The Big Three Depression risk

The Big Three Depression risk

money.cnn.com

NEW YORK (CNNMoney.com) -- The U.S. auto industry weathered the Great Depression. But there are some fears that its current crisis could cause another one.

During a hearing on a proposed $25 billion federal bailout of the industry Wednesday, GM CEO Rick Wagoner used the D word to describe what might happen if Congress didn't approve some sort of rescue package.

"At this point without injections of liquidity, I think it's reasonably probable that some portion if not all of the domestic industry will not survive," Wagoner said. "The way I would explain it to your constituents is it's going to prevent the United States from entering into an economic depression in my view."

(visit the link for the full news article)

So, we are starting to see the big "D" word creep into the major news medias more and more these days. The three CEO's of the major Automakers have spent the better part of this week trying to talk the government into giving them this 25 billion bailout to stave off bankruptcy.

But will this 25 billion split between the three reall do anyhting to save these companies, especially GM? Some say it's only going to put off the inevatable just as the 700 billion bailout is just a quick fix bandain as well.

Plus what are peoples thought here on wether the auto makers going bankrupt reallt cause a full blown depression? For me I could see it being the final nail in the coffine, i mean if the big three go down, it will cause about 1.5 million job losses in the states alone after you take into account all the job losses that will trickle down the pipe with them going under.

whats peoples thoughts here? Will we see a bailout for them? Will it actually fix the problem for the auto industry? If they go under anyway will it finally be enough to cause a full blown depression in the states, that will obviouslt cause a worlwide depression?

money.cnn.com
(visit the link for the full news article)

They allow "Depression" to creep into the lexicon so that we become desensitized to the reality of the coming economic collapse.

reply to post by traderjack


Fair enough, but do you think the falling of these three companies will be the final nail so to speak? Or do you believe that has already happened and we just have not seen the full force yet?

It sounds to me that the US is about to ''Nationialise'' its car industry. You are becoming more European everyday ..... long live the Socialist Democracy.

25 Billion MIGHT last the big three until January 21st, but even that isn't certain. I am only slightly less against a bailout of these idiots than I was against a bailout of the banks with TARP. At least one of them should declare BK IMHO.

I'm going to go out on a limb here and predict that they will be bailed out and $25 Billion will be a fraction of what they steal from the taxpayer.

I do agree that if the government decides to go all in and try to save these companies, it sure as hell is going to cost alot more than 25 billion between the three. I would venture a gues your looking at 25 for each of them. and most likely more for GM wich is the worst of the three.

In my eyes i think they should be allowed to fail as well, but then again you have to take into account the 1.5 million jobs that would be lost withint weeks of them going under.

Not to mention the fact most ecperts seem to agree that if even one fails it will cause all three to fail.

This is what I said in another topic, regarding the same content and subject matter:

Give them the capital and then, after the crisis is over, mortify the CEO's and union leaders. It is counter-intuitive to allow the car industry to become redundant - the massive job losses would be potentially difficult to stomach (in the current economic climate). What we cannot have is the current administration leaving all major economic problems to the new incoming government, the consequences would be disastrous. January is too late to orchestrate a massive stimulus.

Let us be very polite, diplomatic, suave and candid to the automakers/bankers and then violate the Geneva Convention in January. Soviet style public trials are in order after this monolithic failure, with CEO's having abuse hurled at their portraits in Orwellian propaganda theatres (read 1984 to understand the reference).

Seeing Paulson decided to countermand his own bank bailout plan, the idea of an economic depression is back on the table. Allow the automakers to fail and we've dug our own economic graves.

The Treasury should dictate that aid will only be provided if the government holds the responsibility for restructuring the auto sector. Don't allow the lunatics to run the asylum.

[on the auto industry bailout] Wagoner said. "The way I would explain it to your constituents is it's going to prevent the United States from entering into an economic depression in my view."

We are already in deflation and its picking up steam. The auto industry is just another symptom. No bailout can stop this train wreck.

To paraphrase someone else (?), you can't solve a problem using the same thinking that got you into the problem.

Here is what so many people seem to be unable to understand. If these three companies fail and go out of business it isnt just auto workers and GM/Ford employees who are going under.


Think of every manufacturing company that makes and distributes the parts to all of those vehicles. Think of the men and women who work inside of the companies that manufacture and sell the machinery used to build these vehicles. Think of the millions of auto dealership owners, employees and sales people who will be out of work.

Every segment of manufacturing will suffer. Insurace companies will suffer. Anyone and everyone affiliated in business in any way with GM/Ford/Chrysler will be out of business.

If these companies are allowed to go insolvent the domino effect felt across the entire country will be horrific. Im not all for bailing out any corrupt or poorly run business or industry via tax payer money, but I seriously do not see a bright side to our economy if these companies are allowed to go under. The number of subsequent unemployed people losing everything will be in the millions.

Scary times we are living in.



[edit on 11/20/08 by BlackOps719]

reply to post by BlackOps719


I do tend to agree with you on that, the numbers in the article relate to about 1.5 million job losses once the full effect trickles down through the stream. Personally for me I'm think of about 2 million, and thats not even counting the global job losses. Think of the Canada as well, your looking at about 250 thousand jobs give or take that would be lost. and it will effect jobs across the pond as well...remember these three companies are global, and would have global consequences.

