Krugman : Let congress pass another 800 billion $ stimulus

Originally posted by witness63
The Federal Reserve should set up a national investment fun to pay for all kinds of new projects in energy, infrastructure, the space program and so on.

I think this depression is very serious and has the potential to become a total catastrophe like the 1930s. They should probably start considering major debt forgiveness for ordinary people who are about to sink, and maybe a negative income tax financed by the Federal Reserve: just send everyone a check to spend how they like.

Conservative or conventional policies are never going to fix a situation as bad as this. Too many people are too far under.

Obama has been a disappointment in dealing with this, but I don't believe that any of the Republican ideas will make any difference either and will probably make the depression even worse.

It often seems like the elite groups have just written off the common people in this country, and left them to sink or swim as best they can.

And maybe all of us should have another hole in our heads.

You want the Fed to do some good? Let them pack up and leave this country for good. Or maybe, make them outlaws, and put a bounty up for them, that would do wonders for the moral in this country, just by getting rid of them.

reply to post by Ashes of the wake


I think it is apparent what is being done. America is the last super power on earth, we have the means to hold back and pervent a one world government from forming even if all other nations get on board.

The rest of the world has to weaken us economically and militarily, (not necessarily our actual military, but the armed citizenry), or they have ZERO chance odf implementing a one world government.

That is their goal, they have openly stated that their goal is to create a one world government. They need the US to be weak or we will NEVER give up our soveriegnty.

Jaden

Krugman : Let congress bankrupt the country.

The true title of this thread.

reply to post by samkent


The auto companys would not have failed. They would have been purchased by either other auto companys or investors, like a private equity firm.

The majority of the jobs would still be there. Who cares if GM is owned by the Chinese?

I disagree. You give far too much credit to the Chinese economic engine.
The Chinese backed out of the deal on Hummer due to the required price. GM as a whole would have cost far more than any Chinese auto company could afford. No the US government would not have allowed the sale to the Chinese government if that had been on the table.
If there had been any way to sell GM and keep a large percentage of employees, the government would have held a temporary note until the deal was finalized. But that just wasn’t going to happen. GM would have been sold off building by building and robot by robot.

Originally posted by samkent
I disagree. You give far too much credit to the Chinese economic engine.
The Chinese backed out of the deal on Hummer due to the required price. GM as a whole would have cost far more than any Chinese auto company could afford. No the US government would not have allowed the sale to the Chinese government if that had been on the table.
If there had been any way to sell GM and keep a large percentage of employees, the government would have held a temporary note until the deal was finalized. But that just wasn’t going to happen. GM would have been sold off building by building and robot by robot.

GM wouldn't have went out of business folks. It would have went into bankruptcy, reorganized its debts and union contracts and emerged. Instead, the govt injected 10's billions to prop up the union contracts while screwing other creditors over, required green cars to be made whether consumers want to buy them or not, and came up with a pre-packaged bankruptcy.

The only difference in what the free market would have done and what the govt did, was unions would have had to take their fair proportional hair cut in bankruptcy, and GM would have been able to decide which cars to build based on what consumers want instead of the Obama Administration

They would have been purchased by either other auto companys or investors, like a private equity firm.

Like who?

Remember Chrysler was/is a privately owned corperation. Cerberus is one of the countries largest private equity firms and they took a bath with their majority investment in Chrysler. Name one person or company that showed interest in the loosing business we know as Chrysler?

Have you forgotten the congressional hearings? With all the public angst, if there had been any conceivable way of keeping GM running under anybodies ownership, they would have grabbed it. It’s not just buying the buildings, you have to have the money to fund day to day operations until you are profitable. That amounted to billions per month. No one had that kind of money to risk except the feds.

It did go into bankruptcy. The gov has funded it through the process.
GM pensioners took a big hit to their benefits when the gov dumped it onto the union. Plus the union had to give up a lot in wages and benefits. Just like any other bankruptcy.

Originally posted by samkent
It did go into bankruptcy. The gov has funded it through the process.
GM pensioners took a big hit to their benefits when the gov dumped it onto the union. Plus the union had to give up a lot in wages and benefits. Just like any other bankruptcy.

