"Chew the backbone, a solar system, these clever convicts"
- Kasabian
Nearly 8 weeks ago, I railed on the U.S. Congressional bailout plan designed to mitigate the burgeoning economic meltdown. Then, it was the financial titans seeking salvation from their reckless lending and byzantine derivative portfolios.
Today, it's the auto industry with hands out crying poverty while eschewing even 1st class commercial. Does anyone else see the irony of an auto exec flying anywhere, private or otherwise? Those guys ought to have arrived on Capitol Hill in stretch Hummers and bitchin' Cameros with at least a dozen speeding tickets on the 8 hour drive from Detroit.
That fact alone qualifies the Big 3 for Chapter 11, not a federal handout.
Another problem with government intervention is the false expectation that everything would be solved; "all trouble gone blub blub blub," quoth Leslie Neilson.
Seven weeks ago, our feckless leaders granted one man -- Treasury Secretary Henry "Hank" Paulson -- control of more than $700 Billion dollars; money to be spent in any way he saw fit in pursuit of economic stability and restored investor/consumer/commercial confidence. No dice.
Consider:
- Since Oct 1st, the Dow Jones Industrial Average has shed 30%. Yesterday, it broke through the 8,000 floor of resistance and looks to test 7,000 in coming days. Ditto the Nasdaq, S&P, Nikkei, Hang Seng, FTSE, CAC-40, DAX, Bovespa, Merval, and Jakarta Composite.
- All sectors of the global economy are plummeting: Banking, Media, Automotive, Industrial, Technology, Retail... you name it. Auto sales practically do not exist. Advertising is worthless. Orders have been canceled like falling dominoes throughout the global supply chain.
- Global markets are as bad -- or worse. This is not an American phenomenon caused by our own reckless traders. They are everywhere, possibly even in greater numbers "there" than "here".
- Oil broke through the $50 floor of resistance yesterday. Five months ago -- a lifetime! -- it was nearly triple. The pace and scope of its decline is as staggering as it is unprecedented. Commodities of all sorts are experiencing a similar fate.
- Home prices dropped 9% nationally in Q3. Denver was down 11%, Cleveland metro down 12%, Chicago minus 13%, Miami off 17%, Las Vegas down 28%, and San Diego down 36%. With "no bottom in sight" according to Standard & Poors.
So good job, Hank! Your bailout didn't work. Or if it did, things are not appreciably better than the freefall we otherwise would have experienced. What's the difference between a 30% loss and 40% at this point?
Except $700 billion... or much more depending on your accounting method.
Instead, the bill was passed hurriedly under great duress. Further, it created the false expectation that pain would be minimal and vanquished quickly. In the public's mind, the problem got worse simply by virtue of the fact it didn't get better. And it did get worse. So now that our government aided the financial sector, it means we need to extend a hand to other areas of the economy.
Well, the steel industry had been operating at 90% capacity as of mid-August. Selling prices were at record highs. Now that industry expects a 50% operating rate by December 1st, with a corresponding price drop. No demand, no production, no orders to suppliers. How about a little help for an otherwise healthy industry clearly impacted by meltdown instead of one (automotive) already distressed?
Or closer to home, me? I didn't do anything wrong. I bought a house within my means. Got a 30-year mortgage with a boring 5-1/8% fixed rate. Sure I'm still making payments on time. But how's about a little something to grease the wheels, help out with some credit card debt. And you know, Christmas is coming; my kid needs a GI Joe with the kung-fu grip.
Naturally, I'll pay that mortgage. If I don't I lose the house -- no matter its depressed value.
But the credit cards? I might let them slide. And why not? After all, how much is VISA/MasterCard/Discover/AmEx/Diners Club/et al going to get for that repossessed GI Joe?
I guess they'll be next off the jet.
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