Jobless Claims and Dominoes
NEWS ALERT from The Wall Street Journal Dec. 5, 2008
Nonfarm payrolls plunged a larger-than-expected 533,000 in November, the U.S. Labor Department said Friday. The unemployment rate, which is calculated using a separate survey of households, rose 0.2 percentage point to 6.7%, the highest since October 1993.
Plus, this number doesn’t include people who have thrown in the towel and aren’t looking for work anymore.
Big bad domino effect coming.
Public services deteriorate, nation goes deeper into debt, potential civil unrest, and bailout of auto industry becomes imperative. Even if the bailout is a band-aid that falls off in a couple of weeks without healing an ugly scab. Even if the bailout is fiscally irresponsible when assessed by the gods of pure capitalism, which is Darwinism with money.
But why not give the auto companies a shot? Hank “Sleight of Hand” Paulson distributed hundreds of billions to former and future Wall Street colleagues, telling the American public the funds were to be used to clear the credit arteries. Then he gave a wink and a nod to the banks as they used the funds to shore up their own balance sheets and acquire other assets. All the while the patients the dollars were ostensibly intended for went into code red.
In the face of that, what’s a lousy 40 billion dollar wager with less than stellar odds to save a few million jobs?
A necessary gamble.
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Agreed – and you wouldn’t just be saving jobs in the auto industry or the auto industry supply chain. You’d be saving towns and communities whose economic lifeblood depends on there being a functioning manufacturing sector to buy the goods and services the retailers and service providers in that community provide to support that population: the plumbers, the retail clerks, the lawyers, the banks, the supermarkets, etc…
So that community, without an auto bailout, becomes a rust-heap, another dead-end town, the type of place Springsteen sang about in “The River.” Too many towns have already become that sad reality.
Many of us are still amazed how this President stood by and watched Hurricane Katrina batter the Gulf Coast, leaving so many destitute. We should think about this as the Congress and the Administration fiddle while the auto industry burns. For this would be no different than letting Katrina happen again, in smaller doses, in town after town, by letting the American auto industry collapse.
nice nuanced analogy. stay in touch. LK
In Brazil, up to september, the auto-mobile industry took $4.8b in profits to it´s main HQ´s.
Now the government want to give a 4b bail to the auto-mobile industry to *save jobs*.
¬¬
hi Renato. not sure what you mean by “it’s main HQ’s”. guessing you meant corporate profits in contrast to the bailout money being used to save jobs rather than increase profits, but would like to know for sure.
thanks and stay in touch. LK
My biggest problem with the auto bailout is that they’ve been building crap cars for at least 35 years, all in the name of profits (please don’t get me started on earnings reporting). Even the most expensive American brands generally start to fall apart after 3-5 years. Who’s to say that they’re going to stop? The Japanese, the Germans, even the Koreans build a better automobile. We need to LET THEM FAIL!!! The market will fill their gap. Toyotas will triple in value, and as it becomes more profitable to build a car, new companies will emerge. Only then will the mistakes of the past be corrected.
Its like raising a kid, you need to discipline them. Certain sectors of business need discipline. The market will discipline the auto industry if you allow them to fail. Times may get tough, but I think its necessary.
unfortnately i think the time for effective tough love is long past and now if you raise your hand to spank the guilty parties it’s the innocents who’ll receive the blow. it’s a lesser of two evils conundrum. we disagree but it’s easy to see your side.
stay in touch. LK