banks.

http://www.iht.com/articles/2008/11/24/business/citibank.php


The 10 Worst Corporations of 2008. Corporations do not deserve our help. Let them fail, people will lose jobs. By throwing money and will at them the criminals at the top only get richer and more bold in their scandals.

http://www.commondreams.org/headline/2008/11/23-2


Total so far for all these bail outs is going to top $7 trillion. That's twice our government's 2009 budget and that's before calculating the interest on the loans to pay for it. All of that is assumed to be put off for the next generation of tax payer. That's a major problem and honestly I feel sorry for kids these days. They are going to be feudal serfs to the top 0.1% of the wealthy in a very practical way.

http://bloomberg.com/apps/news?pid=20601109&sid=arEE1iClqDrk&refer=home


I think steps 1 and 2 are achievable without much pain to anyone. The Rothschilds et al will be unhappy that their guaranteed revenue stream will be cut off. The immediate goal would be to begin shrinking the Federal debt to the point that we could begin paying down the loans. Notice I'm not saying we should run a balanced budget, but actually target running a significant budget surplus. When you include intra-governmental holdings, we have not run a true surplus budget since the 1930s. Even in times were we ran a claimed budget surplus, we still had a debtor government to the Fed for all the principle and interest because we borrowed more against places like Social Security to pay down the public debt. That was a trick that Clinton did to allow us to pay down some public debt, which allowed him to reduce taxes temporarily. Most of your income tax goes straight to pay the Fed interest (this was why we have a 16th Amendment). Total debt increased under Clinton, but some years we were able to slow the growth of government debt a little by stealing Social Security money to pay the public debt.

Farther, what I think needs to be done is to reduce our military presence all around the world. We have troops and bases in something like 130 countries. The time for the U.S.A. to be the world's policeman is over. It is not our job to install democracies in countries and fund nation building. Our 2009 FY military budget is around $1 trillion. By getting out of all these places and U.N. backing we could pretty easily cut the military budget in half and have a very strong military still.


Interesting article recently from the UK.

http://www.dailymail.co.uk/news/article-1084111/PETER-HITCHENS-The-night-waved-goodbye-America--best-hope-Earth.html

DaveInDenver
11-24-2008, 10:57 AM
OK, step 4.

Once the Fed is eliminated and government spending is reduced, we can start to get somewhere. Ideally I'd like to see our spending return to levels that we saw at the turn of the 20th century. Our government spending now is twice the percentage of GDP as it was during the New Deal. That is insane and the reason why we're dooming ourselves to failure. Once the burden overtakes the economy's ability to afford it, the system collapses. The system assumes a continuous increase in productivity and expansion of the tax base. Productivity increases don't come as fast anymore.

The Fed and income tax supporters were lucky that industry provided typewriters, computers, cell phones and all the other things that make us more efficient. Also birth rates are plateaued and have been for a while. The slow down in population growth is a major impulse behind politicians' desire to allow unimpeded immigration, legal or not. They know the system needs as many people paying taxes as it can get to keep the scheme from collapsing. If taxpayers are not added in significant numbers, then each of us must pay more to cover the burden.

If you read between the lines, you'll recognize that I think income taxes are not only painful, but unconstitutional and generally unAmerican. There is nothing patriotic about paying income taxes in my opinion. Each of us doing our part, bull****. If that was true then each of us should pay exactly the same amount or the same percentage. This progressive or regressive stuff is for the birds. It's obviously "To each according to his need, from each according to his ability." Absolute Marxism and it's designed to pit income classes against each other. I'm willing to pay tax as necessary to support things we need. I don't think we can return to the days of raising a militia to defend the country, so having standing, permanent military is necessary. So that is a common good, fine. I think roads should be supported by tolls and taxes on gasoline and license plates. If you don't like it, don't drive. We could go down the list and I'm a believer in the market and population's ability and desire to support each other (even despite high taxes, Americans still give to charities 10 times what government gives them). Health care. Imagine if you could keep 20% or 30% more of your salary (the average taxpayer pays about 40% of his salary into government when income, earnings and all the misc taxes are summed) how much easier paying for doctors would be.

With the government supplying the money, then it can be funded by the interest on the money loaned to the banks and excise taxes. A radical concept, I know (it's only the way the U.S. Government was funded from 1790 to 1913). Since the debt would go down as we stop adding debt interest to the budget, the income taxes would (presuming we could get politicians to split with our money, a big 'if') go down, too. Just about every penny collected in income taxes goes to service the interest on the Federal debt.