Correct me if im wrong..

reply to post by BlackOps719


I agree this will be disastrous. But the bail out can't save them. There are simply too many industries failing to bail out. Think of how fast these sectors are coming unglued - auto, banking, financing, commerical real estate, and retail. A year ago if you talked of a coming depression you were thought of as a loon.

Auto sales are way down from last year, give money to the industry so they can meet their operating expenses and simultaneously increase our taxes so we can pay for all these bail outs, but I ask who will be left to buy all those cars?

This is the very essence of deflation. Car sales across the whole industry are down, not just the big 3. Why? because people are in debt way over their heads and can't afford to buy new cars. Weaker companies like the big 3 lay off thousands of employees who now can't go buy stuff that other people depend on. Deflation feeds on itself and spirals out of control. The time to do something about it was five years ago. Now it's too little too late.


[edit on 20-11-2008 by 2 cents]

The only thiing that will happen if they bail out these pirates is the same ting that the financial institutions did with their hand outs.

Investigations are beginning into the nine banks that took in the first $125 billion -- the same $125 billion that was supposed to be used to unclog the credit system which was preventing banks from providing much needed funds for individuals and businesses.
There are many feathers in a ruffle over this and New York Attorney General Andrew Cuomo and several congressmen are furious that over $20 billion has already been earmarked as bonus funds for management and employees. Unbelievably, that is just the estimates from Goldman Sachs, Morgan Stanley and Merrill Lynch. There are six more banks that are also working on similar heists.

source

Mass payouts to CEO's and other mangement so they can have a retirement package for when they fail. That or invest it into other companies around the world. These three are a sinking ship, and putting band-aids on it still won't get people to feel safe getting on-board when other car companies offer a better and safer ride. Just my 3 cents(exchange is killing me) on the matter.

[edit on 20-11-2008 by airteck]

I canwhere you are coming from as well. So my question is this, what do you think is the governments next move? Do they bial them while continueing to make more money with now backing? Do they try to reverse the deflation somehow and in the end cause a hyperinflation?

Is there anything that can be done in the end to curd this disaster from happening or are we all in a dream world thinking this can be stopped?

Interesting that here in ATS we were already taking about a "Recession" when everybody else were talking about just an "economic slow down" now I dare to say that we will be officially in a "Depression" before the 2009 is over.

I can only imagine that this time nobody will question the use of the Big "D" after what is going on with this nation's economy.

Even before the Market bubble crash I was talking about how the government manipulated numbers and how our economy was nothing but a dream prop by manipulated interest rates and the illusion of prosperity.

Yes we will be in a Depression very soon.

reply to post by 2 cents





What is scary above all else is where I live (not sure about you guys) but it is already to the point where it is almost impossible to find even a semi decent paying job. Ad another several million unemployed to the equation and there are going to be masses of people who can not find work to feed their families.

I agree something should have been done 10-15 years ago to address the problems that we are facing now. Hind sight is 20/20......too late to even worry about it now. I see things getting considerably worse before they even have a chance of getting better.

[edit on 11/20/08 by BlackOps719]

reply to post by marg6043


Whats your timeline for a fullblown global depression then? Are we talking months? closer to a year. Because in all the research i've done we are not just looking at a depression of America, we are in fact looking at a full blown Global depression? True?

Originally posted by BlackOps719
reply to post by 2 cents

 

What is scary above all else is where I live (not sure about you guys) but it is already to the point where it is almost impossible to find even a semi decent paying job. Ad another several million unemployed to the equation and there are going to be masses of people who can not find work to feed their families.

I agree something should have been done 10-15 years ago to address the problems that we are facing now. Hind sight is 20/20......too late to even worry about it now. I see things getting considerably worse before they even have a chance of getting better.

[edit on 11/20/08 by BlackOps719]

It is the same up here in Cannuck land, at least here in Ontario. I am currently in college and the fact of the matter is this, when i get out next year i seriously doubt im going to find a job. Hell since everything started to decline i went so far as to see if i can find a job now that will support my family.....problem is there is absolutley nothing out there. everywhere i look it's layoffs and downsizeing, or just plane "Going out of buisness" signs.

Not to mention the Canadian market took and even bigger hit than the US today. it was brutal the amounts we lost here today.

TSE 300 -765.80 -9.02% 7,724.76
CDNX -38.14 -5.22% 691.95
S&P/TSX 60 -49.31 -9.61% 463.57

and to think our PM told us just a month ago that our banks and financial system was one of the strongest and we would survive the economic crisis happening.

Edit to add numbers on markets

[edit on 11/20/0808 by Trayen11]

reply to post by Trayen11


I don't think the deflationary spiral can be stopped. I think it will play out on its own eventually and things will pick up again - nothing stays the same.

[tin foil hat on]
But my question is do 'they' really want to turn things around yet? After a little more pain we will all be screaming for 'their' solution to the problem 'they' created.
[/tin foil hat off]

reply to post by BlackOps719


I live in Charlotte NC. Here we were pretty well insulated from the housing bust, but now things are changing. The construction boom is ending fast. unemployment here is a little over 6%. I know several people struggling to find a job.

I really believe that we are going to witness the worst global depression ever. I also think that it was no accident or natural business cycle. I think it was caused so that out of the ashes a brave new world could emerge.