How is austerity doing in Europe

[AmazonTania]

First, thanks for a thoughtful post! I think we are getting into some of the good stuff here.

Sorry for the inside joke about Pareto and Walras. You had to be forced to sit through welfare economics to appreciate the irony.

I try to be careful here. I do not deny that there is a "crowding-out effect", but I contend that it is mostly a property of economies near full employment, just as Keynesian multiplier effects are more pronounced when there are lots of underutilitzed resources. Which one is dominant depends on the state of the economy at the moment. Suppose we look at warehouse space. In a major downturn the warehouse is often less than half full. If the company gears up production and needs more warehouse space, it's already there sitting unused. Warehouse space in this situation is not a constraint on production and to the firm it is essentially free. At the same time if the company next door offers to sell the firm another warehouse, the firm will probably pass. Why pay for space that only increases the amount of unused warehouse? The marginal productivity of the added space is zero.

Now most production processes involve multiple inputs, not all of which are underutilized. Things get complicated pretty fast and in practice two or three sector models become basically worthless and input-output models become the shining stars. This is the kind of stuff I worked on the first year of graduate school studying the Soviet economy. Bringing an unused resource into production normally requires also increasing use of resources that are not in surplus. Using more warehouse space, for example will often increase utility consumption for climate control, increase labor for additional workers, and repairs and depreciation for loading equipment. So even though a given resource is free, that doesn't mean that there is no marginal cost in utilizing more of it.

My point is that this is all on a continuum. Near full employment most other factors of production are in short supply, and increasing output has significant inflationary potential. Conversely surplus resources in one area caused by decreased demand usually are coupled with surplus resources of other kinds. As we move from one position to another issues such as bottlenecks have to be dealt with and the additional output balanced against the inflationary pressures.

I think that there is very little the government can do that only utilizes surplus resources, so that spending has to matched to what resources we are targeting to increase utilization. I'm not understanding what "harmful solution" you are concerned with here. Perhaps an example would help?

Well, let's just say that an industry goes bottom up and is about to fail, it's just say movie rentals. This industry is granted a loan through a subsidy, bailout, or whatever. What good does it do exactly to keep these resources in a dying industry? Sure, you can spend money subsidising these employees, but the market is saying that these employees should have lost their jobs already. If these employees were not employed in an unproductive sector of the economy, they could be doing something which is productive. It would mean this workers would lose their jobs, but people have to lose their jobs in order for them to be employed in the right type of jobs.

Get what I'm saying?

Again, what kind of harm are you concerned with here?

I'm not really concerned about the best ways to allocate resources. I'm concerned that resources are not allocated efficiently. Even if you agree that subsiding something is a net benefit for society, there may be a good reason to oppose it. If private individuals are not willing to pay for good or service with their own funds, then it means they do not value this particular good or service, as oppose to other goods or services which could have been developed.

Through government spending, we will get more goods and services, but they'll be worth less to people than the cost to produce.

I would agree with two caveats. First the market does not do a good job of handling externalities unless they are factored in by either subsidies or fines. Second, there are some perverse price effects in consumer behavior that are problematical.

Are you referring to negative externalities? No, not all markets are good with externalities. The question what is the best way to handle these externalities: Taxation, Regulation or Property Rights. Taxation and Regulation can be market distorting.

A think this is a good example of where absolute arguments break down on both sides. Markets are not very good at producing certain goods and services, like basic research or infrastructure. You can argue these issues intelligently project by project. For example, I would oppose a government plan to subsidize agricultural lime production (yes, some states run this industry directly), but I would support a project to upgrade prisons so they are safer for inmates and staff and more effective in reducing recidivism. I guess that a good project is a good project regardless of how tight the budget is (i.e. if the projected internal ROI is big, do it anyway) and a bad project is a waste of taxpayer money even when the government runs a surplus.

It may be true that it can't produce everything, but it can make everything better. The internet began as a typical government program called ARPANET which was for military use. Sure, the internet owes it's very existence to government funding. But until, 1981 private use of the ARPA communications protocol — what is now called "TCP/IP" — far exceeded military use. Both the design and implementation of the internet was funded with mostly Government Dollars. Packet-switching has serious implications on how the internet can really work. While packet-switching is great for emails, file transfers and web browsing, it's not so great for everything the internet has become today, search as video, audio feeds, real-time applications, server-based applications like webmail, Google earth and Google spreadsheet. Not to mention, today's internet would not have been possible without private companies like Xerox, Apple and Microsoft.

I would agree that the question in a lot of cases is an empirical one. But right now the financial system is sitting on a couple trillion dollars of excess reserves earning 0.25% interest from the Fed, while not generating any economic activity through increased business lending. It seems to me that bank hoarding is crowding out business investment! And we are terminating hundreds of NIH research grants for the purpose of.....where again is this demand for medical research being replaced? Where are the resources being allocated to?

Banks are hoarding cash because of the uncertainty and because it's profitable for them to do so. The Fed pays banks a huge interest not to lend money, at the same time it pays the average citizen next to zero to keep your money in the same depository institution. Effectively, the Federal Reserve market operation involves crowding in average citizens into financial markets because it's the only place where they will be able to yield any decent return.

So long as the US medical system runs for profit, there will always be demand for medical research in America. A decade ago, two-thirds of all drug research was conducted in Europe. Now 60% of it is conducted in the United states.

The same argument could be used to pillory the financial services industry! Most people paid to do a job try to do it well, and this is as true in the government sector as in the private sector.

Yes, but the Government does not operate for a profit. What metric is there to determine whether or not your institution is doing a good job without the role of profits? With no incentive to economise, Governments can really mis-allocate resources.

Not to mention the Government cannot be sued, and it cannot go out of business. It's really easy for someone to be sued or fined for the most trivial things in the financial industry. It really hurts the bottom line. While the Government Sector may supposedly care about it's bottom line, we've rarely seen that to be the case.

 

[Kimura]

What "source" would you consider to be a "rational, impartial source?"

How about General Motors CEO, Dan Akerson?

Akerson Admits GM Bankruptcy Not Well Thought Out | National Legal and Policy Center

It's almost funny that the Obama Administration didn't make Wall Street go through wage restructuring before they could get bailed out. This has been the story for the past thirty years while Labor takes it in the ass. I'm glad the UAW received some compensation. The past thirty years have been a smorgasbord of deregulation, free trade, and stagnant wages. Thank you Carter, Reagan, Bush, Clinton, Bush The Retard, and now Obama!

