Congress Approves $25 Billion in Loans to U.S. Auto Makers

[Sapiens]

http://www.cnbc.com/id/26915639

Congress on Saturday agreed to finance a $25 billion loan package to help troubled auto makers as part of a mammoth spending bill that will keep the government running until early March 2009.

The U.S. Senate approved the more than $630 billion spending bill 78-12. The bill was needed to finance defense, education, farm, health, foreign aid and other government programs after the current fiscal year expires on Sept. 30.


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[c1ue]

Re: Congress Approves $25 Billion in Loans to U.S. Auto Makers

I love what's going on now:

$630 billion to "defense, education, farm, health, foreign aid and other government programs" for 6 months, and $700 billion to bail out the big real estate Ponzi scheme plus $85B for AIG and hundreds of billions more lent out to 'ease liquidity'.

[Tulpen]

Re: Congress Approves $25 Billion in Loans to U.S. Auto Makers

$630 billion to "defense, education, farm, health, foreign aid and other government programs"

Make that almost all for defense, the rest is really peanuts.

[oddlots]

Re: Congress Approves $25 Billion in Loans to U.S. Auto Makers

Just a thought, but maybe we're wrong to fret about deficits too much. Maybe we're sort of in a strange half-way house between free-market logic (think straight-jacket) and the realities of a mercantilist world. I really liked this description from Henry CK Liu:

"World trade is now a game in which the US produces fiat dollars of uncertain exchange value and zero intrinsic value, and the rest of the world produces goods and services that fiat dollars can buy at "market prices" quoted in dollars. Such market prices are no longer based on mark-ups over production costs set by socio-economic conditions in the producing countries. They are kept artificially low to compensate for the effect of overcapacity in the global economy created by a combination of overinvestment and weak demand due to low wages in every economy.

Such low market prices in turn push further down already low wages to further cut cost in an unending race to the bottom. The higher the production volume above market demand, the lower the unit market price of a product must go in order to increase sales volume to keep revenue from falling. Lower market prices require lower production costs which in turn push wages lower. Lower wages in turn further reduce demand.

To prevent loss of revenue from falling prices, producers must produce at still higher volume, thus further lowering market prices and wages in a downward spiral. Export economies are forced to compete for market share in the global market by lowering both domestic wages and the exchange rate of their currencies. Lower exchange rates push up the market price of commodities which must be compensated for by even lower wages. The adverse effects of dollar hegemony on wages apply not only to the emerging export economies but also to the importing US economy. Workers all over the world are oppressed victims of dollar hegemony, which turns the labor theory of value up-side-down."

Putting aside the rhetorical thrust of what Liu is saying - i.e., this is an unsustainable pressuring of labour - the backdrop seems actually very familiar: Asia has companies that pretend to make a profit by exporting finished goods to the OECD who have consumers (both household and consumer sectors) that pretend to be able to pay for them, all trades cleared through their respective national governments who wrangle in public over the comparative marginal advantage at any given time. The bias of the Chinese being toward development and employment the bias of the US toward profitibilty for the (finance) corporations involved as well as securing future access to Chinese markets (especially for finance, needless to say.)

In other words, maybe economics has become post-modern: there's no touch-stone of free-market purity. America has finally achieved through the back-door of crisis the industrial policy that was denied her in the hey-day of finance's rise (early 80s as I recall.) Now that finance is in full retreat we can actually act like Asia and support manufacturing.

Just a thought.

[c1ue]

Re: Congress Approves $25 Billion in Loans to U.S. Auto Makers

Oddlots,

Even putting aside the impossibility of low paid workers manufacturing low paid goods for their own use, the US workers would need to lose 80% of their relative purchasing power vs. China to have an equal labor cost competition.

The devaluing dollar is actually not helping that much as the yuan is still very undervalued vs. the dollar.

Even with 'in sourcing' of manufacturing in the US, this may reduce the overall trade deficit in terms of imports, but doesn't fix the other problem: exports. Any factory in the US is stuck with only selling to the US; it is impossible for it to be competitive internationally - and that leads to additional costs with regard to lack of relative scale, dependence on a single market, etc.

All the Henry is saying is that manufacturers in China, Vietnam, etc are oppressing their workers even more to keep up with declining profitability due to the dollar's fall.

This is not a sustainable situation and points a finger at the complicit foreign government regulation/lack of regulation which is failing to provide for their populace.