READ ABOUT DETROIT AND SOLUTIONS TO ITS PROBLEMS. CLICK HERE.

Sunday, November 23, 2008

What's The Difference?

SEARCH BLOG: ECONOMY and AUTOMOBILES

There are times when philosophy defies reason. If you accept a certain premise, then you can be logical in your conclusions... but not necessarily reasonable.

Some bloggers and politicians and economists... philosophers all... see nothing wrong with allowing the American automobile [and truck and tank and military transport] manufacturers go into bankruptcy and take the automotive supply base with them. It will allow a "fresh start" if there is anything remaining. It's the hypothetical "free market" in action!

The argument is given that since the airlines survived bankruptcy, why not the automobile manufacturers? First of all, have you ever heard of apples and oranges... or producers and consumers?

The airlines are consumers, not producers. Northwest and American and United don't make anything. Boeing and Lockheed manufacture aircraft... and missiles... and space craft. Any comparison with aircraft and automobile manufacturing should be between GM, Ford and Chrysler... and Boeing and Lockheed... not Northwest and American.
I just finished commenting at one site that saw no real reason why bankruptcy wasn't a good option for the American automobile manufacturers. You can read a more detailed argument here, but my comments on that site are below:
There are always alternatives.

- American steel is as vibrant as ever... well maybe not
- American television manufacturers are as vibrant as ever... well maybe not
- American textiles are as vibrant as ever... well maybe not
- American balance of payments are as strong as ever... well maybe not
- American middle class is growing and prospering... well maybe not
- American per-capita wealth is growing faster than any place else in the world... well maybe not
- America is producing the highest percentage of the world's Ph.Ds than ever... well maybe not

There is a difference between self-sufficiency and self-delusion. America no longer sees value in producing what it needs. Rather it seeks to find the next get-rich-quick scheme... dot-coms... flipping houses... oil stocks.

You are correct. We don't have to produce trucks and cars. We can allow the system to collapse and the Japanese and Koreans and Europeans will continue to state-sponsor their own industries. Likewise, we don't have to manufacture our own aircraft because the French and British and Russians and Chinese will be happy to do so.

Likewise we don't have to produce our own energy or food. The Saudis and Venezuelans will handle the oil while we can get our food from South American and Latin America.

Why, we don't have to do anything except blog and take vacations and consume and have university professors talk about CO2 and politicians talk about sharing the wealth.

And then we live happily ever after... well maybe not.
..

Labels: , , , ,

Can"t Find It?

Use the SEARCH BLOG feature at the upper left. For example, try "Global Warming".

You can also use the "LABELS" below or at the end of each post to find related posts.

Blog Archive

Cost of Gasoline - Enter Your Zipcode or Click on Map

Detroit Gas Prices provided by GasBuddy.com
Click here to add this map to your website.

CO2 Cap and Trade

There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
... The Government is on course for an embarrassing showdown with the European Union, business groups and environmental charities after refusing to guarantee that billions of pounds of revenue it stands to earn from carbon-permit trading will be spent on combating climate change.
The Independent (UK)

Tracking Interest Rates

Tracking Interest Rates

FEDERAL RESERVE & HOUSING

SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006 Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
November 28, 2007 FED VICE CHAIRMAN DONALD KOHN
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."
http://www.reuters.com/

December 11, 2007 Somehow the Fed misses the obvious.
fed_rate_moves_425_small.gif
[Image from: CNNMoney.com]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's Economy.com. "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.”
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

My photo
Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)