While I don't really see where the de-regulations are and the free trade America is supposedly having, but you must know that this the GM bailout and UAW compensation is an example of crowding out. In some ways, it's also financial. The purpose of bankruptcy is not to reward or repay creditors. Actually, bankruptcy prevents this from taking place. Bankruptcy is meant to free up resources and allocate them to more efficient uses. These resources may have been put in the hands of people who understand how to use it better. Employee would have been allocated to a much more efficient automobile maker. GM would have ultimately went in the hands of individuals who would have ran it better.

The deregulation of the finance sector started under Carter, went into warp under Reagan, and climaxed with Bush and Clinton. I don't even know where to start. We could start with the repeal of Glass-Steagall. This was one of more retarded things we've done as a country.

The bankruptcy of GM hasn't benefited the people of Michigan or the Unites States. There aren't many people that can manufacture in a more efficient manner than Americans. Maybe the Germans and Japanese, but that's still a tall order, even though their workers are paid substantially more than their American counterparts, yet remain very competitive. It sort of makes these anti-labor arguments look ridiculous. Then again, in Japan, Germany, Italy, and South Korea, etc. health care costs aren't factored into the marginal cost of production for auto manufacturers in these countries.

GM was far more important to the American economy than Lehman Brothers or the zombie banks still on life support.

Edit to add:

I just saw this.

Yes, but the Government does not operate for a profit. What metric is there to determine whether or not your institution is doing a good job without the role of profits? With no incentive to economise, Governments can really mis-allocate resources.

Not to mention the Government cannot be sued, and it cannot go out of business. It's really easy for someone to be sued or fined for the most trivial things in the financial industry. It really hurts the bottom line. While the Government Sector may supposedly care about it's bottom line, we've rarely seen that to be the case.

The government isn't supposed to be run for profit. It supposed execute public policy.

One of the most efficient organizations in the world is the US military. It has more firepower than everyone else by orders of magnitude. It also has the BEST supply chain and logistics in the world, far surpassing any multinational corporation. This institution - and its employees - aren't run for profit.

You mentioned DARPA. We also had the Human Genome Project. We have the CDC, NIH, NASA, DOE, etc. These are institutions that contribute massively to the betterment of society as a whole. The amount of research by NASA alone means we should increase its funding.

 

[AmazonTania]

So, your saying with certainty that gm would have been put in the hands of someone, presumably another company, who could better run the company. Problem with this is,it was tried. And NO ONE wanted GM.

No one wanted the unions which were attached to GM. Other than that, if no one wanted GM, then it should have failed.

You are taking the stance that GM would have survived bankruptcy. The facts were obvious. They would not have.

Exactly. And their assets would have been sold on the open market. Another automaker which could actually run a auto company would have purchased these assets.

Though the other auto makers would have been quite happy. And those companies would have been foreign companies. Chrysler had no chance of surviving. And the ceo of Ford is on record as having said he did not believe ford would have survived had there been no auto bailout.

GM and Chrysler took bailout money, and filed for bankruptcy anyway. Which is what should have happened from the very beginning.

So, the issue was that we would have seen a major unemployment hit, estimated at being in the neighborhood of 1M employees. We would likely have lost one of our largest industries. And, based it would have happened at a time of very difficult economic times, with the possibliity that we may have seen the country slip into a true depression.

And?

This is typical of the rational analysis of the auto bailout":
"But many auto industry experts, including the Obama administration's former car czar, Steven Rattner, a Democrat, and former GM Vice Chairman Bob Lutz, a Republican, say there was no private-sector financing available in 2009 and the bailout was the only way to keep the companies alive.
"He thinks we didn't try to borrow money from the banks?" Lutz told the Detroit Free Press in February. "The banks were even more broke than we were. Who had the money?"
Without financing during bankruptcy, GM and Chrysler would have had to go out of business, taking down many suppliers. That would have likely caused bankruptcies at the healthier automakers such Ford Motor (F, Fortune 500), who would not have been able to get the parts they needed to build cars. That is why Ford went to Capitol Hill in late 2008 pushing for the rescue of its rivals.
The Center for Automotive Research, a well-respected Michigan think tank estimates that the bailout therefore saved 1.5 million U.S. jobs by keeping GM, Chrysler and the companies that depended on them in business."
3 answers to the auto bailout debate - Sep. 6, 2012
Latest estimates for the total cost to taxpayers is likely to end up being under $15B. Wash this against not having lost and industry, not having gone into a depression, and not increasing the unemployment rate by over 1M persons.
Hell, we spent that in iraq in a couple months. Looks to me like a much better deal than blowing holes in the desert.

3 years later, the Auto giants are mere shadows of their former selves. GM profits fell 16% in Q2, and it's PE's are below industry average, then again that could be normal for the way the auto industry is today. Investors now are willing to pay 10 bucks for a mere 3 dollars earnings, which GM relatively a steal and I can't tell whether or not it's still experiencing bankruptcy. It's still growing in sales, but it's not any profitable. Looking at the Y/Y figures GM grew sales $1,943 M, or 9% in 2013 compared to 2012. Y/Y income grew 4.5%, but it's down 16% Q/Q. Sub prime credit receivables under 599 grew $1,376 m and made up 70.8% of the increase in GM sales. Receivables under 599 grew 18.9% Y/Y, and the subsection under 540 grew 26.9% Y/Y. So GM is entirely dependent on Subprime lending growth for the entire North American market... I guess some things never change. And these are just the financials for GM. I haven't even dug into Chrysler yet.

Is this the purpose of bailouts? So we can rescue bad companies and they can continue to preform badly?

 

[Rshermr]

So you don't have a rational, impartial source. Thought so.

What "source" would you consider to be a "rational, impartial source?"

How about General Motors CEO, Dan Akerson?