Red_Chili
11-24-2008, 11:00 AM
Step 1 sounds like a plan. But not at the moment IMHO.

So you would eliminate Treasury Bonds as an investment instrument of last resort? :eek:
You are complaining about cycles and spikes now, do you have any idea what would happen if you did this?

FWIW, Citi ain't getting $300B any more than a depositor in the local bank gets $250K. It is a guarantee, a backer of last resort. And Citi gets to pay 8% interest back to the guvmint (us) for loans.

I'm thinking that is a bond I'd like to invest in!!

The gov is saying that if some of the high risk vehicles not currently on Citi's balance sheet move to the balance sheet and must be written down, the government is backing them. This is stabilizing in that it removes some of the uncertainty that is driving the markets bonkers.

Ya gotta read the fine print (even the medium print) on these bailouts, they are far from a giveaway. They also represent equity stakes with a return, and the gov gets to meddle with executive compensation. Those are not the terms of a giveaway, and most corporations would try to be free of them as soon as possible.

I dunno man, I think the apple cart would go from serious bumping to sudden inversion and applesauce if you did all this. Parts of it... sure, needs to happen.

I don't buy that it is Marxism any more than my having bones like a dinosaur makes me a dinosaur (except metaphorically of course! :lmao: ).

DaveInDenver
11-24-2008, 11:39 AM
Step 1 sounds like a plan. But not at the moment IMHO.
OK, if not now, when? There is no "good" time, but all I'm asking is to freeze the budget fer goodness sakes. Why is that hard to take? It might mean the government could not be all things to all people, though. I have to make decisions. Put gas in the truck or turn up the furnance. Pay Kirsten's tuition or put windows in the house. Why should the citizens be forced to live harder than the government? We don't exist to support it and if the burden of the system is too great, the system needs to be forced to work for us.

Yes, I'm a libertarian, summed up pretty well here:
http://devilskitchen.me.uk/2007/11/philosophy-of-liberty.html

So you would eliminate Treasury Bonds as an investment instrument of last resort?
T-bonds are only worthy as long as the government does not go bankrupt and investors don't lose faith in it's stability. FDR declared the government bankrupt (in legal terms the government was dissolved March 9, 1933) after taking us off the gold standard and forced it's confiscation. That hurt a lot of people who owned gold. It could happen again, since we are technically in receivership to the IMF. And if you believe the conspiracy people, the Fed sold off all the gold in the 1930s and we (as in the U.S.) may not have any gold what-so-ever. As it is the Fed handles the transaction of bonds for the Treasury, so they are getting a cut of that, too (i.e when they 'monetize' the debt). The U.S. Government is not the lender of last resort, that's the Federal Reserve and it's backers, the IMF, the International Bank and the Rothschilds, Morgans, etc. Those are the people and organizations who buy and sell the Treasury securities using money created solely on account ledgers.

Even assuming the wacky people are right about the gold, it really only matters if you're a foreign bank investing in a gold backed economy. Even with the government supporting itself using the interest from the money it generates, I think bonds would still be very important to the operation of the government. But it all depends on how much you want the government to do for you. If there is a justifiable war, then buy war bonds to support it. If you think more social services are important, buy Welfare bonds. Just don't forcefully coerce my taxes to do it. I won't ask for anything, I promise. :-) I'm already assuming Social Security is a joke as far as my retirement and it bugs me every day that we get government contracts. I justify it by asking to only work on commercial programs, but I know that is impossible to quantify. So it is I'm a zealot, but I also need to keep the heat on until something less conflicting comes down the pike.

In the end the idea of money needs to be shifted a little. But it's a nuanced definition, where the money represents a receipt for labor or work done, but not a vehicle in and of itself. Read up about the tallies used in Medieval Europe and how it affected their economy. A good book on the subject of money is Patrick Carmack's book called The Money Changers. The use of a debt-free money (literally sticks in the case of tallies) made them simply a way of accounting for the exchange of good and services rather than something with an intrinsic value of themselves. That's the principle that Lincoln used to fight the Civil War with the Greenbacks, a modern day tally that happened to be a printed piece of paper.

PabloCruise
11-27-2008, 07:53 AM
Corp governance prob dictates they do not fly commercial.

I can think of a number of resons for them not to all fly in one plane...