GM Has Turned the Final Page Before Chapter 11.

It doesn’t take an economic guru to realize the desperate state of the U.S. auto industry. Two of the Big Three car makers—Chrysler and General Motors—have grown utterly reliant on a lifeline of government cash.

The prospect of a deal between Chrysler and Fiat Spa, spearheaded by the Italian automaker’s boss Sergio Marchionne, has brightened the dismal and seemingly hopeless future of the sickly automaker. However, Chrysler still has much more to clean off its plate before it can straight-facedly ask for a second chance to pioneer American auto development.

“General Motors, once the pinnacle of U.S. industrial primacy is on the brink of financial collapse,” say Bill Vlasic and Nick Bunkley in their New York Times article, “G.M., Leaking Cash, Faces Bigger Chance of Bankruptcy.” GM’s market capitalization is now less than 1 percent of its Japanese arch-rival, Toyota.

This poses two important questions. First, what are the chances of GM entering into bankruptcy? And second, if it does file Chapter 11, how should it go about the process?

In a recent MarketWatch article, Shawn Loinglois reported that “Last week, GM posted a first-quarter loss of $6 billion, or $9.78 a share, vs. a loss of $3.3 billion, or $5.80 a share, a year ago and said it burned through $10.2 billion during the three-month period.” GM’s capital reserves are down to almost nothing. The company is confronted with mounting retirement costs and plunging profit margins.

In seeking to gauge the probability of bankruptcy, KeyBanc Capital Markets analyst Brett D. Hoselton notes, “Chrysler is the best indicator at this point of where we’re heading with G.M.” In other words, bankruptcy “is looking like a real high probability.”

It is difficult—and perhaps even counterproductive—to provide specific numerical data stating the likelihood of GM filing for Chapter 11—is there a 50 percent chance of bankruptcy? 60? 70? As Fritz Henderson, GM’s chief executive, stated, “I’m not going to get into relative percentages and probabilities, but certainly the tasks that we have in front of us are large.”

However, one thing is certain: there is at least a big enough chance of the car maker filing for Chapter 11 that the American people and the U.S. government need to employ prescience in preparing for such an event.

So, in preparation, will there be damages or advantages—or both? Assuming that all goes swiftly and smoothly—which is quite an assumption—only those unfavorable scratches and dents which are absolutely necessary and unavoidable will occur.

Sounds good so far. Yet, reality demands a more, well, realistic analysis. “Emerging out of bankruptcy would be very difficult. Given its very large, global operations and various stakeholders, the process will take a lot longer than what people think,” a source familiar with the matter said.

GM Chief Financial Officer Ray Young casts a rather bleak milieu when he explains the effects of the bankruptcy process: “Once you start losing revenues, you get yourself into a vicious cycle from which you cannot recover.”

Thus, a quick recovery should be at the epicenter of focus for all involved in the bankruptcy process. Of course, there will be difficulties. But, in order to avoid a spiraling cycle of plunging revenues, GM and the Obama administration must strive to overcome those difficulties—whether it is via compromise or standing firm on their position.

On a much lighter note, bankruptcy may not be such a bad thing after all. According to Mr. Henderson, “Given the objective that we set for ourselves, it’s more probable that we would need to accomplish our goals in a bankruptcy.” So, in the end, Chapter 11 may not only be necessary for GM—it could also be the best path towards getting the automaker back on its feet.

So long, old friend

A few months ago if you mentioned these words one would think you were talking about the American Revolution. But history repeats itself and some of the things that happened then are happening again today.

For the first time in about 200 years, an American vessel was attacked by pirates. The ship, the Maersk Alabama, was carrying relief aid for Kenya when Somali pirates used grappling hooks to board the ship from their small craft. The crew managed to fight back and captured one of the pirates, but the ship’s captain, Richard Phillips, was himself captured. The crew agreed to trade prisoners, but they forgot that you can’t trust pirates and the liars got their man and made off with the captain on a lifeboat. When the Navy came to help, they needed Obama’s approval before making any actions. When Shah President Obama received the message from the Navy, he shoved it aside, saying that he needed to focus on the housing situation. Luckily, the Navy finally sniped the pirates and recovered the captain before any serious harm was done. Although Obama dropped the ball this time, we hope that he will act more quickly and forcefully if this ever happens again.