Did you read what I said? I said they went into bankruptcy, the difference being it was a pre-packaged bankruptcy. Thats much different than a normal bankruptcy. The union did make some concessions, but nowhere close to what they would have needed to in a normal bankruptcy. Also their benefits were the most generous of any union in the nation, of course they needed to be cut by a large extent. Do you realize the unions had a stipulation that an out of work worker will still be paid for years by the auto maker? Do you realize that the auto workers used to have no payroll deduction for their healthcare? The auto workers unions had the most bloated benefits of any union in the nation, and still are amongst the highest benefits. It was a flat out handout to the unions. Obama made the bond holders take the biggest haircut, while giving 17.5% of the company to the union (US owns 60%, Canada owns 10%). So the bloated union contracts and crappy work of the unions, which caused much of GM's problems got special treatment, while those that loaned GM money at preferential rates to keep them afloat get screwed over

In a normal bankruptcy there is some institution there to fund things (for a price) through the proceedings. But at that point in time all the big banks were unable to. No one was big enough, strong enough or willing except the feds. The same thing happened to Chrysler in years gone by. Only the government was willing to step in and hold thing together.

There's still a mindset out there that can't conceive of a company as big and historical as GM, closing its doors. I couldn't either until I lost sever hundred bucks on GM stock at that same time. Remember Circuit City? Poof! No one bought them out. No one wanted to fund them through bankruptcy.

You may think it was a sweetheart deal for those involved but I see it as the necessary evil for the greater good. How much in income, property and sales taxes have been returned to the governments from all who would have been affected? We should subtract that from what we have spent and see what the balance sheet says.

Originally posted by samkent
In a normal bankruptcy there is some institution there to fund things (for a price) through the proceedings. But at that point in time all the big banks were unable to. No one was big enough, strong enough or willing except the feds. The same thing happened to Chrysler in years gone by. Only the government was willing to step in and hold thing together.

There's still a mindset out there that can't conceive of a company as big and historical as GM, closing its doors. I couldn't either until I lost sever hundred bucks on GM stock at that same time. Remember Circuit City? Poof! No one bought them out. No one wanted to fund them through bankruptcy.

You may think it was a sweetheart deal for those involved but I see it as the necessary evil for the greater good. How much in income, property and sales taxes have been returned to the governments from all who would have been affected? We should subtract that from what we have spent and see what the balance sheet says.

What you just said is partially correct. Yes in bankruptcy proceedings their is someone financing the business or providing loans for its emergence from bankruptcy. Yes the govt stepped in to fill that roll. However, what you neglect to think about is that the govt also then steered the details of the bankruptcy towards the political aims of Obama and the unions. In a normal bankruptcy, the bank or financing institution is not able to do this. Did you know that Obama actually subverted bankruptcy laws in the GM bankruptcy? Bankruptcy laws state that those owed money by the bankrupt company get in line according to their debt priority. Obama moved the unions above the bondholders and stockholders. Thats not even legal. But he forced them to agree by saying it was the only structure he would allow while also providing taxpayer dollars.

Granted

But by doing that he prevented the GM retirees from entering the Medicaid rolls. I'm not saying the whole thing was pretty or even fair. But it was expedient and necessary.

Them with the most money makes the rules.

When I read stories like this I take a deep breath
and with every breath I take they are(Bankers) contracting the money supply in America
and removing money.
The Politician knows this and are trying to spend their share in their minds before their share is gone.
Look beyond the Politician
Bankers are the threat.
I will not debate my thoughts as that is what the bankers want.
Let them debate the theft while we rob them all.

reply to post by samkent


There are numerous boutique asset management firms that would have bought GM. Here is what they would have done:

Immediately declared bankrupcy, voiding all labor agreements.

Sold off or kiboshed lines/models

Renegotiated labor contracts, bringing back about 2/3 of the current labor force.

In other words it would have been managed like a business, rather than the current balance sheet nonsense that they are currently engaged in which makes the firm look profitable, despite the fact that they are simply moving cash around in various corporate entities.

Why didn't they do that? Because the unions would not allow it, thats why.

Within 10 years, GM will no longer exist and we will all discover that what has been engaged in here with respect to its "return to health" is tantamount to fraud, if not outright fraud.

reply to post by samkent

No one had that kind of money to risk except the feds.

