The Street Beats Up on GM
GM spokesman Jerry Dubrowski said speculation of a GM bankruptcy is inappropriate and doesn't reflect the predominant view on Wall Street. "We have no plans to declare bankruptcy, and we don't think it's appropriate to continue to comment on what I would term sensational speculation by some observers," he said.
GM has reported four consecutive quarterly losses for the first time in more than a decade. So far this year, the automaker has racked up more than $4 billion in North American losses in the face of flagging demand for its gas-thirsty SUVs, heightened foreign competition and mounting health benefit and pension obligations.
Fitch Ratings credit ratings agency lowered GM's debt deeper into "junk" status Wednesday, a move that will make it more costly for the automaker to borrow money.
Even more stunning is the reality of GM's deep dive in market value:
GM's shares have lost more than 14 percent of their value this month, and its market value has slid to $13.3 billion -- now one-twelfth of Toyota Motor Corp.'s $164 billion market value.
Morgan & Company has some particularly revealing graphs about the position of US automakers.
This comes on the heels of news that General Motors, just this week, announced that it will be restating earnings from 2001 and forward.
A GM spokesman had this to say: ''The issue here was that we basically booked the income in the wrong period."
The 8-K - filed with the SEC - is here. It describes the reason for restatement.
Comments (53)
I posted a comment here yesterday and received a number of visits from your readers. But, now my comment is gone.
Is there are glitch in the system?
Published: November 13, 2005 7:30 AM
I like GM.
Published: November 13, 2005 9:16 AM
For those who missed my original comment, which was apparently lost:
What's happening to GM, and what will soon happen to the Nation, is the inevitable result of a privatized interest-based monetary system that demands reimbursement of more money than it has created.
When a patient suffers from systemic toxicity, the only way to save him is to remove the poison.
Interest on money loaned is like a heavy metal that attaches itself to hemoglobin in an RBC destroying its capacity to carry oxygen to the body's tissues. You cannot save the tissues without restoring the RBC's capacity to carry oxygen.
Interest on money loaned must be eliminated and money should be EQUALLY accessible to each individual through his labor and ingenuity.
http://wakeupfromyourslumber.blogspot.com/
Published: November 13, 2005 10:27 AM
Dear Mr. Wakeupfromyourslumber: your comment was thought by the moderator to be Googlebait, which is not allowed. You must make an independent point beyond: look at my site. As for your point about interest, money crankism isn't barred as such, but it sure can be tedious to rehash a debate settled many hundreds of years ago. Surely you can find a more suitable forum. Thanks.
Published: November 13, 2005 10:39 AM
So much for libertarians.
Apparently, liberty is only a cheap catch phrase at your site.
Why don't you let others decide for themselves what is and is not "crank"?
http://wakeupfromyourslumber.blogspot.com/
Published: November 13, 2005 10:52 AM
The market determines winners and losers. Not GM, not the Federal Reserve, not legislators in Washington or what ever state but the decisions of millions of car, SUV and light truck buyers.
The market has crushed GMs market share. But it is GM that has killed itself. Just like the hog that eats itself to death, GM has dined on promises to workers of future pension and health care. These promises have come due and now GM is dying.
Of course the workers were foolish to take this bargin. The unions and managers never thought that GM would have financial trouble or more likely they thought that Washington would bail it out.
First airlines, now auto manufacturers and on it will go.
THe solution: Pay individuals CASH and let them buy the financial products they want. I wonder how many other folks will be hurt by this stupid ideal that a union or management can take care of every financial issue an individual could have.
Published: November 13, 2005 11:16 AM
"Pay individuals CASH and let them buy the financial products they want."
Everything you say rings true. But, there is a missing element. Who controls the CASH supply?
Whoever controls the volume of money in any country is absolute master of all industry and commerce. --President James A. Garfield
People use CASH to invest; the stock market does not accept bread or building material or rice (remember, In God we trust, all others pay CASH);
In order for people who have no access to CASH (i.e., those who work for a living) to acquire the CASH to invest it elsewhere, they must work.
Now, they will not work unless they get paid CASH(they too do not accept bread or building materials or rice; In God we trust, all others pay CASH).
The U.S. Treasury prints the CASH; the Federal Reserve System which is PRIVATELY OWNED controls its supply; and the CASH is only issued at interest.
