Really, I'm talking about economic apocalypse, what trumps that, Drew?
That's perhaps an economic apocalypse for you up there. But the idea that the end of GM would cause anywhere near the damage to the nation as a whole that a collapse in the banking system would cause is moronic. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
That's perhaps an economic apocalypse for you up there. But the idea that the end of GM would cause anywhere near the damage to the nation as a whole that a collapse in the banking system would cause is moronic.
Let's talk about this.
I think that we can both agree that the origins of the current credit crisis lie in the large number of mortgages in default.
The presumption is that the reason that mortgages are in default is because there was a housing bubble, and that people bought more than they could afford thinking that the house price would go up allowing them to flip it. (i.e. speculation)
Ok, then let's look at the top 20 cities for foreclosures, which I've matched here with housing price appreciation.
The housing bubble is only part of the story here, the other half of the default crisis has nothing to do with housing prices in California and Florida. It has to due with mortgage default brought on because people are no longer able to earn what they once did.
So actually, the economic hardship in the "Rust Belt" states has had a very real impact on the economy of the rest of the country. If GM collapses then you're going to see foreclosure rates in cities where plants are located skyrocket. Same thing is watches are slashed in half. Just because you don't feel the pain immediately, doesn't mean that this all won't have an impact on the rest of the country.
Housing affects credit markets, but else than that the effect is fairly localized. The collapse of GM would unleash deflationary pressures in a number of other sectors that would have a far larger effect on the rest of the country.
A large part of this credit crisis does have to do with economic hardship resulting from deindustrialization in the Midwest. And what's happened so far would pale in comparison to what the collapse of GM and the other auto companies would do.
You would see the effects even in Washington.
<blockte And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
5 years ago I lived in Stockton, CA (no.2) and now I live in Sacramento (no.5). The housing bubble is following me around. If I could just get off this planet, things would settle down.
Any suggestions? In the end, might makes right. Nothing has changed since the caveman.
If you're trying to get me to agree that economic collapse in the Rust Belt has an impact on the real economy, my answer is, of course, "No shit." But your argument to me was that the collapse of GM would constitute economic apocalypse, and my point was that the collapse of GM would pale in comparison to the collapse of the nation's banking system.
The latter would make GM's demise look like the Great Keynesian Boom by comparison. We'd be going from millions struggling to tens of millions going without pay, facing foreclosure, eviction, bankruptcy, and a nearly-unstoppable downward spiral. Probably political instability as well, and not of a variety you'd like.
And it's not as though there aren't other car companies. Rebuilding the auto industry is a lot easier when there's already another set of companies around to build on. Rebuilding the banking industry is a more complex, much more expensive, and more immediately devastating (from a nationwide perspective) situation. GM isn't likely to bring down the banking system, but the banking system could damned sure bring down GM.
My biggest beef with Detroit is that they produce shitty cars and then demand money from the rest of us to continue building shitty cars. The best GM seems to be able to come up with is a $40,000 sports car with a standard-issue electric battery that wouldn't suffice for most people where I live even if we had that obscene amount of money to blow on a car. Ford made the effort by producing a hybrid SUV. Great, so now they're only several years behind their competitors.
I don't drive an American car and am not likely to ever do so as long as the alternatives continue to exist. They're lousy cars. You're essentially advocating that I, and those like me, give our money to the American automakers after we've already voted with our feet.
Now from a practical perspective, I can agree that it's probably better to find some solution that allows the automakers to continue on, at least for now, so that we're not throwing more gasoline on an already-out of control fire. There are certain areas where I'd be okay with working with them -- if (say) we had a clear avenue to get our money back, if we were allowed to dictate what they could and could not build, etc.
I'd also prefer we allow the Europeans to enter the market in a bigger way. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
MfM is right to note that automobile manufacturing is macroeconomically significant, that macro policies have had a disproportionate impact on it because of the way it was set up (and the fact that it was a mature industry already before the Reagan/financial revolution) and that it is worth finding solutions for it that reduce the pain for the many people that are still in it and have no prospects out of it, even if it's not the best theoretical bang for a buck in overall terms. In the long run, we're all dead. John Maynard Keynes
