Daily Kos: Goodbye, GM
I write this on the morning of the end of the once-mighty General Motors. By high noon, the President of the United States will have made it official: General Motors, as we know it, has been totaled. As I sit here in GM's birthplace, Flint, Michigan, I am surrounded by friends and family who are filled with anxiety about what will happen to them and to the town. Forty percent of the homes and businesses in the city have been abandoned. Imagine what it would be like if you lived in a city where almost every other house is empty. What would be your state of mind?
I write this on the morning of the end of the once-mighty General Motors. By high noon, the President of the United States will have made it official: General Motors, as we know it, has been totaled.
As I sit here in GM's birthplace, Flint, Michigan, I am surrounded by friends and family who are filled with anxiety about what will happen to them and to the town. Forty percent of the homes and businesses in the city have been abandoned. Imagine what it would be like if you lived in a city where almost every other house is empty. What would be your state of mind?
WASHINGTON -- It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry. Nor, for that matter, had he given much thought to what ailed an industry that had been in decline ever since he was born. A bit laconic and looking every bit the just-out-of-graduate-school student adjusting to life in the West Wing -- "he's got this beard that appears and disappears," says Steven Rattner, one of the leaders of President Obama's automotive task force -- Mr. Deese was thrown into the auto industry's maelstrom as soon the election-night parties ended.
But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry.
Nor, for that matter, had he given much thought to what ailed an industry that had been in decline ever since he was born. A bit laconic and looking every bit the just-out-of-graduate-school student adjusting to life in the West Wing -- "he's got this beard that appears and disappears," says Steven Rattner, one of the leaders of President Obama's automotive task force -- Mr. Deese was thrown into the auto industry's maelstrom as soon the election-night parties ended.
German Chancellor Angela Merkel, 54, discusses government bailouts for companies, her achievements during her term in office and the legacy of the East German secret police, the Stasi. Editor's note: The following interview was conducted with Chancellor Angela Merkel prior to the government's announcement Saturday that it had reached a deal to rescue the German automaker Opel. SPIEGEL: Chancellor Merkel, you have shaped an astonishing career for yourself since you took office three-and-a-half years ago. In addition to being head of government, you are now Germany's chief executive, as your government intervenes in the economy to an unprecedented extent. Did you ever dream this would happen? German Chancellor Angela Merkel: "The crisis is an extraordinary situation for which there is no script." Angela Merkel: I have little interest in such word games. My daily work consists of coping with the worldwide financial crisis and doing everything possible to ensure that it doesn't happen again. In recent months, we have had to devote more of our attention to government bailout programs than anyone could ever have imagined. Nevertheless, it isn't anything new for the government to be issuing loan guarantees for businesses. For example, my election district is a center for shipbuilding. Loan guarantees have played an important role in this industry for decades.
German Chancellor Angela Merkel, 54, discusses government bailouts for companies, her achievements during her term in office and the legacy of the East German secret police, the Stasi.
Editor's note: The following interview was conducted with Chancellor Angela Merkel prior to the government's announcement Saturday that it had reached a deal to rescue the German automaker Opel.
SPIEGEL: Chancellor Merkel, you have shaped an astonishing career for yourself since you took office three-and-a-half years ago. In addition to being head of government, you are now Germany's chief executive, as your government intervenes in the economy to an unprecedented extent. Did you ever dream this would happen?
German Chancellor Angela Merkel: "The crisis is an extraordinary situation for which there is no script."
Angela Merkel: I have little interest in such word games. My daily work consists of coping with the worldwide financial crisis and doing everything possible to ensure that it doesn't happen again. In recent months, we have had to devote more of our attention to government bailout programs than anyone could ever have imagined. Nevertheless, it isn't anything new for the government to be issuing loan guarantees for businesses. For example, my election district is a center for shipbuilding. Loan guarantees have played an important role in this industry for decades.
BERLIN -- The ink is hardly dry on the deal to salvage the German automaker Opel, but already the political recriminations are echoing across Europe.In Berlin, the government was in turmoil Sunday after Karl-Theodor zu Guttenberg, the conservative economics minister, broke ranks with Chancellor Angela Merkel by criticizing the deal to hand Opel, the European unit of General Motors, to a Russian bank and a Canadian-Austrian auto parts maker. In Rome, it was Prime Minister Silvio Berlusconi's government that was under fire, accused of having not sufficiently aided Fiat in its rival bid. G.M. is expected to file for bankruptcy protection Monday in New York after bondholders accounting for more than $27.2 billion of the company's debt voted Saturday to exchange their debt for an ownership stake as high as 25 percent.
In Berlin, the government was in turmoil Sunday after Karl-Theodor zu Guttenberg, the conservative economics minister, broke ranks with Chancellor Angela Merkel by criticizing the deal to hand Opel, the European unit of General Motors, to a Russian bank and a Canadian-Austrian auto parts maker.
In Rome, it was Prime Minister Silvio Berlusconi's government that was under fire, accused of having not sufficiently aided Fiat in its rival bid.
G.M. is expected to file for bankruptcy protection Monday in New York after bondholders accounting for more than $27.2 billion of the company's debt voted Saturday to exchange their debt for an ownership stake as high as 25 percent.
Better a white buyer than a darky? Or better an unrelated party than having a national carmaker taken over by ... the Italian makers of the Panda and 500 soapbox? In the long run, we're all dead. John Maynard Keynes
In a speech at Beijing University at the start of his two-day visit, Mr Geithner reassured his Chinese hosts that they need not worry about the estimated $770bn (£475bn) they have invested in US treasuries, a class of US government debt. "Chinese financial assets are very safe," he said, drawing laughter from the audience.