As for those tea parties, they were a huge success! Thousands of people from all political parties gathered together on the 15th across the nation to protest the rising taxes and insane spending. In California alone, there were 65 tea parties to protest against the Taxinator. When it was said that the government was spending like drunken sailors, John Ziegler said in a speech that that was offensive to sailors because they spend their own money.  Many of the picket signs were homemade and very creative.  One was: “Forget Somalia, the real pirates are in Congress!”  Many protesters wanted Arnold’s head on a stick, and, with the way things are going now, his and many others’ days in office are limited.

These occurrences are certainly reminiscent of the past, but will they have the same result as the last time?  The pot is cooking, and it seems that a revolution just may be brewing.  Sooner or later, time will tell.

7:02: The world is pausing, watching to see what the US will do in these times.  In our hands lies the power to shape the world.  Inspiration comes from the aspirations of “ordinary” Americans.

6:59: Budget increases pay, healthcare for soldiers.  We must restore our values, that is why the Guantanamo Bay camp was closed.  “America does not torture.”

6:51: Also our responsibility not to pass on to our kids a debt they can’t pay.

6:50: Education plans are great, but it is our responsibility to ensure that our kids will walk through that education path.

6:47: Budget incl. incentives for teacher performance, rewards for success.  Pres. Obama asks every American to get at least 1 year of higher education.  Quitting high school is quitting on our country.

6:45: Third challenge – Education.  Only half of our citizens have a high school diploma.  Every child must be promised a good education.

6:44: Healthcare reform must not wait and it will not wait another year.

6:40: Pres. Obama: We shouldn’t protect our auto industry from their own mistakes.  However, the nation that invented the automobile shouldn’t walk away from it.

6:18: President Obama addresses economic crisis; says that “we will rebuild.”

6:00: President Obama just started to deliver the address…hope to see some good stuff from it.

An easy, simple, and insightful explanation of the massive problem we have now.

It was doomed to die from the start.  Why?  The reason has nothing to do with the fact that it’s a spending package.  It all goes back to the heart of free-market economics and what Ludwig von Mises calls “Liberalism”.

But what is liberalism?  Liberalism is the foundation of limited government based on the common belief that individual liberty to prosper in an unequal system is best.  By unequal I mean a system where there is no balance of wealth: the rich can become more prosperous, the poor poorer, etc.

So how does liberalism play into the economic package passed last week?  It’s not just this one bill that’s doomed us to failure.  The United States began a downward trend the minute FDR initiated his “New Deal” package which did absolutely nothing to stimulate the economy.  In fact in 1939 unemployment under the new deal was HIGHER than it had been previous to Roosevelt’s election in 1931.  Even Roosevelt’s secretary of the treasury, Henry Morgenthau Jr., admitted years after the New Deal had been put into place that it did nothing to solve unemployment and didn’t do anything to stimulate the economy.

Why?  Because when you spend money you have to get the money back from somewhere.  So where does it come from?  Taxes…  Money doesn’t come out of thin air, and for every dollar we spend it’s another dollar we have to tax… or more than a dollar once you look at the interest.  The entire basis for the spending packages now and in the past comes because the government 1) recognizes the difference in income/ benefits and 2) believes that reallocation of wealth is more beneficial than leaving it in the hands of the “wealthy.”

What that means is that every stimulus package comes amidst a philosophical mindset of government intervention that necessitates more intervention to provide for the adverse of effects of spending and taxing.  It’s a perpetually degenerating system that always requires more involvement to “solve” for the problems it creates.  By that token alone we only dig ourselves into a deeper hole every time the government ignores the freedom of the individual in a concerted effort to bring those who aren’t as well off back into the arms of prosperity.

This system has a name, and it’s called socialism.

All socialistic societies lead to more intervention and regulation and less innovation, because the government becomes the provider and the allocator of knowledge and resources.  The question then becomes not whether or not we spend money to try to save capitalism.  We’re too long-gone to try to salvage a capitalistic/free-market system.  The question we now must face is whether or not we let a system so bereft survive or raise it from the ground up.

The first big change was a notable one. Obama froze the pay of his staff. Making a cut for the economy and a brilliant gesture that helped get many in the nation on his side. Also putting some restraints of the lobbyists. Not only reducing their influence on politics, but also giving himself more power over congress and other agencies. But although both of these policies are of some repute I think that there might have been some additional changes that would have further bettered his approval rating and would have been good for the nation.

First, he could have cut his staff. He frankly doesn’t need a thousand plus staff. This is something that Bush should have done as well. Abraham Lincoln went through the civil war with a small staff of two. Even FDR had a staff of only a couple hundred during WW2. There is no need to have that many people in the executive branch. Although a wonderful gesture, freezing funds will do little to help the smothered economy. But cutting the bloated staff would have been a great way to streamline the Cabinet.

