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Saturday, May 02, 2009

Obama's New American Economy

The saying used to be, What's good for Detroit is good for America.

These days Detroit is a barely functioning city, one of the few major American cities whose population has actually dropped sharply losing half its population since 1950 and whose Mayor is awaiting a prison sentence. It also highlights the future of Obama's New American Economy... and this time what's going on in Detroit, isn't good for America.

Of the three big US automakers, two, Chrysler and GM, found themselves in big financial trouble. And out of that emerged their new future, as government subsidized and union controlled companies, following the lead of Europe's own failing car companies.

No matter what it says on paper, Chrysler and GM are no longer American corporations. They're now government subsidized job banks for Obama's union supporters and eventually providers of paid corporate positions for Obama's political allies. Capitalism is dead, meet the future of the American auto industry built on the same model as the planned car companies of Russia and Eastern Europe.

Chrysler and GM no longer exist to make cars. They exist to make jobs for Obama's supporters. They exist to show the "virtues" of a planned economy, and to provide graft and payoff opportunities up the corporate ladder. That's how the Russians used to make cars. That's how we make cars now. Ford may hold out for now, but it can't hold out forever. Government money is too tempting and for corporate CEO's a cushy position that doesn't demand anything in the way of performance, beyond kowtowing to the unions, seems like a good bet.

That's now how American business was supposed to work, but GM and Chrysler created the problem themselves, when they got out of the business of selling cars-- and got into the business of selling debt. As the car companies took selling auto loans as their business model, they became banks who happened to provide cars. And they began selling an increasingly worsening product in exchange for loan obligations.

A credit centered business model meant that the quality of the car didn't matter, because the car wasn't the product, the loan was the product. Car salesmen grew sleazier than ever, because they were selling debt, not product. The old American auto industry that depended on hard work was gone. The new American auto industry was nothing more than a scam wrapped around a few brand names. Now it's a whole different kind of scam.

Yet this problem is not unique to the auto industry. The creditization of America meant that most American companies were in the business of selling debt to consumers. The actual American industry was increasingly outsourced to China. The products grew shoddier and cheaper, the profit margins grew higher and so did the debt margins.

The American people came to think of themselves as consumers, a word that might be better applied to cows grazing in the field. Not workers, not citizens... but consumers. Credit rating became a vital part of their identity, more important than reputation, honor or integrity. Debt ceased to be shameful, and became something casual. Everyone now owed money without worrying about it. One credit card paid off another. Mortgages were paid off with credit cards too. People who did not own small businesses found nothing wrong in balancing several loans and debts at the same time.

And then the system crashed and all the loans came due. Observers like Soros had understood for a long time how flawed the current economic model was. Where in the days of the USSR, Western industry had drawn its strenght for labor and production-- the present day West no longer had industry or labor, it only had debt, which it in turn resold and passed along down the line to everyone, who in turn passed it along to China.

It didn't take much to make the whole thing come crashing down. The government itself had gotten into the debt business with Fannie Mae and Freddie Mac. Debt had become a national right, which means that even people who couldn't afford the debt they wanted, had to have it anyway. Backed by the government. Their debt itself became an investment, and the investment was no good.

All the while endless scams were taking place inside the great financial system of debt, like rats in the walls, men like Madoff, Pang or France's Kerviel were moving around billions of dollars, unnoticed. Unnoticed while the tide was rising and floating all boats, but when the tide began to recede, suddenly the scams were visible, and the scams themselves helped bring down the system.

The cynics of Capitalism, the Lenins or the Soroses, had always argued that greed was capitalism's weakness and would bring it down. Capitalism had been invulnerable when it provided opportunities for individual economic advancement, when it connected resources, production and labor. But the so-called service economy marked the shift away from actual labor and industry. And what was left were imports, services and debt.

That is where the 2008 Communist Revolution came in. GM and Chrysler are not the only companies that have committed themselves to debt based economic models or that sell shoddy products. GM and Chrysler counted on consumer stupidity to keep buying cars filled with Mexican parts, put together by overpaid union hacks, while driving themselves deeper into debt to do it. Had they dispensed with a debt based model, with the dealerships and their whole disastrous business model, they wouldn't be an Obama owned enterprise. But they're just the beginning.

Lenin's revolutionary model called for seizing the banks and means of communication and transportation. These days communication means the internet, and a tall order. Instead the banks came first. Then the auto companies. The airlines will probably be on the list soon enough, when they're in need of major bailouts.

The point of all this of course was to control the population. Banks hold the public wealth. Transportation defines the limits of personal mobility. Communication controls what people see and hear and say. So far Obama holds 2 out of 3. And the worst is yet to come. The more public debt the government has control over, the more power it has.

Mortgages are an excellent tool for resettling portions of the American population. And that was exactly how the FDR administration used them. Auto loans are a factor in the lives of a large number of Americans. Being able to selectively drive the right sorts of people into debt, while making life easy for others, is about as good a tool of social control as possible.

