Making Things Versus Shuffling Paper


Clearly the Obama Administration is no where near being ready to face the reality of our economic predicament. Today's example is that of the forced departure of GM's CEO Rick Wagoner. What's wrong with that, you ask? Well, I'll get to that in a second. But let's talk fundamentals first.

What is it that GM does? The build cars. Reasonably good ones, too. Not perfect, mind you, but they do manufacture what the US public (and many Omanis I might add) want. Big cars that guzzle gas and are cheap. They can do better. We all know that. But, they still make something. Something with real value. Something that lasts for a few years at the minimum.

Now, what do the banks and the Wall Street firms make? What do they build? Exactly: nothing! And yet, not a single Wall Street CEO has been asked to step down, even in the midst of actions they took that have brought the American economy and the global one to its knees.

Or as Ian says:

here are a ton of cynical things I could say about this, but I’m going to point out something more fundamental: long run the US needs its industrial sector healthy and strong more than it needs an overpriced, overpaid financial sector. One major long term problem the US has is its trade deficit. Financial companies don’t noticeably help that, what they do instead is package up paper assets for sales to foreigners, but those assets are almost all debts. Everytime the US sells a collateralized debt ogligation, it’s selling its future to foreigners. Every time it sells a car, it’s getting money now for a real item now.

And therein lies the hypocrisy. As Barry notes:

I am no fan of Wagoners, but I have to ask the geniuses behind the bank bailouts: When are you going to ask the TARP and bailout recipients to step down? Ken Lewis being asked to step aside after many years of running BofA ? How about Blankfein? Pandit? And the rest of the TARP recipients?

This is one of those examples where our government is being penny-wise and pound foolish. And it serves the public no good. Not one iota.


Sean Paul Kelley March 30, 2009 - 8:54am

Perhaps because they are too big to be asked to step aside?

creativelcro March 30, 2009 - 9:28am

on a national scale.

That is (banks) where the money comes from, isn't it?

I did inhale.

Don March 30, 2009 - 9:56am

I'd say that the banks do two things:

1: the government tracks your cash flows;

2: the government launders money via the CIA.

mrmx March 30, 2009 - 10:07am

some people say this is a good problem since if everyone has dollars, they'll want the currency to stay around; however, if every country tries to get people hooked, then you have a problem since everyone's printing money. perhaps that's why we might move to a basket centered currency.

mrmx March 30, 2009 - 10:10am

... Summers or Geithner could run the Kool-Aid stand at Jonestown. We are now completely in the thrall of bought amd compromised neo-liberals, who are only interested in saving their own arses!

jbaspen March 30, 2009 - 10:34am

Today's Krugman piece has a few things to say about the immunity of the financial class from risk and punishment:

http://www.nytimes.com/2009/03/30/opinion/30krugman.html

Along similar lines is also this much longer piece, by Simon Johnson, at The Atlantic:

http://www.theatlantic.com/doc/200905/imf-advice

Inappropriately close connections (read: crony capitalist, corrupt and patrimonial) between the financial sector and government have created an outsized financial sector that is impossible to regulate, much less punish, because it now /is/ the government.

Wandering Cynic March 30, 2009 - 10:55am

Especially at a big place with complex IT systems...

creativelcro March 30, 2009 - 5:23pm

i thought it was th bankstas that know where the skeletons in the closet are buried, politically speaking...

Zuma March 30, 2009 - 3:52pm

Probably true.

creativelcro March 30, 2009 - 5:24pm

When ever the topic comes up, I always bring up the vast differences in how the financial industry buy-ins and the GM/Chrysler Loans are. People are not understanding the differences:

One is getting a loan that they are contractually obligated to pay back with interest. The other, our government is buying into and owns majority portions of many. The financial industry is getting multiple times more money than GM/Chrysler. And there is exponentially less oversight of the financial industry.

And it bugs me to no end that it's called the "auto industry bailout" when it's only two companies. How many financial institutions are getting government handouts?

It's ridiculous. It really is.