Akerson Admits GM Bankruptcy Not Well Thought Out | National Legal and Policy Center

Great, a piece inThe National Legal and Policy Center:

"The National Legal and Policy Center (NLPC) is a right-leaning 501(c)(3) non-profit group that monitors and reports on the ethics of public officials, supporters of liberal causes, and labor unions in the United States. Among the NLPC's more high-profile targets have been Reverend Al Sharpton, Reverend Jesse Jackson, U.S. Representative Charles Rangel (D-NY), U.S. Representative John Murtha (D-PA), U.S. Representative Alan Mollohan (D-WV), Senator Hillary Rodham Clinton (D-NY) (while she was First Lady), Senator Ted Stevens (R-AK) and Senator Lisa Murkowski (R-AK). The Center files complaints with government agencies, legally challenges what they view as abuse and corruption, and publishes reports. The NLPC has been praised by right-wing media personalities such as radio broadcaster Rush Limbaugh."
The National Legal and Policy Center (NLPC) is a right-leaning 501(c)(3) non-profit group that monitors and reports on the ethics of public officials, supporters of liberal causes, and labor unions in the United States. Among the NLPC's more high-profile targets have been Reverend Al Sharpton, Reverend Jesse Jackson, U.S. Representative Charles Rangel (D-NY), U.S. Representative John Murtha (D-PA), U.S. Representative Alan Mollohan (D-WV), Senator Hillary Rodham Clinton (D-NY) (while she was First Lady), Senator Ted Stevens (R-AK) and Senator Lisa Murkowski (R-AK). The Center files complaints with government agencies, legally challenges what they view as abuse and corruption, and publishes reports. The NLPC has been praised by right-wing media personalities such as radio broadcaster Rush Limbaugh.

Yup. That is impartial. Like moveon.org. Great job. You just do not get it, me boy. Impartial source.

 

[Rshermr]

What did the uaw give up in the saving of gm??
UAW leaders agreed to the revised contract last week that freezes wages, ends bonuses, eliminates noncompetitive work rules and requires binding arbitration for the next contract if a deal can't be reached. Gettelfinger said there are some conditions under which the union could still strike. The UAW said the cuts would save GM $1.2 billion to $1.3 billion a year.

"We very much appreciate the support of our employees and retirees," Diana Tremblay, GM vice president for labor relations, said in a statement. "Their shared sacrifices will enable GM to become a stronger, more viable company that will continue to deliver world-class cars and trucks."
UAW members approve General Motors concessions - USATODAY.com

The UAW gave up a great deal prior to the bankruptcy. So, if you want to see more, the are many additional concessions. But, if you want to believe the right wing dogma, no one is saying you can not.

 

[oldfart]

Well, let's just say that an industry goes bottom up and is about to fail, it's just say movie rentals. This industry is granted a loan through a subsidy, bailout, or whatever. What good does it do exactly to keep these resources in a dying industry? Sure, you can spend money subsidising these employees, but the market is saying that these employees should have lost their jobs already. If these employees were not employed in an unproductive sector of the economy, they could be doing something which is productive. It would mean this workers would lose their jobs, but people have to lose their jobs in order for them to be employed in the right type of jobs.

Get what I'm saying?

It's a perfectly reasonable argument and generally correct. I am generally opposed to bailing out failing firms. I was particularly disgusted with the bailout of financial institutions with virtually no requirements that the funds be used for what the banks represented they would be used for.

If technological changes or changes in consumer tastes cause a business model or industry to become extinct (as in your example of video rental stores), then I think the best public response is to encourage orderly liquidation and expedite reallocation of resources, especially labor.

If private individuals are not willing to pay for good or service with their own funds, then it means they do not value this particular good or service, as oppose to other goods or services which could have been developed.

Positive or negative externalities are almost ubiquitous in a modern economy. I believe that the best way to deal with this is to foster market and quasi-market solutions (a market for carbon credits for example). That leaves a class of problems resulting from a combination of positive externalities, risk-avoidance, and long development periods which causes things like long-term basic research and education to be underproduced, unless directly sponsored or supported by government.

Are you referring to negative externalities? No, not all markets are good with externalities. The question what is the best way to handle these externalities: Taxation, Regulation or Property Rights. Taxation and Regulation can be market distorting.

By property rights, I assume that you are referring to a tort system. If Acme Chemical pumps industrial waste into the Gulf, local shrimpers can sue for damage to fisheries. I basically think that all three alternatives you mention are mediocre at best. The all add a layer of government bureaucracy and stifle innovative solutions. I much prefer market and quasi-market solutions. Actors are encouraged to find better solutions.

Banks are hoarding cash because of the uncertainty and because it's profitable for them to do so. The Fed pays banks a huge interest not to lend money,

I have a bit different view of the cash hoarding. The Fed pays 0.25% on excess reserves (are you thinking of the 6% dividend rate on member banks' stock in the regional Feds?) I believe banks are hoarding cash because they rightly question their own risk management models (given how great they did this in the recent past!), and they are trying to restore their balance sheets (in a large part by draining hundreds of billions in riskless fees from the real economy, a tactic suggested by Larry Summers!). But ultimately the solution to bad loans is not no loans, but rather good loans.

So long as the US medical system runs for profit, there will always be demand for medical research in America. A decade ago, two-thirds of all drug research was conducted in Europe. Now 60% of it is conducted in the United states.

Yes, as long as the payoffs are predictable in the near future! But basic medical research is dying in the US because sequester is requiring cancellation of NIH grants and Pharma doesn't pay for that kind of research.

The same argument could be used to pillory the financial services industry! Most people paid to do a job try to do it well, and this is as true in the government sector as in the private sector.

Yes, but the Government does not operate for a profit. What metric is there to determine whether or not your institution is doing a good job without the role of profits? With no incentive to economise, Governments can really mis-allocate resources.

I think that all large organizations behave very similarly. Monopolies function remarkably like governments; indifferent to consumers, slow to change and hobbled by rule-driven behavior. The challenge is to make large organizations behave like small organizations which are truly accountable for their performance.

It's really easy for someone to be sued or fined for the most trivial things in the financial industry. It really hurts the bottom line.

For many years I held security licenses. I know what you are referring to. I think more of that problem than you realize is attributable to the influence of large players in the industry who have captured the regulatory process to protect the largest firms and most egregious behavior while holding the retail end of the business to much higher standards.

If it's any consolation, as frustrating, unfair, nitpicking, and petty as I found the audits, they were small potatoes compared to the compliance enforcement of the IRS.

 

[AmazonTania]

It's almost funny that the Obama Administration didn't make Wall Street go through wage restructuring before they could get bailed out. This has been the story for the past thirty years while Labor takes it in the ass. I'm glad the UAW received some compensation. The past thirty years have been a smorgasbord of deregulation, free trade, and stagnant wages. Thank you Carter, Reagan, Bush, Clinton, Bush The Retard, and now Obama!

