Please Don’t Spend My Money On…. – Jared
November 22, 2008 1 Comment
First we had the financial bailout. I was and probably would still be considered in opposition to this “rescue package“. I thought it was a bad idea simply because the market works when companies fail to adapt, go under, and their workload and resources are redistributed to other companies that will use those resources more efficiently, creating more wealth and giving their employees higher salaries. This in turn benefits the rest of the economy by giving them more spending money, and you see where that goes.
The recent news on supposed “economic stimulus” is first, Secretary Paulson has decided to change the Treasury tactics with regards to buying these bad loans. Paulson will no longer be directing the Treasury to buy the bad loans like origanally proposed, instead he will direct the Treasury to purchase preferred stock. The government in this action is no longer taking unto itself ownership of the bad loans. Instead the Treasury is providing the banks with much needed financial capital, or as I learned in class yesterday, excess funds, to open up the credit markets, etc, to put money back into the economy. In essence, rather than more government ownership (of mortages) we will see government ownership of banks (nonvoting rights) that will provide economic stimulus. A better plan I think, as this will also enable the Treasury to back out when the markets heal, giving us a much better potential profit from this venture, though I doubt a profit is what we will see.
Even more recently is the proposed bailout for the automotive industry. Some may argue “we bailed out the banks, why not Detroit?” but this is a different proposition. Bailing out an industry that needs to fix itself is like putting a band-aid on a cannon ball wound.
This begs the question about what should be done about the Big Three and the jobs they carry. While my jerk self really thinks it should be left to die or rebuild I cannot help but feel for those whose jobs would disappear. I fall with Mitt Romney on this issue in that government help is only delaying the inevitable.
The best way to solve this is to not spend my money on the Big Three. The labor unions I am sure are screaming at the Democrats in Congress and the DNC for money to secure their people’s jobs and the union administrations jobs. Sidebar: When Unions say they are representing the workers, it is true they are. They also represent their own employees too however. Regardless I it would be a poor decision by the Democrats to bailout Detroit.
Detroit needs something to help revive itself. Honestly, there is nothing like the impending death of a company to get people’s rears in gear. I have supreme confidence in the ingenuity of the American worker, American business owner, and the American stockholder to spur an entrenched organization like GM, Ford, or Chrysler to remake itself. I drive a 2007 Ford Focus and I could be happier with the car and it alone gives me hope for the American automotive industry.
I heard the other day an American made car typically costs $2000 less than a similarly made Japanese car. What this means is to compete, the Big Three have to remove $2000 worth of extra stuff. Advantage, Japanese cars. With a little creative destruction and some reorganization there is no reason the Big Three (or maybe just the Big One when all is said and done) couldn’t come back from the grave.