Silent Autumn March 30, 2009 - 9:48pm

i remember the mid-70s when the big 3 were tasked to make more fuel-efficient cars. i watched them ooze their way back over the years to return to high power levels.

i also watched what happened to volkswagens. the rabbit sentimentally was heresy, what with FWD and water-cooled OHC engines but it had to be and was a good car. now VWs are considerably bigger -full sedans -but at least still relatively frugal gaswise -but why not put modern engine technology in a rabbit? ferdinand porsche's philosophy was lightness, after all.

i have had plenty of vws and porsches and i miss 'em. i had an 1800 lb 914 that made 135 hp from a 1700cc type 4 motor. the last 914's made close to 200 hp. compare that to a contemporary mid-engine porsche, the cayman s -3000 lbs and 300 hp. unporschelike... even worse was that they actually went ahead and came out with an SUV model porsche.

back in the day, it was touted that we'd be using peak oil about now, and that changing car owners and buyers mind-set had to begin right then. now here we are, using water injection and what-not to scrape the bottom of the barrels.

so, wisdom was ignored once, predictably will again.

little commuter cars are great. fuel efficient sedans too. but what some flatly do need are sports cars. porsche, MG midget, austin cooper, whatever their taste is, something small, light, nimble.

without such, the V8s remain. new barracuda, new mustang, new camaro.

nothing, worldwide, is made nowadays that i would want.

light bikes on the other hand are superb nowadays. just not american-made. H-D really ought to come out with a lower end light bike, available cheap... demand is high, so the cheap part is hard to keep down as people will pay. johnny pag 300cc choppers aren't 3 grand new any more, they're more like 3.5, 3.7...

Zuma March 30, 2009 - 11:41pm

used fryer grease from mcdonald's. it's no brainer. I tried doing it myself, but I bought a lemon mercedes. $1000 for a 81 mercedes , top of the line, beautiful leather interior, but of course it had a busted axle that I didn't notice because I'm a girl and it was pretty and cheap. and now if you're caught making your own biodiesel you're subject to EPA fines. Fuel industry caught on quick to that trend. and there's that regulatory capture you were talking about re: codex alimentarius.
it's the same shit w/ the banks. how can it be fucking surprising that the banks control the gov't and not the other way around. been that way every time we've had a privately held central bank. folks just seem to accept the Fed and capitalism as a way of life. it's not.
it's a temporary phase.

he who has the gold makes the rules. that is capitalism.
the concept of splitting a defined line infinitely is calculus.
economics is applying calculus to capitalism.
assuming that humans are mathematical equations is idiocy.
apparently someone named Alfred Whitehead calls this the fallacy of concreteness .

there. that's my summary of chapter 1 of for the common good :)
oh, I can see how well that's gonna fly. ;>

dk March 31, 2009 - 2:35am

one thing about diesel is how good it works in conjunction with turbos. and automatic transmissions too for that matter.

so i googled up bio-diesel stuff. seems willie nelson sells it in durant, oklahoma. a 3 hour drive from here. i also looked for bio-diesel rabbits and found this page:
http://www.transmitmedia.com/golfTDI/

probably nothing new there for ya.

a good turbo motor can be small in displacement and yield high mpg if the driver doesn't have a lead foot...

Zuma March 31, 2009 - 3:27am

You can put biodiesel in a diesel engine, but it's not straight used vegetable oil: you have to cook it first. Homebrew people do this in their garages. Large vats of yummy burny oil and alcohol reagents.

You have to convert the engine to use the veggie oil directly.

And I sympathize on the Benz. Had two old ones; great, solid, but expensive to maintain. The parts, you see, ripen on the shelf like fine wines, becoming more valuable with age.

De la Wikipedia:

Biodiesel refers to a non-petroleum-based diesel fuel consisting of long-chain alkyl (methyl, propyl or ethyl) esters. Biodiesel is made by chemically-reacting lipids, typically vegetable oil or animal fat (tallow), and alcohol. It can be used (alone, or blended with conventional petrodiesel) in unmodified diesel-engine vehicles. Biodiesel is distinguished from the straight vegetable oil (SVO) (sometimes referred to as "waste vegetable oil", "WVO", "used vegetable oil", "UVO", "pure plant oil", "PPO") used (alone, or blended) as fuels in some converted diesel vehicles.