While I don't really see where the de-regulations are and the free trade America is supposedly having, but you must know that this the GM bailout and UAW compensation is an example of crowding out. In some ways, it's also financial. The purpose of bankruptcy is not to reward or repay creditors. Actually, bankruptcy prevents this from taking place. Bankruptcy is meant to free up resources and allocate them to more efficient uses. These resources may have been put in the hands of people who understand how to use it better. Employee would have been allocated to a much more efficient automobile maker. GM would have ultimately went in the hands of individuals who would have ran it better.

The deregulation of the finance sector started under Carter, went into warp under Reagan, and climaxed with Bush and Clinton. I don't even know where to start. We could start with the repeal of Glass-Steagall. This was one of more retarded things we've done as a country.

Statues and regulations have been added to the federal register every year since the Carter administration. You can search within the entire Banking and Financial sectors of the US Code, very few regulations were repealed. Not a single one relating to the US crisis. Over 600 + regulations were added to the federal register relating to the Office of the Comptroller of the Currency, The FDIC and the Federal Reserve since 1994 to 2008. I only started up to 1994 because this is as far back as the Federal Register will allow me. There was no deregulation. Deregulation is reducing the amount of state regulations. This didn't happen.

Also, Glass Steagall is also irrelevant to the crisis as well. Most of the commercial banks got into trouble because they held large portfolios of mortgage backed securities. Glass-Steagall didn't prohibit banks from investing in securities. The investment banks got in trouble because they also held large portfolios of mortgage-backed securities funded by very short term commercial paper. Glass-Steagall didn't prohibit investment banks from issuing commercial paper or investing in securities.

The bankruptcy of GM hasn't benefited the people of Michigan or the Unites States. There aren't many people that can manufacture in a more efficient manner than Americans. Maybe the Germans and Japanese, but that's still a tall order, even though their workers are paid substantially more than their American counterparts, yet remain very competitive. It sort of makes these anti-labor arguments look ridiculous. Then again, in Japan, Germany, Italy, and South Korea, etc. health care costs aren't factored into the marginal cost of production for auto manufacturers in these countries.

If Americans can manufacture and produce in a more efficient manner, then it should have no problem pulling itself up. Part of what makes Germany and Japanese workers higher paid are lower cost of labour. This insures employees working for the wages are highly skilled, and at the same time, makes sure that these high wages can be afforded. There really isn't anything keeping Americans uncompetitive, except Americans.

GM was far more important to the American economy than Lehman Brothers or the zombie banks still on life support.

The Zombie banks are really more or less the direct a the FED FOMC actions.

Mazel Tov!

The government isn't supposed to be run for profit. It supposed execute public policy.

Says who? There are governments with institutions which operate for profit. Now I do not suggest that all governments should function this way, and it doesn't necessarily mean that these governments are good at it. But it does offer government an incentive to economise, and that is good for everyone.

One of the most efficient organizations in the world is the US military. It has more firepower than everyone else by orders of magnitude. It also has the BEST supply chain and logistics in the world, far surpassing any multinational corporation. This institution - and its employees - aren't run for profit.

Maybe it should. If it is going around keeping the peace and stability of the world, it should be able to get paid for it.

You mentioned DARPA. We also had the Human Genome Project. We have the CDC, NIH, NASA, DOE, etc. These are institutions that contribute massively to the betterment of society as a whole. The amount of research by NASA alone means we should increase its funding. These organizations are efficient and not run for profit.

NASA and the CDC have made considerable contributions to science. What about the FDA? Has this made a good contribution towards science?

 

[Rshermr]

So, your saying with certainty that gm would have been put in the hands of someone, presumably another company, who could better run the company. Problem with this is,it was tried. And NO ONE wanted GM.

No one wanted the unions which were attached to GM. Other than that, if no one wanted GM, then it should have failed.

You are taking the stance that GM would have survived bankruptcy. The facts were obvious. They would not have.

Exactly. And their assets would have been sold on the open market. Another automaker which could actually run a auto company would have purchased these assets.



GM and Chrysler took bailout money, and filed for bankruptcy anyway. Which is what should have happened from the very beginning.

So, the issue was that we would have seen a major unemployment hit, estimated at being in the neighborhood of 1M employees. We would likely have lost one of our largest industries. And, based it would have happened at a time of very difficult economic times, with the possibliity that we may have seen the country slip into a true depression.

And?

This is typical of the rational analysis of the auto bailout":
"But many auto industry experts, including the Obama administration's former car czar, Steven Rattner, a Democrat, and former GM Vice Chairman Bob Lutz, a Republican, say there was no private-sector financing available in 2009 and the bailout was the only way to keep the companies alive.
"He thinks we didn't try to borrow money from the banks?" Lutz told the Detroit Free Press in February. "The banks were even more broke than we were. Who had the money?"
Without financing during bankruptcy, GM and Chrysler would have had to go out of business, taking down many suppliers. That would have likely caused bankruptcies at the healthier automakers such Ford Motor (F, Fortune 500), who would not have been able to get the parts they needed to build cars. That is why Ford went to Capitol Hill in late 2008 pushing for the rescue of its rivals.
The Center for Automotive Research, a well-respected Michigan think tank estimates that the bailout therefore saved 1.5 million U.S. jobs by keeping GM, Chrysler and the companies that depended on them in business."
3 answers to the auto bailout debate - Sep. 6, 2012
Latest estimates for the total cost to taxpayers is likely to end up being under $15B. Wash this against not having lost and industry, not having gone into a depression, and not increasing the unemployment rate by over 1M persons.
Hell, we spent that in iraq in a couple months. Looks to me like a much better deal than blowing holes in the desert.

3 years later, the Auto giants are mere shadows of their former selves. GM profits fell 16% in Q2, and it's PE's are below industry average, then again that could be normal for the way the auto industry is today. Investors now are willing to pay 10 bucks for a mere 3 dollars earnings, which GM relatively a steal and I can't tell whether or not it's still experiencing bankruptcy. It's still growing in sales, but it's not any profitable. Looking at the Y/Y figures GM grew sales $1,943 M, or 9% in 2013 compared to 2012. Y/Y income grew 4.5%, but it's down 16% Q/Q. Sub prime credit receivables under 599 grew $1,376 m and made up 70.8% of the increase in GM sales. Receivables under 599 grew 18.9% Y/Y, and the subsection under 540 grew 26.9% Y/Y. So GM is entirely dependent on Subprime lending growth for the entire North American market... I guess some things never change. And these are just the financials for GM. I haven't even dug into Chrysler yet.