Perhaps, I am wrong, but someone please explain to me how you can repay the net sum of prinicipal and interest on debts when only principal is issued?
An interest-based monetary system is mathematically impossible to sustain—making it completely without redemption.
As long as money is treated by private bankers as a commodity leveraged to enrich themselves, rather than a tool to benefit the public as it is designed to be, all the prudent free-market investing in the world will not avail us.
GM is in critical condition—suffering from systemic toxicity; INTEREST is the poison; we must invest TIME and LABOR--not CASH-- in removing this poison from our monetary system.
Published: November 13, 2005 11:37 AM
Even if GM were to completely shed all its union and pension contracts, it would still be making horrible cars that no one wants to buy outside of flyover America. Buying company stock today is only good for the parts.
Published: November 13, 2005 1:18 PM
Qrswave asks, someone please explain to me how you can repay the net sum of prinicipal and interest on debts when only principal is issued?
http://www.mises.org/easier/critique.asp
If you have any questions after reading the above, please come back and ask.
Curt-
Published: November 13, 2005 1:24 PM
"Why don't you let others decide for themselves what is and is not "crank"?"
You are a crank.
Anyone who believes "The Money Myth Exploded" is worth reading certainly qualifies as such.
Published: November 13, 2005 2:03 PM
Curt,
Thanks for the link. However, explain to me how this information justifies lending at interest.
To me it only explains that people have a tendency to be willing to pay interest, if required.
----------------------------
Mr. Canning, thanks for your remark; perhaps next time you can support your position rather than name-call.
Published: November 13, 2005 2:41 PM
You posed the question. As to supporting my position, Jeffery explains above that this debate was settled long ago.
The basic problem with the silly story from "The Money Myth" is that money did not originate in the way described in the story, thus, conclusions drawn from that premise are unfounded. See Menger's work on the origin of money for a more realistic story.
Published: November 13, 2005 2:54 PM
qrswave,
I appreciate your passion but lament your confusion. First of all, liberty is not "only a cheap catch phrase" on this site. The Mises Institute owns this site and reserves the right to include or exclude any comments, especially off-topic advertisements for erroneous conspiracy theories. If I commented on your blog with an incoherent string of profanities, wouldn't you exercise your liberty as owner of that site to remove my comment? You are confusing "liberty" with "always getting to do what you want without consequences." If you don't agree with their policies, you should boycott the site. That will show them.
Secondly, your understanding of interest is pure fantasy. A borrower is willing to pay interest on a loan if he believes that he will be able to invest that money in production to earn a profit greater than the sum of the principal and interest. If he fails to earn this profit (as GM is doing), he still owes the money to the creditor. If he is ultimately unable to pay anything and goes broke, the creditor loses the money he has lent. No creditor will assume this risk unless he believes that he can earn a profit comensurate with the risk, which he does by charging interest. I implore you to read about the Austrian theory of time-preference on this site for a better explanation.
Interest will always exist as a consensual contractual agreement between two parties, regardless of the monetary system. The only way a third party could prevent such agreements would be through the initiation of force against the two parties. As a champion of liberty, I can't imagine that this is what you are promoting.
If you are willing to loan me some money without interest, just let me know and I'll tell you where you can send it.
I apologize to the moderator for being off-topic.
Published: November 13, 2005 2:57 PM
Pete, thanks for the explanation. I will check out Menger's work and get back to you.
------------------
Tim, thanks for addressing my comment and appreciating my passion.
However, I cannot see how you can draw a realistic analogy between my theory (which you happen to consider erroneous and conspiracy-like) and an "incoherent string of profanities" which is a valid target for censorship in a self-respecting society.
The Institute undeniably has the power and right to exclude ideas that it does not support. However, it cannot do so and legitimately claim that it promotes the free exchange of ideas.
If it wants to exclude ideas that have no objectionable attributes except that they do not match the moderator's logic or belief, then the Institute should notify readers that it reserves the right to censor for logic, not obscenity.
As for your comments on the substance of my argument, first, I agree that interest will always exist regardless of the monetary system. And, I do not suggest that people should be prevented from entering into consensual contracts even if it involves their exploitation.