"Chinese financial assets are very safe," he said, drawing laughter from the audience.
NYT: In China, Geithner Backs Cooperation
Following Mr. Geithner's speech Monday, a student asked the Treasury secretary whether China's investments in the United States were safe. He responded without hesitation. "Chinese financial assets are very safe," Mr. Geithner said, eliciting some laughter. He then quickly said that the United States still had deep and liquid financial markets, and that the administration of President Barack Obama was committed to tackling the deficit and maintaining a strong dollar.
He responded without hesitation. "Chinese financial assets are very safe," Mr. Geithner said, eliciting some laughter. He then quickly said that the United States still had deep and liquid financial markets, and that the administration of President Barack Obama was committed to tackling the deficit and maintaining a strong dollar.
On his China visit, Secretary Geithner is immediately on the defensive. The language he is using on the Chinese policy of exchange rate undervaluation-through-intervention is the mildest available. And the commitment he is making, in terms of bringing down the US deficit - which we all favor - is an extraordinary thing to put numbers on in a foreign capital. Such commitments are of course unenforceable, but still the wording indicates - and is understood by China - great US weakness. Not surprisingly, China seems likely to push for more. Their main idea is that some part of their US dollar holdings be transfered to a claim on the International Monetary Fund, which would shift it from being in dollars to being in Special Drawing Rights - and therefore a claim against (a) the IMF's whole membership, and (b) presumably, the IMF's gold reserves. (My bold) This is a bad idea. No one asked China to build up a huge level of reserves. If one country wants to run a current account surplus that is big relative to the international economy, then someone else has to run a deficit - it's a zero sum game because "reserves" are a claim on another country (preferably a strong one, with a convertible currency). No one has ever offered a guarantee on the real value of reserves, i.e., what China now wants.
Not surprisingly, China seems likely to push for more. Their main idea is that some part of their US dollar holdings be transfered to a claim on the International Monetary Fund, which would shift it from being in dollars to being in Special Drawing Rights - and therefore a claim against (a) the IMF's whole membership, and (b) presumably, the IMF's gold reserves. (My bold)
This is a bad idea.
No one asked China to build up a huge level of reserves. If one country wants to run a current account surplus that is big relative to the international economy, then someone else has to run a deficit - it's a zero sum game because "reserves" are a claim on another country (preferably a strong one, with a convertible currency). No one has ever offered a guarantee on the real value of reserves, i.e., what China now wants.
What seems clear is that the nature of monetary policy leading up to recessions has changed dramatically. Pre-Great Moderation, recessions were preceded by tightening policy, presumably to control inflation; the combination of policy tightening and a high underlying inflation rate meant high rates going in, giving lots of room for policy loosening. Increasingly, however, recessions have been the result of bursting bubbles, with monetary policy getting looser even before the recession begins. Lots of implications, which I'll draw out on later occasions.
Lots of implications, which I'll draw out on later occasions.
Since the crisis hit, it has been clear that the only pro-environment policies that have a chance, in the US and possibly elsewhere too, are those that involve increased public spending. In this case environmental and Keynesian demand-boosting imperatives point in the same direction. Examples are grants for home insulation, support for R&D and environmentally friendly infrastructure expenditure such as public transport improvements. When environmental logic demands policy measures that increase costs to the private sector, however, the fact that such measures impose a financial burden on an already groaning private sector means that such measures will at best be watered down, at worst not implemented at all. We have just seen two examples of this - the strange and deeply uninformed debate about a cap & trade scheme for CO2E emissions recently introduced in the House of Representatives, and the admission by the US Secretary of Energy, Dr. Steven Chu that bringing US fuel taxes (especially taxes on gasoline/petrol) is politically out of the question for the time being. ... What this discussion shows is how much superior a straightforward uniform tax on CO2E emissions would be to a cap & trade scheme. It avoids the non-transparent initial allocation of the permits, and it does not require an efficient secondary market for permits trading. Efficient financial markets have not exactly been prominent since August 2007. Trusting the efficient allocation of permits to the same people and institutions that brought us the Great Financial Crisis of 2007-2008 would not, in my view, be wise. Taxing emissions makes exactly the same informational demands on the authorities as the cap & trade scheme - they must be able to monitor the actual volume of emissions. Taxing emissions avoids the potential problems of speculative bubbles and market manipulation in the markets for permits.
We have just seen two examples of this - the strange and deeply uninformed debate about a cap & trade scheme for CO2E emissions recently introduced in the House of Representatives, and the admission by the US Secretary of Energy, Dr. Steven Chu that bringing US fuel taxes (especially taxes on gasoline/petrol) is politically out of the question for the time being.
...
What this discussion shows is how much superior a straightforward uniform tax on CO2E emissions would be to a cap & trade scheme. It avoids the non-transparent initial allocation of the permits, and it does not require an efficient secondary market for permits trading. Efficient financial markets have not exactly been prominent since August 2007. Trusting the efficient allocation of permits to the same people and institutions that brought us the Great Financial Crisis of 2007-2008 would not, in my view, be wise. Taxing emissions makes exactly the same informational demands on the authorities as the cap & trade scheme - they must be able to monitor the actual volume of emissions. Taxing emissions avoids the potential problems of speculative bubbles and market manipulation in the markets for permits.