"Turning Japanese I think I'm Turning Japanese I really think so da-da-da det det det det" - The Vapors

Tonsure Wimple April 1, 2009 - 2:30am

I had considered having my mechanically inclined S/O rig up a home-brew system, but once I read up on the ugly chemicals involved, I had second thoughts. You see, my S/O likes to tell the story of how in her youth, she rigged an old MG up to have nitro injection. And then she really likes to tell the part of the story of driving it down the freeway one day on fire, due to the lousy electrical systems of British sports cars. She thinks that's funny.

I value her life and my neighbor's lives just a little bit more than I value the ecological and economical tidyness of homebrew. :)

I did however find a customer who happened to have a system for doing 80 gallon batches. He stopped doing it due to the pressure of new fatherhood. Just as well, it was about the same time that people were getting fined for home-brewing and grease companies started paying for used oi again.

speaking of home-brew, I've decided that her diagrams for building a still might come in handy now that the price of copper and corn has started to come down ;>

dk April 1, 2009 - 6:25am

is the killer. I did some research not too long ago and found that for all the engineering advances over the last 20 years (or so), fuel efficiency has actually gone down...across the board.

I find it absolutely astounding that my '87 Toyota Pickup gets almost the same mileage as a new Tacoma. And there's not much in the way of plastics on my truck.

It is, as so many other things, a matter of Americans wanting it all: power, safety, comfort, and now fuel efficiency. We also (almost) never calculate how much energy it takes to manufacture a vehicle. The Prius, for example, doesn't look so earth-friendly if you start counting the nickel mining and shipping back and forth to/from Japan. And an old Escort diesel gets equivalent mileage.

But even as a native Detroiter (who sees the beauty of muscle cars and cars being "cool"), i find automobiles to be overly complicated.

And, oh, you brought back childhood memories of sitting in the garage pretending to race the Porsche 365 that my uncle was restoring. I grew up in bugs and microbuses, and several uncles were 914 drivers. The late model that got the big engine was a fearsome beast...just as a sports car should be: underweight, overpowered and bordering on a death trap.

Lex March 31, 2009 - 8:10am

914's didn't soak up a lot of damage like ghias did. karmann ghias were surprisingly good that way. i had one wreck in one, that i caused, where i ended up being a hockey puck and got smacked by no less than 4 other cars. (the first one being a lincoln.) no 914 could have taken that abuse. the lesson for was dramatic; stout guard structure is great but the real key is soaking up kinetic energy. crumple power.

and yeah, fix the loose nut behind the wheel.

Zuma April 1, 2009 - 6:47am

2000 M Roadster

eBay! woot! I dunno which version, it's the so's car, but the guy who fixed its dent was all excited by it. says its a rare version
time for a road trip. after tornado season perhaps

dk April 1, 2009 - 7:45am

It's an important distinction: making things vs. shuffling money around the system. And same goes for Silent Autumn; these are loans.

As previously stated, i grew up in the shadow of the Big 3 (GM being the only company that an immediate blood relative has not worked for). There are huge problems that stem from not running these companies as auto companies but as a means to the end of "shareholder value".

That's what makes Ford look so good right now. I have pretty good inside information on Ford. The people there are working their asses off to build high quality cars. And Ford's spending time and money to test components...that's how cars make 100,000+ with nothing but routine maintenance.

As i understand it, Ford workers aren't so worried (some on the line are, but that's from the economics broadly speaking rather than trouble in the company) because they're overrun with work. And the work is to build excellent vehicles. It's been said to me that if someone requests office supplies, they have a hard time justifying it...but if someone needs a tool that goes towards car building, the request sails through.

Build the cars, the rest will follow.

On the other hand, i'm disturbed by the President firing people from the private sector.

Lex March 31, 2009 - 8:18am

One plan is to buy thousands of high-efficiency cars from Detroit and give them to poor people: they're in safer cars, burning less gas and dumping less pollution. This latter is an un-priced health risk.

"Turning Japanese I think I'm Turning Japanese I really think so da-da-da det det det det" - The Vapors

Tonsure Wimple April 1, 2009 - 2:33am

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