But, the monetary system is not a simple consensual contract between two parties, it is monopoly thrust upon us by the government--one that we cannot escape and that taxes us with no end in sight.
Second, I have read the Austrian theory of time preference and pointed out to another reader that it merely explains why people are willing to pay interest, which is not the same as justifying it. To justify interest you must weigh its costs as well as its benefits.
Also, you accurately describe the dynamics of loaning at interest but you fail to address its inevitable consequences which manifests itself in the case of GM, the Nation, and practically every state and municipality in this country.
Finally, I do not lend at interest. Send me a letter describing your business plan and I will see if it is worth investing in on a risk AND profit sharing basis.
Thanks for your time. And thanks to the Mises Institute for providing a forum in which people can freely exchange their ideas.
Published: November 13, 2005 4:32 PM
"To justify interest you must weigh its costs as well as its benefits."
Shouldn't your profit sharing loan face the same test? And who should be the judge? The fact is, all proclamations against interest are purely arbitrary. It is no less arbitrary to call for an end to hand washing of dishes or the use of automobiles.
Published: November 13, 2005 5:17 PM
Pete, thanks for your comment.
You can read my argument for investing at risk and against lending at interest.
http://wakeupfromyourslumber.blogspot.com/2005/11/why-would-you-loan-money-to-someone-if_09.html
I welcome any comments or criticism.
Published: November 13, 2005 6:31 PM
I can't see how lending with a profit-sharing agreement is analytically any different then lending with an explicit interest rate. In both cases the lender is simply providing current goods in exchange for future goods. Is not lending w/profit-sharing the same as purchasing inital shares of a firm? The "interest" rate exists in all scenarios and always does.
Published: November 13, 2005 6:39 PM
Brian, thanks for your comment.
The critical difference between lending at interest and investing at risk is not in the profit-sharing aspect, but in the risk-sharing, which differs enough between the two activities that it creates a potential conflict of interest between the lender and the borrower that does not exist between co-investors.
This conflict exists because the most lucrative scenario for the lender is when the borrower earns enough to pay interest steadily on a long-term basis, but cannot pay the principal, leaving it in place to continue accruing interest.
The lender's risk is further reduced as compared to the investor because his loan is often secured, and while that may not guarantee the full value of the principal, added to the interest already earned, it often allows the lender to break-even. Furthermore, under bankruptcy, tax, and corporate law, the lender is entitled to many advantages that an investor is not.
Ultimately, the differences in the risk associated with the two activities acts as a moral hazard for lenders who do not know how to invest their money creatively (in a manner that they are confident will yield profit) to lend to just about anyone; losses in the borrower's activities are tolerated, and even encouraged to allow the continued payment of interest. In this context, lenders do not "profit" because they are especially bright or talented, but simply because they have money that borrowers need.
Thus, unlike those who invest at risk, lenders profit most by exploiting the borrower’s inability to pay his debts. This exploitation not only results in massive misallocation of capital to inefficient purposes, but also, because interest grows exponentially when it remains unpaid, over time it has the potential to transform borrowers into slaves.
To read my argument in support of investing at risk visit http://wakeupfromyourslumber.blogspot.com/2005/11/why-would-you-loan-money-to-someone-if_09.html
I welcome any comments or criticism.
Published: November 13, 2005 8:29 PM
To qrswave;
Dude,
Interest is simply a risk premium on the use of money. Period. Trolling and baiting folks on Mises.org is a sure sign of latent neo-con-ism, for which you should seek professional help.
Use your forum to decry the fractional banking system or the Federal Reserve system instead.
Published: November 13, 2005 8:51 PM
Vince, why did you post anonymously at my site?
In any event, like some of your colleagues, you mix insults with descriptions of interest while failing to articulate a reasoned argument that justifies its use.
Second, I am against the Federal Reserve System.
Published: November 13, 2005 9:08 PM
qrswave,
By giving a loan, a lender deems the risk (i.e. cost/benefit) analysis to be in his favor. But it is the intrest rate of the loan in which he quantifies the price of the risk. Intrest is merely the price of loaned capital.
Published: November 13, 2005 9:49 PM
qrswave - it is obvious that you never built a business funded by venture capital (which exactly matches your "profit sharing loan" concept).