Tales a while for new models to be developed and brought to market. Nearly all gm models have not changed since reorganization. But that is about to change, in a big way with 18 new introductions in September. Pre released models of chevrolet (impala and corvette, as well as Cadilac, have been panned as very good cars. So, the company is expected to do very well over the next year:
Goldman Sachs Group Inc. last week swapped GM for Ford on its Americas Conviction Buy list and projected that the largest U.S. automaker's shares may rise to $45 in the next year from $36.76 at Monday's close.

Read more: http://www.autonews.com/article/201...om-18-new-or-refreshed-vehicles#ixzz2c0sxfnCl

Is this the purpose of bailouts? So we can rescue bad companies and they can continue to preform badly?

So, are you saying that we should let germany, japan, korea, and other countries have the auto business?? We should simply buy from them?? Most do not agree with you, but if that is your opinion, good for you.
And so it is ok with you that over 1M would be unemployed??? Apparently. Most, happily, disagree with you.

Your assessment of gm is a bit odd. They are the second largest auto maker in the world, behind Toyota. You seem really concerned about stock price, but not much interested in profits. And for the first time in years, they are profitable. And getting more so.

No one suggests that they are straightened around. They were pretty well screwed up, no question. Had been for YEARS. Well back into the 1960's. But they are better. And they will be completely private within 9 months. Which is a good thing.

But to most, the concept that gm going out of business would have been a good thing is a political statement. It makes no real sense to most from a national economic standpoint.

GM and Chrysler took bailout money, and filed for bankruptcy anyway. Which is what should have happened from the very beginning.

I assume you meant that they filed for bankruptcy, then took bailout money. But your statement is only true if you believe that an additional 1+ million unemployed is not lunacy. And if you do not believe the cbo statements that without it we may have seen a full fledged depression. and if you fully believe that no auto industry headquartered in the us is no problem. Few believe any of these things.

What has happened over the years since the gm bailout occured is that fewer and fewer believe it was a bad idea. The conservative machine keeps harping on the issue, but are getting less and less traction, according to polls. So, in a few years, most auto experts believe that the auto bailout will not ba a big deal at all. And though the old gm was pathetic in many ways, as long as the new gm goes the way of Ford and the direction they seem headed now, no one will be concerned about the bailout.

 

[AmazonTania]

So, are you saying that we should let germany, japan, korea, and other countries have the auto business??

They already have the auto business.

We should simply buy from them?? Most do not agree with you, but if that is your opinion, good for you.

The market decides what consumers want and what they do not want. What businesses should fail and what businesses should not fail. If American automakers can produce cars efficiently, affordably than foreign competitors, then it shouldn't be in the business of producing automobiles.

And so it is ok with you that over 1M would be unemployed??? Apparently. Most, happily, disagree with you.

Explain the purpose of keeping employees in a dying industry?

Your assessment of gm is a bit odd. They are the second largest auto maker in the world, behind Toyota. You seem really concerned about stock price, but not much interested in profits. And for the first time in years, they are profitable. And getting more so.

I really don't understand the point in you responding to me if you're not going to bother comprehending what was written.

3 years later, the Auto giants are mere shadows of their former selves. GM profits fell 16% in Q2, and it's PE's are below industry average, then again that could be normal for the way the auto industry is today. Investors now are willing to pay 10 bucks for a mere 3 dollars earnings, which GM relatively a steal and I can't tell whether or not it's still experiencing bankruptcy. It's still growing in sales, but it's not any profitable. Looking at the Y/Y figures GM grew sales $1,943 M, or 9% in 2013 compared to 2012. Y/Y income grew 4.5%, but it's down 16% Q/Q. Sub prime credit receivables under 599 grew $1,376 m and made up 70.8% of the increase in GM sales. Receivables under 599 grew 18.9% Y/Y, and the subsection under 540 grew 26.9% Y/Y. So GM is entirely dependent on Subprime lending growth for the entire North American market... I guess some things never change. And these are just the financials for GM. I haven't even dug into Chrysler yet.

Just in case you don't understand what was said, I've used a valuation metric, profit margins, and Y/Y comparisons in sales and net profits. No mention of used… at all. Who even determined the performance of a company from stock prices anyway? I really don't even know why you suggested anyone was concerned about the price of GM's stock. That's a mistake only a rookie makes.

Also, GM is not the second largest auto marker. Not in terms of Market Cap anyway. Maybe revenue, but I doubt that as well.

No one suggests that they are straightened around. They were pretty well screwed up, no question. Had been for YEARS. Well back into the 1960's. But they are better. And they will be completely private within 9 months. Which is a good thing.

There are no more profitable being complete private than they were under government control.

But to most, the concept that gm going out of business would have been a good thing is a political statement. It makes no real sense to most from a national economic standpoint.

There is nothing political about it. Resources were badly misused and mis-allocated. As a result, GM failed and therefore needs to go under. It doesn't help the economy to keep directing resources inefficiently.

I assume you meant that they filed for bankruptcy, then took bailout money. But your statement is only true if you believe that an additional 1+ million unemployed is not lunacy.

Um, no. Dec. 19th President Bush announced a $13.4 billion emergency bailout for GM and Chrysler to be paid by mid-January 2009. GM and Chrysler submitted their restructuring plans for the next 5 years on Feb 18th. April 30th, Chrysler files for bankruptcy protection. A month later, GM follows suit and files for bankruptcy.

They've filed for bankruptcy after, not before, they've accepted bailout money.

And there is nothing lunatic about unemployment. Companies are born, they die, capitalism moves forward. Unemployment is just the natural part of the business cycle and a proper allocation of resources.

And if you do not believe the cbo statements that without it we may have seen a full fledged depression. and if you fully believe that no auto industry headquartered in the us is no problem. Few believe any of these things.

The CBO projected the recession would have been much worse if no action were taken. According to their own projections, if we did nothing the unemployment rate would be where it is now, as oppose to a stimulus plan where the unemployment would only be a few basis points smaller.

I don't know why you have such reliance on people with such terrible track records.

