Socialism, Communism, or Mohronism

“By Reuters | 27 Oct 2008 | 11:24 PM ET

General Motors and Cerberus Capital Management have asked the U.S.
government for roughly $10 billion in an unprecedented rescue package
to support a merger between GM and Chrysler, two sources with direct
knowledge of the talks said on Monday. ”  – Taken from
Folks, only a few years back, many business magazines were touting the
advantages of private equity. After all, it sure did great things for
RJR Nabisco. Last year some of you no doubt read the news stories
about how private equity firms fought off an effort by the government
to impose the same income tax standards on their partners as simple
folk have.

Now we have another advantage of private equity: they can combine with
a publicly held company to suck billions of dollars out of an already
broke federal government. I suppose the pitch goes something like
this:  “If you don’t give us $10 billion bucks, we’ll lay off
thousands of workers who are being paid way more than the value of
their production.” I believe Tony Kornheiser would call anyone who
took this deal a mohron.

Now I’m just an old, mostly broken down sailor, who’s never taken a
single economics course. But I can balance my checkbook (while
beginning sentences with conjunctions), which puts me ahead of the US
Treasury. Germany did much the same thing in the 80’s and 90’s as is
being proposed here. State governments took stakes in certain
manufacturers to prevent them from moving their remaining German
production overseas. You might also say it permitted tens of thousands
of Germans to keep their irrationally generous benefits, and 36 hour
work weeks. It gave Germany something that we used to call “the
English sickness”.

Folks, in my opinion, private equity firms such as Cerberus should
sink, or pay for private swimming lessons. As for GM – it paid CEOs a
fortune in salary and bonuses in return for moving the firm from an
approximate 70 percent market share to just under a 50 percent share.
In fact, the late Roger Smith brought GM so low that the board thought
they should pay him a handsom post retirement consulting fee, jsut in
case they needed more of the same. I’m trying to figure out in what
way the GM board was smarter than Beth, Cooter, or I.

It seems that the rot in our country is broad as well as deep.
President Obama may find himself a bit busy to give us all those
goodies he’s promising.

Given the fact that we are about to begin printing money even faster
than the archetypal banana republic, we should hope that one thing in
particular does not happen. If China were to let her currency free
float on international markets, it might very well become attractive
to international investors. That would expose us to the “danger” of
not being able to borrow up the wazoo to finance our deficit. If the
United States has to become a pay as you go enterprise, then we will
enter a depression as severe as any that has been seen.


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