I base this conclusion on the fact that you seem to think that interests of a VC and an etrepreneur will coincide after the ivestment is made. This is simply not true - because VCs are interested in ROI (return-on-investment) and paying back to their friends and such; the entrepreneur is interested not only in money but also in his reputation and pleasure of seeing his ideas turn into products; his time horizon is also much longer than VC's.
This is a mistake many novice entrepreneurs made (myself included), often with disastrous results.
Published: November 14, 2005 12:15 AM
...oh, and in my case this mistake had a price tag of nearly a quarter billion dollars. Now the astute hi-tech market watchers has a fair chance of finding out my name...
Published: November 14, 2005 12:18 AM
Andy D., thanks for reading my comments and engaging my thoughts. However, I point out as I've done before, that you merely describe what I already know about interest—the dynamics that make it facially attractive to borrower and lender, but do not provide a justification for it because it fails to consider both costs and benefits.
-----------------------------
averros, THANKS for your thoughtful comment!!! You’re right; I’ve never built a business that’s fallen prey to VC. So, it did not occur to me until you drew my attention to it. Indeed, it is a very important exception to my risk/interest theory.
I have yet to flesh out the details, but it seems clear that the exception can be explained, while preserving the logic of my theory, by applying a game theory analysis and considering the legal and economic landscape that enables VCs to satisfy their remarkable greed to their heart’s content.
The pernicious effects of lending at interest arise when the borrower is in a vulnerable position and the lender takes full advantage of his own position of power by transferring over time to himself a significant portion of the borrower’s earned capital.
Over time, capital consolidates into the hands of lenders and the economic landscape transforms, elevating the lender high above ordinary players and setting the stage for gamesmanship under a corporate law regime that exalts the bottom line above all.
The personality who formerly assumed the role of lender now seeks opportunities to force transactions (Leveraged Buy Outs) with parties who formerly engaged in them willingly. The lender/borrower relationship is discarded because corporate structure (and the new economic landscape) enable VC to readily find greedy co-conspirators that are willing to sacrifice others in vulnerable positions (laborers) to satisfy their own greed. And, the vicious cycle goes on.
The common denominator in both scenarios is a selfish greed that is characterized by an open-ended willingness to make others suffer in order to be satisfied.
Of course, you will argue and I cannot deny that greed is embedded in human nature. Indeed, a healthy dose of greed is essential to a prosperous economy. But, that does not justify allowing people who exhibit greed in its most malignant form to subjugate and consume others to satisfy that greed. I am certain that none of you will argue that ownership of others by a handful of individuals is consistent with liberty or a healthy economy.
This result is the natural corollary of granting individuals exclusive control of the money supply and allowing them to employ an instrument that allows wealth to be gotten by wealth without adding any productive value to the economy, simply by exploiting others need for that which they control.
As always, I welcome comments and criticism.
Published: November 14, 2005 4:06 AM
This result is the natural corollary of granting individuals exclusive control of the money supply and allowing them to employ an instrument that allows wealth to be gotten by wealth without adding any productive value to the economy, simply by exploiting others need for that which they control.
If you feel that there is something wrong with current wealth producing more wealth - then I guess we will never learn - since you are disseminating your crappy ideas interest-free.
Published: November 14, 2005 4:28 AM
qrswave:
"In any event, like some of your colleagues, you mix insults with descriptions of interest while failing to articulate a reasoned argument that justifies its use."
I reject you as a judge to whom anything should be justified. Is that unreasonable?
Published: November 14, 2005 5:14 AM
MLS, thanks for your remarks. They say more about you than they say about my ideas.
-----------------------------
Peter, M., fair enough. But ultimately, if we fail to consider our common interests, we will end up sharing a miserable fate.
Published: November 14, 2005 5:44 AM
Qrswave,
explain to me how this information justifies lending at interest[?]
It is not for you to decide what is "justified" for other people to do with their own property. If someone else decides to lend their property for a fee that is their choice.
You may expound how you consider it "wrong" all day long, but by doing so you certainly have not justified interfering with the peaceful interactions of others.
I'm surprised that the concept of time preference eludes you. Try this: A new computer game costs, say, $50 on the day it is released. After a year, the same game sells for $20. The preference of having the game now rather than a year from now carries a premium of $30. If it is capital that I desire now, rather than later, I pay a premium on acquiring that capital. That premium is called "interest".