I understand what you are saying, but this is the flaw in your logic. The feds did not have the money to risk, either. That was our money. Yours, mine, and everyone else's. They had no right or obligation to donate my money to charity for me.

Not only was buying out GM not the federal governments prerogative, but doing so against the wishes of the minority or the majority (the smallest minority is the individual) is possibly the most tyrannical move since the oh-so-Orwellian-named "patriot act".

reply to post by witness63


While your ideas sound nice, let remember the fact that our Federal Reserve is not ours per say its run by private entities and that they are not the elected Government of the US either to make decisions like that as a private owner entity.

There are numerous boutique asset management firms that would have bought GM. Here is what they would have done:

Who? I keep asking who? Name one entity that showed any interest.
They owed their own retirees almost 50 billion. Any one that wanted to buy up the pieces would have to strike up a deal with them and many other creditors. To make a deal like that would take many months and possible lawsuits. By that time the brand would have been dead. If you think some white knight could have run things until the papers were signed think again. GM was loosing almost 2 billion per month at the time.

No asset/investment company would ever start a buy out by spend 2 billion per month to fund day to day operations. Especially for a company that had been loosing money for years. The instant you do that the creditors know you also have skin in the game. They will be less likely to accept a lower offer to expunge their debt.

Not only was buying out GM not the federal governments prerogative, but doing so against the wishes of the minority or the majority (the smallest minority is the individual) is possibly the most tyrannical move since the oh-so-Orwellian-named "patriot act".

It was their prerogative and they did it. They have done it before and they might again if it’s in the best interests of the country. Now if it had come about two years earlier and just Chrysler, they might have let the poo hit the fan. But not at that time. That’s what people can get their hands around. The economy was seizing up. Housing sales had dried up. All the way from single family up to high rises. In many smaller towns GM or Chrysler was the driving force of their economies. If you lost GM at that time, the single largest employer in your city you also lose restaurants, small shops, dealerships, realtors, Circuit City, city services, and on and on. 08/09 was not the time to lose GM.

There was no one that would have stepped up to save the day. The price was too high and the risk too great. All of this white knight thinking is contrary to the facts.

reply to post by marg6043


Firms like KKR, Blackstone, Caryle, Goldman.

The pensions are rubbish if you declare chapter 11. The contracts are null and void.

The cost was artifically propped up by the federal government's involvement and support of the unions.

The physical assets of GM were likely worth more than anyone would have had to pay for it. Take the physical infrastructure, parts and a few lines where GM does reasonably well, like trucks and fleet sales and you have a money making proposition.

The bottom-line is that the shareholders, largely institutional investors would have demanded a sale to obtain some value. Owning shares of a firm losing that much cash and seeing a total loss or some value what-so-ever, a shareholder vote would have been to sell.

How is taking money from people and spending it on luxuries like parks, museums, and fancy schools supposed to pull us out of a recession? What planet are these waterheads from?

The market value of KKR is only 2 billion with stock price 27 times their yearly earnings. Even today they wouldn’t stand a chance never mind at that time.

Blackstone is worth 3.7 billion, no chance.

Goldman is currently worth 72 billion. At that time they were worth less than half that much. I guess they could have made some attempt assuming they sold their entire operations and poured everything into GM. But that would mean they would go from earning 3 million per month to loosing 1 billion per month. Not really a smart move is it.

Carlyle is not publicly traded but does state a value of 84.5 billion today. So it was in the same situation as Goldman. Do you sell the farm and roll the dice on a loosing business? Not with investors money. That could put you in a cell next to Bernie.

You would stand a better chance with Chrysler. You could have bought in 50% with Cerberus for just a few billion. But that would put you in a position of loosing 1 billion extra per month until you turn things around. But no one was interested.

Take the physical infrastructure, parts and a few lines where GM does reasonably well, like trucks and fleet sales and you have a money making proposition.

It doesn’t work that way. Engine plants make engines for GMC and Chevy. You can’t run the plant efficiently on one shift per day. The same with several other sub assemblies. Your entire cost structure goes way up. Wasn’t that their big problem all along?