What has happened over the years since the gm bailout occured is that fewer and fewer believe it was a bad idea. The conservative machine keeps harping on the issue, but are getting less and less traction, according to polls. So, in a few years, most auto experts believe that the auto bailout will not ba a big deal at all. And though the old gm was pathetic in many ways, as long as the new gm goes the way of Ford and the direction they seem headed now, no one will be concerned about the bailout.

No one is making this about politics except for you. Park your political bias at the door and discuss business.

GM's valuations are lousy, their PEs are far too low which indicates there are no expectations for growth anytime soon, they're struggling to make a profit and their sales are completely reliant on the subprime lending market, a key catalyst in the financial collapse.

This means if and when interest rates rise GM's losses will once again be realised and their financials will be underwater. What are you going to do once this happens? Bail them out again?

 

[Kimura]

Statues and regulations have been added to the federal register every year since the Carter administration. You can search within the entire Banking and Financial sectors of the US Code, very few regulations were repealed. Not a single one relating to the US crisis. Over 600 + regulations were added to the federal register relating to the Office of the Comptroller of the Currency, The FDIC and the Federal Reserve since 1994 to 2008. I only started up to 1994 because this is as far back as the Federal Register will allow me. There was no deregulation. Deregulation is reducing the amount of state regulations. This didn't happen.

Also, Glass Steagall is also irrelevant to the crisis as well. Most of the commercial banks got into trouble because they held large portfolios of mortgage backed securities. Glass-Steagall didn't prohibit banks from investing in securities. The investment banks got in trouble because they also held large portfolios of mortgage-backed securities funded by very short term commercial paper. Glass-Steagall didn't prohibit investment banks from issuing commercial paper or investing in securities.

The repeal of Glass-Steagall immensely contributed to the crisis. The only people who say otherwise are Jamie Dimon and his sociopathic and parasitical peers in investment banking. It prevented commercial banks, which were insured by the government, from using bank deposits for speculation by investment firms.

For example, Glass-Steagall would have prevented JPMorgan from its adventures in the electricity business. It also wouldn’t have allowed banks to speculate with metal storage facilities, oil tankers, power plants, etc. This list goes on and on. Detroit and many other cities wouldn’t have been solicited swaps from bank-controlled LIBOR rates. We should restore it ASAP. We need a firewall between commercial banks and investment banks.

If Americans can manufacture and produce in a more efficient manner, then it should have no problem pulling itself up. Part of what makes Germany and Japanese workers higher paid are lower cost of labour. This insures employees working for the wages are highly skilled, and at the same time, makes sure that these high wages can be afforded. There really isn't anything keeping Americans uncompetitive, except Americans.

Japan and Germany don't have a segment of their political class obsessed with the destruction of labor. We have a whole fascist segment with the American Right obsessed with wage suppression and the destruction of unions.

By the way, in Germany, they have institutions which guarantee excellent working conditions and high wages. Upper management and the unions have a symbiotic relationship.

In the US, on the other hand, we have an upper management which is hostile to labor almost to a pathological degree. German autoworkers are also paid twice as much as their American counterparts which includes salary and benefits. All of the German auto manufacturers are very profitable and competitive.

Says who? There are governments with institutions which operate for profit. Now I do not suggest that all governments should function this way, and it doesn't necessarily mean that these governments are good at it. But it does offer government an incentive to economise, and that is good for everyone.

The federal government doesn't face the same constraints as a corporation. I see no reason to economise when dealing with the social safety net, whether it's food stamps, WIC, Medicaid, jobs programs and training, etc. As a society, we get decide what public policies initiates we want the government to provide and execute.

Maybe it should. If it is going around keeping the peace and stability of the world, it should be able to get paid for it.

I'll trust the defense of my country to guys that grew up in my neighborhood over Academi or any other military contractors. Would you really want to see defense privatized? Yeah, what could possible go wrong. Some of the US military's current problems are privatizing certain aspects of its operations with these outfits like KBR.

NASA and the CDC have made considerable contributions to science. What about the FDA? Has this made a good contribution towards science?

Yes, I think there should be federal standards for the supplements I take and the medication some of my family members use. Left up to their own devices, pharma and supplement manufactures will cut corners given the chance. Sort of like those "natural" Viagra pills from a few years ago that turned out being spiked with Viagra down in Belize. Yeah, we really don't need that in the United States. I do have gripes with the FDA, but that has more to do with the revolving door between Pharma and regulatory agencies. We see the same thing with the FED, SEC, Treasury Dept, etc.

 

[Rshermr]

Originally Posted by Rshermr View Post
So, are you saying that we should let germany, japan, korea, and other countries have the auto business??

They already have the auto business

.
You are being dishonest again. You know what my sentence said. The auto business would indicate all, including OUR auto business.
Quote:
We should simply buy from them?? Most do not agree with you, but if that is your opinion, good for you.

The market decides what consumers want and what they do not want. What businesses should fail and what businesses should not fail. If American automakers can produce cars efficiently, affordably than foreign competitors, then it shouldn't be in the business of producing automobiles.

????

Quote:
And so it is ok with you that over 1M would be unemployed??? Apparently. Most, happily, disagree with you.

Explain the purpose of keeping employees in a dying industry?

Hardly dying. People seem to be buying automobiles. Did you think they had stopped?? The purpose is the same as any reason for keeping people employed.
Quote:
Your assessment of gm is a bit odd. They are the second largest auto maker in the world, behind Toyota. You seem really concerned about stock price, but not much interested in profits. And for the first time in years, they are profitable. And getting more so.

I really don't understand the point in you responding to me if you're not going to bother comprehending what was written.

And I do not understand why you do not believe that I do not understand what you wrote. It was really quite simple. Hardly profound.

Quote: Originally Posted by AmazonTania View Post
3 years later, the Auto giants are mere shadows of their former selves. GM profits fell 16% in Q2, and it's PE's are below industry average, then again that could be normal for the way the auto industry is today. Investors now are willing to pay 10 bucks for a mere 3 dollars earnings, which GM relatively a steal and I can't tell whether or not it's still experiencing bankruptcy. It's still growing in sales, but it's not any profitable. Looking at the Y/Y figures GM grew sales $1,943 M, or 9% in 2013 compared to 2012. Y/Y income grew 4.5%, but it's down 16% Q/Q. Sub prime credit receivables under 599 grew $1,376 m and made up 70.8% of the increase in GM sales. Receivables under 599 grew 18.9% Y/Y, and the subsection under 540 grew 26.9% Y/Y. So GM is entirely dependent on Subprime lending growth for the entire North American market... I guess some things never change. And these are just the financials for GM. I haven't even dug into Chrysler yet.