Welcome to the New American Economy, one that will have more than a passing resemblance to the old Soviet economy. One where products are not built for consumers, but exist to create jobs in a planned economy. One where "Green" shortages and scarcities insure that people will buy whatever is being sold. Where the loans are always coming due and never coming due. Where industry and the dignity of labor don't matter, where jobs are payoffs for political support, and where being a party member is all you need to get ahead in life.

Welcome, because if we can't get it out by 2012, it may just be here to say.

7 comments:

Keli Ata said...

Unfortunately a lot of people, especially in tough economic times, are duped into believing Socialism/Communism are the way to go. The word Communism conjures up images and warm feelings of living in a commune or kibbutz; everyone working together. Places of safety and harmony.

If I'm not mistaken even the old USSR national anthem speaks of being united in brotherhood and work. It sounds positive and I can see where the uniformed or desperate would be attracted to Socialism. They might have less freedoms but at least everyone would be taken care of and looking out for each other...

That's how they're reeled in, by an ideal and the lie of a utopia.

The good news for the US is that Obama is making so many blunders that its unlikely he'll get elected again.

The spending frenzy and most recently the expensive and disturbing stunt with the fly over in NYC will be used against him--and I believe successfully--in the next campaign.

A closet Muslim president who tries to recreate one of the worst tragedies in American history which was perpetrated by Muslims. Money aside it is deeply disturbing that he would in essence try to recreate September 11.

Grossly insensitive and no doubt traumatizing to a lot of people but I see something even darker in what he did. No wonder so many newspapers used the phrase scare force one.

Anonymous said...

There were 2 recent articles/opinion pieces in the Wall Street Journal that should be considered when trying to explain the demise of GM and Cryslar.

1 The unions anti-business demands added several thousand dollars to the cost of every car built here.

2 Various government regulations, especially CAFE, forced the manufacturers to build small cars that people did not want. This made the factories sell small cars at a discount. The government let SUV and trucks by-pass the CAFE regulations thereby let the manufacturers make some profit. But, this meant putting gas guzzlers on the road.

The proper action should have been letting them enter bankruptcy court. But, Bush was afraid to to that prior to an election, especially when the Republicans were fairing so badly. Obama didn't want to go to court before the unions had a grip on the outcome. Now that the companies will be man-handled by the Democrats and their buddies in the unions they can go to court.

While there are many examples of well manage employee owned companies, I predict, these wouldn't be one.

Hard to predict what will happen to Ford.

My broker once told me that in college his teacher said that the sign of a developed country is the presents of a car manufacturing company. I guess American is in worse shape that we think.

Lemon said...

American car manufacturers are reaping the whirlwind now.
American Car manufacturers aided Nazi production in the war.
GM owned Opel. Ford was a big nazi promoter. Crysler also.
Their cars and trucks helped to kill Jews through out Europe.
90% of 3ton half-trucks and more than 70 percent of the Reich’s medium and heavy-duty trucks were manufactured for them by American car manufacturers.

When you sow evil seed you harvest bitter fruits.

Lemon said...

"GM and Ford were vital components of the Nazi war effort. GM’s plants built thousands of bomber and jet fighter propulsion systems for the LUFTWAFFE — while at the same time profiting from production of aircraft engines for the U.S. Army Air Corps.
GM reinvested the profits in other German companies. At least $20 million was invested in companies owned or controlled by Nazi officials. 'The Nazis could not have invaded Poland and Russia without GM'
After the German occupation of Czechoslovakia in 1939, GM Chairman Alfred P. Sloan commented that the Nazis’ behavior "should not be considered the business of the management of General Motors." The GM plant in Germany was highly profitable. "We have no right to shut down that plant," Sloan declared.

Keli Ata said...

You're right. Didn't Ford even set up his own newspaper to spew anti-Semitic Nazi rantings?

As for the car industry, they knew smaller foreign cars were more popular and affordable for average Americans and what did they manufacture? Gas guzzling Hummers.

It shouldn't be the government's job to bail out private sector companies that can't run their business well.

Either Obama is elected out of office next time around or this country will sink to the bottom before it can rebuild.


OT--the latest Obama story about them going hog wild on spending--Michelle's $500 pair of sneakers she wore while volunteering at a soup kitchen or food pantry.

navyvet48 said...

Ford did do despicable things to support the Nazis but I think they will make do without the government. The Ford family still has their hand in running the company. They don't want to lose their autonomy. It also helps they do have programs in partnership with other industry.

OT: By the way the next housing bubble is about to burst. And yes it involves the government run Federal Housing Authority!

See my post: http://msplaceddemocrat.com/http:/msplaceddemocrat.com/the-next-housing-bust/

Congress and Obama have been meddling again. They are expanding subprime loans at the FHA. They never learn!

ytba said...

And, in this "new" economy, where will the money come from for health care? Well, partly from not "wasting" it on the elderly.

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