GM asks for more bailout money, plans 47,000 lost jobs

[dr_d12]

GM says it will go bust in days without new US bail-out




General Motors today warned it would go bust within 30 days unless the US treasury gives it a further multi-billion dollar loan.


GM has so far received $13.4bn (£9.5bn) in treasury loans and a further $1.6bn in other government loans. Today , effectively holding a gun to the government's head, it said it could default on this $15bn if it did not receive a further cash injection.

[jayman]

Please tell me that nobody is actually *surprised* at this news? I seem to recall certain pro-GM PriusChat members predicting that the money GM originally received would be great, turn them right around, etc

At this rate, might as well nationalize GM, and turn the country into a Workers Paradise

Hmmmm where have I heard that phrase ....

[galaxee]

default on the loans unless they get MORE loans? nooooooo
who didn't see that coming?

good money after bad...

[dr_d12]

Does anyone have a good idea of what will happen if one of these big car companies goes bankrupt? I'm starting to worry about a soup-line dust-bowl style depression (maybe 6 months of dire predictions on the 6 o'clock news is getting to me). I also wonder how long the lower gas prices will last. When they go up again, it will probably be fast because new production in NA has stalled.

It does sound like things are going to get worse. More lay-offs from the car producers in Canada will hurt. I'm so lucky I got scared at the beginning of September and sold most of my investments. The TSX is down from highs above 14,000 to about 7,600.

[JimN]

Originally Posted by dr_d12

Does anyone have a good idea of what will happen if one of these big car companies goes bankrupt? I'm starting to worry about a soup-line dust-bowl style depression (maybe 6 months of dire predictions on the 6 o'clock news is getting to me). I also wonder how long the lower gas prices will last. When they go up again, it will probably be fast because new production in NA has stalled.

It's going to happen anyway. What is the source of the bailout money? Not the USA, we don't have any. The Federal government is going to have to print lots more dollars to cover all the debt. The increased money supply is going to cause inflation. Did I miss the clause in the US Constitution stating that the federal government is obligated to continue the existance of poorly managed corporations?

Time for a name change. This is now the United Socialist States of America.

[Mike Dimmick]

The fact is, without extensive, excessive credit, the level of consumption could not be maintained. That was always going to cause a contraction. A lot of people bought new goods by Mortgage Equity Withdrawal - i.e. remortgaging your house for a higher sum, on the perceived new value of the home, and banking the difference. Cars were a favourite.

Even those already maxed out on their mortgage were happily borrowing to buy cars as hey, interest was low.

The problem is that people overreact. Any sense that unemployment is rising causes people to want to start paying down debts or saving, reducing consumption still further. It's a spiral. Business sells fewer goods so has to lay off or idle workers, so they reduce consumption, which causes more layoffs or idling, and so on until pretty much all discretionary spending is eliminated. To kick out of the spiral requires some force to buck the trend; the only co-ordinating force is government. This spiral is deep and hard, so the bailouts have to be large.

It's not nice to throw more money at a basically bankrupt company, but it keeps more people in work, and it should mean that those workers are able to consume more than they would have if they were unemployed.

You'll no doubt spot that my description is a positive feedback loop. That appears to be the case. Positive feedback spirals up until no more discretionary spending is possible - credit is exhausted - then spirals back down until people cannot reduce their spending any further. I blame G. Bush for tax cutting and stimulus cheques from 2001 onward, when we should have had the peak of the cycle; Gordon Brown and Tony Blair for deficit spending in the same period; all western nations for adopting Basel II which allowed banks to create far more money than they would under strict fractional-reserve banking; futures market regulators for 'light touch' (i.e. no) regulation.

If interest rates had been tightened in 2001 and governments reduced deficits/balanced budgets at the same time, there would have been a mild recession 2002-3 and very few people would have got hurt. The continual overfuelling of the economy caused it to run away and eventually explode.

[jayman]

Originally Posted by JimN

It's going to happen anyway.

Of *course* it is. Only an apologist, living-in-denial fool would believe otherwise. Our consumption habits - as Mike Dimmick correctly pointed out - could not in any way be maintained. It was completely unnatural and unsustainable

Originally Posted by JimN

What is the source of the bailout money? Not the USA, we don't have any.

Hello? China? Care to purchase 1 trillion dollars of worthless government securities and IOU's? Hello? Hello??

Originally Posted by JimN

The Federal government is going to have to print lots more dollars to cover all the debt. The increased money supply is going to cause inflation.

That's the part that has me *really* worried right now. Inflation, especially hyperinflation, always punishes the frugal and wise. Doesn't matter if I busted my hump, did without, have zero debt.

Ole meth-mouth was able to live high as a kite, and can now laugh at me as the value of my hard-earned savings erodes. Very nice, that

Originally Posted by JimN

Did I miss the clause in the US Constitution stating that the federal government is obligated to continue the existance of poorly managed corporations?

Ssshhhh. As part of nationalizing the corporations, that clause may be put in

Originally Posted by JimN

Time for a name change. This is now the United Socialist States of America.

That *is* the change: we will become the United Socialist States of Amerika, and Canada will become a Socialist appendage of that

[jayman]

Originally Posted by Mike Dimmick

The fact is, without extensive, excessive credit,

I cannot add anything to your excellent rant, so can only say

+1