Just in case you don't understand what was said, I've used a valuation metric, profit margins, and Y/Y comparisons in sales and net profits. No mention of used… at all. Who even determined the performance of a company from stock prices anyway? I really don't even know why you suggested anyone was concerned about the price of GM's stock. That's a mistake only a rookie makes

.
Wow, We are getting snarky. You used selected financial performance metrics, from selected time periods. Which are not draconian, but are fair. Which is why their stock prices have increased overall, and why they are expected to do quite well in the near future. So, you are suggesting based on those metrics that we should not have allowed made the decision to make the loan. Got it. And you are wrong by most people's opinion. And in the opinion of any financial annalist that I have seen.

Also, GM is not the second largest auto marker. Not in terms of Market Cap anyway. Maybe revenue, but I doubt that as well.

Market cap? Not sure why you are so interested in market cap. But in cars sold and revenue and profit, they are second worldwide, and first in the US.
"In the first five months of 2013, General Motors Company (GM - Analyst Report) led with a 18.0% market share in the U.S., followed by Ford Motor Co. (F) with a 16.4% market share, Toyota Motors Corp. (TM - Analyst Report) with a 14.2% market share, Chrysler-Fiat with a 11.7% market share, and Honda Motor Co. (HMC - Analyst Report) and Nissan Motor Co. (NSANY) at the last spots with 9.5% and 8.1% market shares, respectively.

Toyota recaptured the sales crown from General Motors by selling 9.75 million vehicles globally in 2012, which exceeded GM’s sales of 9.29 million vehicles. Germany’s Volkswagen AG (VLKAY) came third with sales of 9.07 million vehicles for the year."
Auto Industry Stock Outlook - June 2013 - June 11, 2013 - Zacks.com


Quote:
No one suggests that they are straightened around. They were pretty well screwed up, no question. Had been for YEARS. Well back into the 1960's. But they are better. And they will be completely private within 9 months. Which is a good thing.

There are no more profitable being complete private than they were under government control.

??????

Quote:
But to most, the concept that gm going out of business would have been a good thing is a political statement. It makes no real sense to most from a national economic standpoint.

There is nothing political about it. Resources were badly misused and mis-allocated. As a result, GM failed and therefore needs to go under. It doesn't help the economy to keep directing resources inefficiently.

It was completely political. Absolutely political. Either far right conservative sites, or politicians with foreign car companies in their states. Take those away, and almost no criticism about the bailout. Even the last repub president and his economic advisers supported the bailout.

Quote:
I assume you meant that they filed for bankruptcy, then took bailout money. But your statement is only true if you believe that an additional 1+ million unemployed is not lunacy.

Um, no. Dec. 19th President Bush announced a $13.4 billion emergency bailout for GM and Chrysler to be paid by mid-January 2009. GM and Chrysler submitted their restructuring plans for the next 5 years on Feb 18th. April 30th, Chrysler files for bankruptcy protection. A month later, GM follows suit and files for bankruptcy.

They've filed for bankruptcy after, not before, they've accepted bailout money.

OK. That is true. The bush money was a place keeper, only, however. The main tarp money was approved after the company declared bankrupcy. $59.5B as I recall.

And there is nothing lunatic about unemployment. Companies are born, they die, capitalism moves forward. Unemployment is just the natural part of the business cycle and a proper allocation of resources.

Normally, yes. That would be the capitalistic economy. Free market and all that. But in any economy, only fools let industries die it there is a fair chance that economy can go forward. Killing your economy for reasons of keeping your economic philosophy pure is, like allowing people to commit suicide, not a good idea.

Quote:
And if you do not believe the cbo statements that without it we may have seen a full fledged depression. and if you fully believe that no auto industry headquartered in the us is no problem. Few believe any of these things.

The CBO projected the recession would have been much worse if no action were taken. According to their own projections, if we did nothing the unemployment rate would be where it is now, as oppose to a stimulus plan where the unemployment would only be a few basis points smaller.

I don't know why you have such reliance on people with such terrible track records.

Hardly. You do indeed like to misquote the cbo. But, ok. You do not believe the cbo. got it.
Quote:
What has happened over the years since the gm bailout occured is that fewer and fewer believe it was a bad idea. The conservative machine keeps harping on the issue, but are getting less and less traction, according to polls. So, in a few years, most auto experts believe that the auto bailout will not ba a big deal at all. And though the old gm was pathetic in many ways, as long as the new gm goes the way of Ford and the direction they seem headed now, no one will be concerned about the bailout.

No one is making this about politics except for you. Park your political bias at the door and discuss business.

There we disagree. See my comment above.

GM's valuations are lousy, their PEs are far too low which indicates there are no expectations for growth anytime soon, they're struggling to make a profit and their sales are completely reliant on the subprime lending market, a key catalyst in the financial collapse.

This means if and when interest rates rise GM's losses will once again be realised and their financials will be underwater. What are you going to do once this happens? Bail them out again?

That is your analysis. I will go with those financial analysts that I have reasonable faith in. And none have your doom and gloom analysis. You do not know what is going on operationally with GM. Or Chrysler. Makes your analysis pretty empty.

But in the long run, time will tell. And over 1M people will remain employed. And profits from car sales stay in this country. And gov revenue is increased by the taxes they pay. And we did not go into a depression. Seems like a fair trade to me.

 

[RKMBrown]

SS isn't a ponzi scheme. SS is a well-run program with exceeding low administrative costs that provides Americans with decent retirement income. Old age in this country used to mean relegating 50% or so of seniors to abject poverty.

You can't be this blind and naive. Each subsequent generation has had to pay double what the prior generation had to pay for SS. SS started out as and continues to be outright theft by current retirees of current income earners wages.

"A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation."

Ayup that is SS in a nutshell. At best you could argue that it's not "fraudulent" because it's law. It's good to be the law, you can do anything you want, even run a ponzi that redistributes from peter to pay paul.

 

[Kimura]

SS isn't a ponzi scheme. SS is a well-run program with exceeding low administrative costs that provides Americans with decent retirement income. Old age in this country used to mean relegating 50% or so of seniors to abject poverty.