There are no common interests, there are only individuals.
Published: November 14, 2005 8:34 AM
But back to the point of the thread.
GM agreed to defined benefit pensions and retiree health care back in the 1950's when it was, for all practical purposes, one of three auto manufacturers in a country where automobile transportation was (and is)subsidized. The generation that made GM billions back then has stuck with GM to this date, but they're dying in large numbers.
So, with a declining customer base and shrinking market share, GM nevertheless continued to promise defined benefit pensions and medical care into perpetuity to its union employees.
The funny thing about GM is, for all the benefits it showers on employees, it is still run to a fair extent the way all businesses should be run: for the benefit of the owners. This philosophy is reflected in its $2/sh. dividend--unheard of in today's businesses. Of course, if you pile up debt like GM, the owners must eventually cede the business to the creditors.
I cannot imagine being an institutional bondholder for GM and putting up with $2/sh dividends when the company is in so much debt.
Perhaps the bondholders believe that the $2/sh dividend (paid for by cash flow, not profits) is the only thing keeping the stock afloat.
The other problem I have with GM (and Ford) is its insane approach to product marketing. Why the @#%& would you have numerous product lines competing with each other for the same demographic? Ford, for example, bought Jaguar, effectively conceding that its luxury class cars couldn't compete. If that's the case, then dump the Continental! Nobody buys it anymore!
GM's doomed Buick division is fighting tooth and nail for a younger customer base. WHY? Why undercut the same marketing efforts by Chevrolet and GMC (and Saab, also owned by GM)?
Insanity! Why can't somebody pay me $10 million/year to make such patently stupid decisions?!
Published: November 14, 2005 8:46 AM
Qrswave:
You’re comment “…the Austrian theory of time preference …merely explains why people are willing to pay interest, which is not the same as justifying it. To justify interest you must weigh its costs as well as its benefits� suggests a non-Austrian perspective on what justifies human action. To an Austrian what is justified and considered to have passed the costs/benefits criterion is determined by observing how free individuals act voluntarily. If an individual believes it is in his best interest to borrow at interest, then that is the complete and sufficient justification for it from his perspective. Similarly, if someone believes it is in his best interest to lend at interest that is the complete and sufficient justification from his perspective.
There is no other justification needed or desired for human action other than that it takes place in a free market unhampered by violence or coercion.
To view it otherwise allows for a central coercive and violent governing authority ready and able at any time to forcefully intervene in voluntary activity for some “higher� cost/benefit cause. Central planners cannot do a better job of performing cost/benefit analysis than individuals because only individuals know their own value scales and preferences.
Published: November 14, 2005 9:31 AM
Qrswave:
(Also) Can you also explain to me how:
“Interest on money loaned must be eliminated and money should be EQUALLY accessible to each individual through his labor and ingenuity.�
squares with:
“...I do not suggest that people should be prevented from entering into consensual contracts even if it involves their exploitation.�
How do you eliminate interest on money loaned when you concede that people will always voluntarily choose to borrow and lend at interest?
Published: November 14, 2005 9:49 AM
qrswave;
"Vince, why did you post anonymously at my site?"
Uh, because I don't have a Blogger identity, and, as you can see, I knew you would be able to tell who I was pretty easy.
So tell me - how is business supposed to obtain capital if it is too small or too early in its development to attract VC funding? And isn't the VC's take of the profits just time-shifted interest? Conversely, isn't interest just a risk-adjusted, time-preferenced share of future profits?
Really, I can't understand your argument no matter how often I try.
Published: November 14, 2005 9:53 AM
Curt, if there are no common interests, then why do people have families, and why do communities prefer a code of interaction among themselves to a free-for-all?
-----------------------------
Steamship, You appear to use the terms owner and creditor interchangeably, as you do the terms dividends and interest. These terms represent qualitatively different relationships and earnings respectively.
I am sorry you think that my input is off topic, but apparently you concede that debt is a part of this picture. "if you pile up debt like GM, the owners must eventually cede the business to the creditors." Bad business decisions may lead to losses, but these losses are tolerated and even encouraged by creditors as long as interest is being paid(and it is ALWAYS paid first).
--------------
Paul E., if you read my other comments, you would understand that I do not advocate elimination of interest in the free market; each individual is free to enslave themselves if they choose.