The second big change was not nearly so pleasant. Obama announced to the world and many pleasantly surprised terrorist groups, that he is closing Guantanimo Bay for “national security reasons”. What he forgot to mention is where we will put them. Coincidently, this story was highlighted by the fact that the last guy we released from the Detention center went and promptly blew 16 people sky high. Apparently not getting the message of the Saudi “Jihad rehabilitation center” that he attended.

So where do we send them? To another country? How about France? Imagine the headlines. “Mob attacks French prison. Terrorists mysteriously missing.” It would be Bastille all over again. Or maybe to the Saudi’s rehab for terrorists? Or to Yemen, where terrorists “inexplicably” disaster from prisons.

How about the US? Well, there are several reasons why bringing them here would be a national security disaster. First, if they break out, were in deep trouble. (To say the least)  Second they get the same rights as an American citizen. So if they get a good lawyer, a couple of them could go scott free. Even though they are unlawful combatants. And where would we let them go? Here? I would not sleep a wink for months. The last reason I don’t think sending them to your local county prison is that we don’t need to be setting up terrorist “cells” in the US. These prisoners could get the opportunity to converse with each other, or worse US prisoners who will do anything for money. We could inadvertently have people who we would never expect being converted to jihad and helping with terror activities

I would like a better explanation from Obama what his national security reasons are. If they have to come here though I think we should send them all to San Francisco and Manhattan. If they have to be in the US, let the Obama lovers have them.

The next thing was the economic stimulus. Here’s a Lesson in economics. You don’t go into more bad debt to boot up an economy. That is basically what this stimulus does. Also interesting is the pork that is in the bill. For instance the Billions in the original bill that went to contraceptive devices. How does that help the economy? It is really simple really. Just cut taxes. That is the best economic stimulus. Ultimately it is the government’s duty to serve the people, and to protect the people from itself. And they can’t do one without doing the other.

Finally the most disturbing change was on the life issue. In an effort to make the world a better place, Obama reinstituted the “Mexico city policy.”  The funds aid organizations that do abortions in other countries. In addition to being yet another abomination of human rights, it takes my money and uses it to allow human traffickers an easy way to hide their dirty work, and continue to oppress woman.

On the same topic he also cleared the way for the useless, wrong practice of stem cell research. Many scientists have already found that adult stem cells are effective when embryonic ones are not. It makes not sense to do the unnecessary when we are talking about creatures that are just like what we once were. Many who would have grown up to live healthy fruitful lives if they were allowed to live. Liberals hate doing testing on animals. So why people?

In conclusion, Obama has made some good choices, and some not so good ones. On one hand he is not ending the war on terror. But on the other he is making it harder. He is decreasing government corruption. However he ignores much good advice too. I will admit I am not one of the 68% that approve of Obama first week as our leader.

As the looming crisis with Iran, North Korea, Iraq, Israel, and even our own financial crisis, there are tiny foreign issues that weigh quite heavily on politics. The issues in Zimbabwe, overshadowed by bigger crises, have been quietly following in the shadows. Yet, if there was something wrong, the political scandal would embroil the whole region, causing chaos.

Recently, Zimbabwe leaders brokered a power-sharing deal between incumbent Robert Mugabe and opposition leader Morgan Tsvangirai. However, in the free elections, Tsvangirai had won by the election. But President Mugabe refused to concede office, and this political crisis ensued. They compromised with this power-sharing deal, but the developed nations are still wary. Mugabe controls much of the country, and his dictatorial standards have hurt the country under his rule. Even the UN is unconvinced of the power-sharing deal’s success.

Even as the country deals with its problems, Zimbabwe had to use foreign currency, as theirs completely failed. This is just one problem facing the nation. Their ‘progress’ has Mr. Mugabe calling on the lifting of sanctions against the country for economic growth. Because of the concern of the developed nations, the UN has not yet agreed to do so.

The crisis is escalating in the background. The world must be careful not to avoid the situation.

Josh’s Comments: Sam has it right when he warns us not to avoid the Zimbabwe situation.

Unfortunately, the UN’s unwillingness to lift sanctions shows callousness to the people of Zimbabwe. The lack of free trade and equal opportunity for Zimbabwe to participate on the international stage. This is definitely a problem that we must grapple with.

Still, Zimbabwe should be able to begin their own homegrown industries if the UN won’t allow access to international ones. Zimbabwe does have a way out of these sanctions -a way that wasn’t available under Robert Mugabe’s rule. For this, the G8, the Third World, and the Zimbabweans should be thankful.