The taxpayers are giving billions of dollars to the auto manufacturers so they can avoid bankruptcy.In order to avoid bankruptcy, they plan to close plants, and lay off thousands of workers. If they go into bankruptcy, they will have to close plants, and lay off thousands of workers.
Okay, here's my naive question.Giving billions of dollars to the auto companies will boost the economy how?
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RE: Question from a teenager for the economic wizards
First let me say that by replying to your question implies that I may be an economic wizard. Well I'm not. However I do have an opinion.
I believe these billions of dollars are in the form of loans. I was listening to Rick Wagner yesterday addressing GM's plans for the next few years. They need to avoid bankruptcy due to the billions it would cost - way higher than the billions in loans they are requesting. They have plans to lean down as well - selling Saab, axing Saturn in 2011, and so on.
So as to your question, bankruptcy will force more plant/brand closures than if they had support in loans. If they don't get help, they may be forced to shut down altogether. Seeing as the auto industry contributes roughly 12-13% to our GDP, and nearly 20% indirectly (suppliers, marketing, etc.), without that industry we would not only be facing a huge hole in our economy, but our ability to produce war goods would be greatly diminished.
With that said, I am not in favor of bailing out anyone by printing fake money, so will it work? Probably not.
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RE: Question from a teenager for the economic wizards
Cryslter has already been bailed out once, and did pay back its loans. I think the idea is to try to keep the industry alive, until the market gets better. Or that is my oppinion as to why we are bailing out the auto industry. We know we are going to be needing cars. We dont want to kill a major economic driving force, at thesame timecreating a monopoly for the survivor. I just hope the auto industry will start meeting the times. If they get bailed out, they need to retool and start focusing on efficient vehicles. The C.E.O.s need to learn their trade a bit better. I"™m still on the fence when it comes to this industry. Let them die and be forced to pay higher prices due to less competition down the road. Or give them a boost, and allow them to get back on track and pay back their loans. Which could give us more choice in the future and keep competition alive. I just fear the precedence set by all this bailing out. I fear it will get to the point to where we do not let businesses die that need to die.
One measure i'm very much agianst is the idea of giving the money to the unions or pension plans.
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RE: Question from a teenager for the economic wizards
GM needs to file for bankruptcy. The problem with the bailout are the three parties involved. You have the corp leaders, union leaders and the government. The latter 2 are in bed with each other so we have no good faith bargining. If GM takes the bailout, that opens the door for even more government control which is a big reason we find ourselves in this mess. No good can come from it, just like the banking mess. The government is going to control everything. It's bad enough they force these stupid cafe standards down their throat but now Obama is planning a government panel to tell them how to do business. GM should want no part in that. It would be much better working with a judge who is experience rather than a panel of so called experts.
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RE: Question from a teenager for the economic wizards
FYI, from a man with a PHD in Economics and Dean (perhaps former) of Economics at George Mason University, Dr Walter E. Williams.
Quote:
A MINORITY VIEW
BY WALTER E. WILLIAMS
RELEASE: WEDNESDAY, FEBRUARY 18, 2009 AND THEREAFTER
Economic Miracle
The idea that even the brightest person or group of bright people, much less the U.S. Congress, can wisely manage an economy has to be the height of arrogance and conceit. Why? It is impossible for anyone to possess the knowledge that would be necessary for such an undertaking. At the risk of boring you, let's go through a small example that proves such knowledge is impossible.
Imagine you are trying to understand a system consisting of six elements. That means there would be 30, or n(n-1), possible relationships between these elements. Now suppose each element can be characterized by being either on or off. That means the number of possible relationships among those elements grows to the number 2 raised to the 30th power; that's well over a billion possible relationships among those six elements.
Our economic system consists of billions of different elements that include members of our population, businesses, schools, parcels of land and homes. A list of possible relationships defies imagination and even more so if we include international relationships. Miraculously, there is a tendency for all of these relationships to operate smoothly without congressional meddling. Let's think about it.
The average well-stocked supermarket carries over 60,000 different items. Because those items are so routinely available to us, the fact that it is a near miracle goes unnoticed and unappreciated. Take just one of those items -- canned tuna. Pretend that Congress appoints you tuna czar; that's not totally out of the picture in light of the fact that Congress has recently proposed a car czar for our auto industry. My question to you as tuna czar is: Can you identify and tell us how to organize all of the inputs necessary to get tuna out of the sea and into a supermarket? The most obvious inputs are fishermen, ships, nets, canning factories and trucks. But how do you organize the inputs necessary to build a ship, to provide the fuel, and what about the compass? The trucks need tires, seats and windshields. It is not a stretch of the imagination to suggest that millions of inputs and people cooperate with one another to get canned tuna to your supermarket.
But what is the driving force that explains how millions of people manage to cooperate to get 60,000 different items to your supermarket? Most of them don't give a hoot about you and me, some of them might hate Americans, but they serve us well and they do so voluntarily. The bottom line motivation for the cooperation is people are in it for themselves; they want more profits, wages, interest and rent, or to use today's silly talk -- people are greedy.
Adam Smith, the father of economics, captured the essence of this wonderful human cooperation when he said, "He (the businessman) generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. ... He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain." Adam Smith continues, "He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. ... By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." And later he adds, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."
If you have doubts about Adam Smith's prediction, ask yourself which areas of our lives are we the most satisfied and those with most complaints. Would they be profit motivated arenas such supermarkets, video or clothing stores, or be nonprofit motivated government-operated arenas such as public schools, postal delivery or motor vehicle registration? By the way, how many of you would be in favor of Congress running our supermarkets?
Walter E. Williams is a professor of economics at George Mason University. To find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.
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"I never said I was worth it. I only said I wouldn't do it for less " William F. Buckley Jr.
RE: Question from a teenager for the economic wizards
The auto companies aren't necessarily doing anything wrong, the economy is in the tank for other reasons, nothing auto related...
people can't even get financing to buy a new car, so right there limits buyers.
plus with the economy and autos doing poorly, no one wants to buy a new car if they're unsure their gm, ford etc...will be around in 2 years to get serviced etc...warranties.
on top of things, people have less money, wages etc...so spending money they may need to pay the gas bill when they lose their job etc....isn't able to be put towards a new car.
Everyone wants to blame american car companies for producing poor products, personally I just dont really see it, sure they didnt pursue hybrids or electric cars, but hybrids aren't the answer at all. And they had an electric car back in the day, rent the movie "who killed the electric car" aside from that error in judgement I think they're giving the consuer what they want...
Especially nowadays...with gas so cheap, who wants a hybrid anyway? nows the time to own a huge SUV. Course when the economy rebounds gas should be up as well.
I know people bash that "buy american" idea, but personally if you have two cars, both equal quality etc....buy the american made car.
Personally a foreign automaker doesn't make a truck I'd even think of owning, but that's JMHO.
I just find it hard to believe a person can't find an american made car they like.
Question from a teenager for the economic wizards