But, a monopoly of the nation's money supply by private interests is NOT a free market. And taxing citizens by force if necessary to pay for that interest is not peaceful.
On the whole, this has been a useful discussion. Thanks for your attention and your comments. I will leave you to discuss the things that you all agree upon.
Published: November 14, 2005 10:08 AM
Vince, Thanks for your questions.
Part of the answer can be found in my discussion in support of investment at risk and against lending at interest http://wakeupfromyourslumber.blogspot.com/2005/11/why-would-you-loan-money-to-someone-if_09.html; and
alternative, productive solutions to encourage investing are articulated by Margrit Kennedey in this PDF: http://www.margritkennedy.de/english/MoneyPres05MK.pdf
Take what you will from it, and I bid you all liberty, peace and prosperity.
Published: November 14, 2005 10:23 AM
qrswave,
Can you please take your nonsense elsewhere? You've torpedoed what would otherwise be an informed discussion about GM's poor business practices and why the markets haven't dumped this turkey yet.
Interest is a fact of economic existence: some people will prefer to accelerate spending and others will charge them interest for the privilege. Numerous businesses and individuals leverage their debt successfully. Why can't GM? Because of its poor business practices. Debt accruing interest below the rate of inflation is effectively zero interest. GM still can't pull it off because some debtors, like GM, will still indebt themselves beyond their future income stream. So obviously, interest isn't the problem. GM's poor business practices are.
There are numerous other internet forums that will declare you a financial genius for your crackpot social-credit/interest-is-evil BS. The door is that way ------------>
Published: November 14, 2005 10:53 AM
Mr. Wakeupfromyourslumber has been asked to take his passion for interest-free loans elsewhere. My apologies for waiting so long, since, as we know, time is money.
Published: November 14, 2005 11:17 AM
Steamship, couldn't have said it better - GM was once the largest company on earth, with the largest cash hoard, and it STILL borrowed money at interest, when the business case for such made sense. Its cash was then reinvested in other inside or outside investments. GM's decline was marked by two specific phenomena; Federally-forced unionization, and protectionism. Both of these things set the company on a path of unsustainable growth, with the consequences finally coming home to roost in the early 70's, when abysmal quality and plummeting market share woke the company up temporarily, long enough to get it to improve its products slightly. But the underlying unsustainable pension and medical obligations, guarantees of salary, and bad business decisions have doomed GM, not bankers lending at interest.
Published: November 14, 2005 11:20 AM
Most Americans have concluded that the Japanese are designing and building better cars.
The Big Three have been making money by loaning money, not building cars. We have our house and cars insured by GM.
One can no longer "Buy American." The choice is between a Japanese marque car made in America or an American marque made in Mexico.
Published: November 14, 2005 11:24 AM
qrswave - I think your distinction is correct and your statements so far (I need to read your site) are something like the "real bills" debate between here and Nelson Hultberg & Antal Fekete.
The person loaning the money (or the bank issuing what it calls a "real bill") don't want to take the risk of default. Either they frauduently guarantee payments (or are guaranteed - breaking the debtor's legs still won't fulfull the loan), or they just assume nothing ever goes wrong.
Generally it is proper to swap a pile of cash for an income stream, and proper debt does that. I loan you money - which I no longer have, but it is replaced with a stream of money which will end up lasting longer and amount to more if both creditor and debtor are wise, and at least not too unlucky.
Similarly, if we all had to save 100% of the price of houses, there would be few owners (and probably more multifamily dwellings).
But just like the end of "real bills" seems to be inflation, too many times, the end of debt is instead to consume or live beyond means instead of productive investment.
Published: November 14, 2005 3:20 PM
qrswave - Nonsense: If I lend to you $120 and $120 is all that "exists" as money and you make me payments of $11 per month ($132 per year or 10% interest), all I need to do is buy something from you for $12 and PRESTO WHALAH SHAZAM! we are okay (this neglects of course the changes in demand to hold money, etc. etc. and the rest of the complexities of trade)
The expenditures of banks for goods and services are ultimately sent back to the bank in the form of interest.