You can't be this blind and naive. Each subsequent generation has had to pay double what the prior generation had to pay for SS.

"A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation."

Ayup that is SS in a nutshell. At best you could argue that it's not "fraudulent" because it's law. It's good to be the law, you can do anything you want, even run a ponzi.

Social isn't an investment or savings plan. It's social insurance which has benefited Americans immensely.

Here's how we should change it: eliminate FICA and get rid of the trust fund. The trust fund is a magnet for nutty ideologues who obsess whether it's in surplus of deficit. We fund it out of the general revenue. We pass legislation and the problem is solved. I'd also like to see payments increased by at least 30%-40% and/or guarantee yearly COLA increases.

 

[oldfart]

SS isn't a ponzi scheme. SS is a well-run program with exceeding low administrative costs that provides Americans with decent retirement income. Old age in this country used to mean relegating 50% or so of seniors to abject poverty.

You can't be this blind and naive. Each subsequent generation has had to pay double what the prior generation had to pay for SS. SS started out as and continues to be outright theft by current retirees of current income earners wages.

"A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation."

Ayup that is SS in a nutshell. At best you could argue that it's not "fraudulent" because it's law. It's good to be the law, you can do anything you want, even run a ponzi that redistributes from peter to pay paul.

You do realize that by your definition all financial investments including bonds, CD's, and savings accounts are Ponzi schemes?

 

[RKMBrown]

SS isn't a ponzi scheme. SS is a well-run program with exceeding low administrative costs that provides Americans with decent retirement income. Old age in this country used to mean relegating 50% or so of seniors to abject poverty.

You can't be this blind and naive. Each subsequent generation has had to pay double what the prior generation had to pay for SS. SS started out as and continues to be outright theft by current retirees of current income earners wages.

"A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation."

Ayup that is SS in a nutshell. At best you could argue that it's not "fraudulent" because it's law. It's good to be the law, you can do anything you want, even run a ponzi that redistributes from peter to pay paul.

You do realize that by your definition all financial investments including bonds, CD's, and savings accounts are Ponzi schemes?

Get an account and fix the wiki then:
Ponzi scheme - Wikipedia, the free encyclopedia

I realize that it does not describe all of the nuances of investments that are not ponzis.

 

[RKMBrown]

It's social insurance which has benefited Americans immensely.

Not in my opinion. But I can see how a Marxist would believe that. Why stop at retirement why not just pay everyone from cradle to grave through the same redistribution system? Why should anyone have to work at all? Why should anyone have to save at all?

 

[Toro]

SS isn't a ponzi scheme. SS is a well-run program with exceeding low administrative costs that provides Americans with decent retirement income. Old age in this country used to mean relegating 50% or so of seniors to abject poverty.

You can't be this blind and naive. Each subsequent generation has had to pay double what the prior generation had to pay for SS.

"A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation."

Ayup that is SS in a nutshell. At best you could argue that it's not "fraudulent" because it's law. It's good to be the law, you can do anything you want, even run a ponzi.

Social isn't an investment or savings plan. It's social insurance which has benefited Americans immensely.

Here's how we should change it: eliminate FICA and get rid of the trust fund. The trust fund is a magnet for nutty ideologues who obsess whether it's in surplus of deficit. We fund it out of the general revenue. We pass legislation and the problem is solved. I'd also like to see payments increased by at least 30%-40% and/or guarantee yearly COLA increases.

CBO already says that SS will pay out 75% of what is promised in 30 years so jacking up payments isn't a good idea, particularly with expected soaring Medicare spending.

SS has been sold as a retirement scheme, not a wealth transfer mechanism. It is effectively run like a giant commingled bond pool backing the liabilities of the Treasury.

It should be structured as a real pension fund. It should be run like a real pension plan like in Canada and Norway, and people should have the option to opt out.

 

[Toro]

SS is not a Ponzi Scheme.

 

[Kimura]

It's social insurance which has benefited Americans immensely.

Not in my opinion. But I can see how a Marxist would believe that. Why stop at retirement why not just pay everyone from cradle to grave through the same redistribution system? Why should anyone have to work at all? Why should anyone have to save at all?

I’m not a Marxist. I’ve also never advocated that the government control the means of production.

This whole SS debate is based on how this liability of the federal government is an asset to the public. The corresponding assets are never mentioned during this ridiculous debate. The total SS wealth of the US population is real as the financial liabilities which support it.

SS isn’t a Ponzi scheme. We’re talking social insurance for the elderly, disabled, and their families. Before it was implemented, fifty percent or so of the elderly would live in abject poverty. I’m sorry, this isn’t the type of country we should regress to as a modern society.

All we need is a funding guarantee from Congress.

 

[Kimura]

You can't be this blind and naive. Each subsequent generation has had to pay double what the prior generation had to pay for SS.

"A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation."

Ayup that is SS in a nutshell. At best you could argue that it's not "fraudulent" because it's law. It's good to be the law, you can do anything you want, even run a ponzi.

Social isn't an investment or savings plan. It's social insurance which has benefited Americans immensely.

Here's how we should change it: eliminate FICA and get rid of the trust fund. The trust fund is a magnet for nutty ideologues who obsess whether it's in surplus of deficit. We fund it out of the general revenue. We pass legislation and the problem is solved. I'd also like to see payments increased by at least 30%-40% and/or guarantee yearly COLA increases.

CBO already says that SS will pay out 75% of what is promised in 30 years so jacking up payments isn't a good idea, particularly with expected soaring Medicare spending.

SS has been sold as a retirement scheme, not a wealth transfer mechanism. It is effectively run like a giant commingled bond pool backing the liabilities of the Treasury.

It should be structured as a real pension fund. It should be run like a real pension plan like in Canada and Norway, and people should have the option to opt out.

Toro,

If we’re to understand what’s not Kosher at the macro level, we first have to understand that SS participation is functionally the equivalent of purchasing a government bond.

With our current SS program we give Uncle Sam dollars now, and it gives us back dollars later. This exactly what happens when we purchase a government bond (you know, just like a savings account). We give Uncle Sam our dollars now and we get back dollars and some accumulated interest.

This is what drives me up a fucking wall about SS privatization. SS privatization would reshuffle the ownership of bonds and stocks in the economy – shifting risky assets held by seniors and safer ones to wealthier people – without any associated economic effects so to speak.