The sky isn't falling after all...
So much for the right-wing "sky is falling fear" that capitalism won't survive on its own because of threats from a radical left wing--if they didn't worry about it, they wouldn't use the Socialist Propaganda "what is happening to America" narrative so common to their talking points.
For those of us who trust that markets work, trust the democratic process, and understand basic principles of what capitalism is in the real world the elections in Europe that tilted rightward is another reminder of why the "socialist" rhetoric from the right wing is nonsensical.
There is no Left-wing conspiracy, there is no radical European idea that is sweeping onto our shores. The Europeans trust market systems--why don't conservatives in America? Probably because Europeans have a higher quality of life, but I digress....
Although glancing at the national review today at the bookstore reminds me on how conservatives are knee deep in Trotsky/Lenin ideology--keep in mind many if not most of the neo-conservatives were reformed Trotskyites--which probably explains their fear of communism.
For those of us who got the memo about the fall of the Soviet Union and the failure of central planners this can be quite baffling from time to time...
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Didn't central planning fail because they didn't have enough symbolic analysts? :-)
June 8, 2009 2:16 PM | Reply | Permalink
Nice.
I like Krugman's take on Europe, in that had we had Gore instead of Bush we might see the same dynamic here.
June 8, 2009 4:35 PM | Reply | Permalink
Yes. Well someone is always coming up with some reason it's falling or going to fall in 2012 or 2222 or whatever. Since I don't really think it's possible for the 'sky to fall', I'm afraid I've stopped listening to the theories...
Nice post, thanks.
June 8, 2009 4:44 PM | Reply | Permalink
The guys with signs wearing togas will always be with us.
June 8, 2009 5:04 PM | Reply | Permalink
The Administration is definitely changing the rules of capitalism. Just look at how the UAW was given preferential treatment in the GM bankruptcy as compared to the unsecured bondholders. That is going to affect how distressed companies are able to attract private capital going forward.
June 8, 2009 7:55 PM | Reply | Permalink
Ok, UAW bought their 17% stake with union dues and lost the right to strike(which is the only negotiating tool they have)for like five years or so. Bondholders like Chase bank got their share of government bailout a while back in spades and then force GM into bankruptcy. GM is closing something like 14 locations in US and using tax payers money to import a million cars from China. And prey tell where is this private capital? Statements like this prove you are anything but middle class. I'd say there's a good chance you're one of the thieves that has robbed this country.
June 9, 2009 1:48 AM | Reply | Permalink
Ok, UAW bought their 17% stake with union dues and lost the right to strike(which is the only negotiating tool they have)for like five years or so. Bondholders like Chase bank got their share of government bailout a while back in spades and then force GM into bankruptcy. GM is closing something like 14 locations in US and using tax payers money to import a million cars from China. And prey tell where is this private capital? Statements like this prove you are anything but middle class. I'd say there's a good chance you're one of the thieves that has robbed this country.
June 9, 2009 1:51 AM | Reply | Permalink
The bondholders aren't Chase bank. (Chase was a SECURED creditor that got paid back in full - like they should since they are senior to the unsecured holders). The bondholders are asset managers that run people's retirement plans and 401k's. The bondholders are also individuals who thought it was a good investment years ago to buy GM bonds.
The bondholders didn't "force GM into bankruptcy". GM no longer had the right capital structure and restructuring something as big as GM forced an in-court process. But that's not the point - GM was going to be massively restructured, whether it happened in court or out of court.
The point is that Obama played favorites and gave the UAW 5 times the consideration received by the bondholders. And they are both pari passu creditors so they should have been treated equally as unsecured creditors.
The UAW was owed $20bn and the bondholders $27bn. The UAW gets a recovery of 66 cents on the dollar while the bondholders get 11 cents. (UAW receives $9bn of new debt and 17.5% of the equity, which has been valued at $4.2bn; the bondholders got zero new debt and 10% of the equity, valued at $3.1bn)
Private capital (ie bond investors) will be much more reluctant to invest in the next turnaround situation now that the rules have changed and they have no idea if the government will intervene and how the government will treat creditors in a bankruptcy.
June 9, 2009 6:23 AM | Reply | Permalink
Isn't the deal that UAW works for less in exchange for the equity and hoped-for future earnings? Given the huge pay cuts in recent times and now, this doesn't seem unfair to me, but what do I know, I work for a living.
So are you going to boycott GM? BTW, do you now own GM cars? I owned them from 1981 through 2001, when I switched to Ford's European-design Focus. I miss the low-priced GM parts, though. And I ran my 1990 Chevy Lumina van for 240,000 miles.
June 9, 2009 12:26 PM | Reply | Permalink
The point is that the UAW got 5 times what the bondholders received. And to make it worse, the bondholders received ALL equity, whereas at least the UAW received some interest bearing debt as part of their package.
I don't own a GM today and don't have any plans to buy a car. I will be running my current car into the ground like you did unless I hit the lottery.
June 9, 2009 2:18 PM | Reply | Permalink
Well, I may be wrong but I'd say private capitla got their backup in 2007 when the FED started handing out interest free money to keep the game going....
June 9, 2009 1:15 PM | Reply | Permalink
What does that have to do with the GM bankruptcy? We're talking about regular people that put their money into bond mutual funds at Fidelity, Vanguard, etc. And pension fund managers that invested peoples' pensions in GM bonds. Now those people are being treated very unfairly versus the UAW.
Interest free money should have helped issuers like GM but how does it help the bondholders?
June 9, 2009 2:09 PM | Reply | Permalink
PS - why do you choose to include personal attacks in your responses? My original post on here simply tried to argue a point. But you chose to call me a thief - why?
June 10, 2009 5:50 AM | Reply | Permalink