Published: November 14, 2005 3:24 PM
qrswave - you may want to read Adam Smith carefully: there is NOTHING WRONG with greed. Fraud and use of violence are wrong, but not the natural desire for personal gain. In fact, exactly this desire is responsible for creation of prosperity of capitalism. The famous "invisible hand" of the market is the way free trade channels greed into constructive activity of satisfying needs and wishes of others.
Published: November 14, 2005 4:16 PM
Averros:
I agree with you if you’re saying that Adam Smith didn't advocate state intervention in the market to prevent free market cartels. However, i do detect a hint that his attitude was that there is something subversive about what happens when greedy "people of the same trade" get together to talk; even in a free market. This Smith quotation was brought to my attention today in a different thread, which I commented on there too to explain why i disagree with his view:
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings by any law which either could be executed, or would be consistent with liberty and justice."
Based on this Smith quote, i would argue that he did in fact cast dispersions on greed, going so far as to suggest it might lead to "conspiracies against the public", cartels, and "contrivances to raise prices". I think he had a small problem with greed. He just seemed to feel that a free market trumped overruling it even when he found it distasteful.
Anyways, it’s a small point and one on which I disagree with him on (meaning i agree with you), assuming I am correct about his sentiments.
Published: November 14, 2005 6:17 PM
GM, like an old rustbucket, should be sold for parts.
Surely others could make better use of its assets including its human resources and waste.
The sooner the better; there's nothing left but the cryin'.
Published: November 15, 2005 6:37 AM
There is no logical difference between paying interest and paying rent. One borrows and asset and compensates the owner for its use which includes wear and tear on the asset and compensation for the owner giving up the use of his asset.
Published: November 15, 2005 11:16 AM
billwald;
That is so obvious it is tedious to even listen to the crackpot argument. Still, it is a good exercise to hear such from time to time.
Published: November 15, 2005 11:31 AM
I happen to like GM products and look forward to buying a new gas-thirsty SUV.
Published: November 15, 2005 12:15 PM
I offer the following essay as food for thought, though it doesn't deal with GM.
This Time It Really Is Different
Published: November 15, 2005 4:30 PM
Yancey,
I already had "Empire of Debt" on order (having recently read "The Demise of the Dollar") and have now ordered "Our Brave New World."
Based on what Maudlin had to say about the latter, I seriously doubt that it's going to change my contrarian point of view about the economic meltdown to come. But I look forward to reading the book and, especially, to hearing how Bonner responds.
Thanks for your post.
Published: November 16, 2005 3:45 PM
David,
I think the authors of "Our Brave New World" are probably full of crap, but I have also ordered the book. I have checked out The Daily Reckoning the last few days to see if Bonner had a reply. He, of course, posted Mauldin's essay, but has not yet written of his own impressions of the dinner.
Published: November 17, 2005 9:47 AM
Has anyone considered the expenses incurred because of Union Labor and Government meddling?
GM is typical of a US based company that got into the small car and truck market too late. Protectionism and economic fascism "helped" them for a while but the market, ultimately, cannot be denied. They deserve what they are getting.
I find it unbelievable that the Union leadership is helping to burying this company. What idiots.
Published: November 17, 2005 1:16 PM
GM is going the way of the old US steel mills.
Good riddance.
Published: November 17, 2005 1:19 PM
I have a 1994 Accura Integra with almost 300,000 seriously abusive miles on it. I am taking it in for a new clutch on Monday. Other than that, it runs like new. I'm not kidding. It's like the energizer bunny. But I thought my family needed a bigger car.
I fell for the advertising and now I have a 2005 Chrysler PT Cruiser with less than 20,000 miles on it. It is a nice car. It is big enough for my wife and 2 children. But the engine (it whines and rattles), the handling (uuuggghh!), and the attention to detail in the manufacturing leave much to be desired. And the oil pressure light keeps coming on for no reason.
Next time I'm buying another Accura.
(Yes, I know Chrysler is German now, but this car was built in America. And yes I love my country, but I am ashamed of our auto industry.)
Published: November 19, 2005 12:50 AM
Excuse me if I'm out of place. I found this blog because it was listed as a GMC blog. I just wanted to let the world know that due to reasons beyond my control I am not going to continue developing my GMC related site but I'm puting it up for sale. If anyone is interested you can get more information at http://www.gmcar.com.
Published: June 10, 2006 10:37 PM