Automaker bailouts a global problem

Honey, I shrunk the global car market.

So everyone wants to maintain the volume of hulking giant pieces of metal built each year, and hopefully ship them to Africa and South America or Antarctica...

Of course the auto industry problem isn't confined to America. The devaluation of the dollar is spread globally because so many other countries have invested in it. China owns most of our debt. Most first world countries have been eating up the dollar for decades. And now that the value of the dollar is collapsing, we want to play dumb?

Just because it's a "global problem" doesn't mean that it's an excuse for a bailout. This is a cyclical problem. If the bailout goes through, it'll only devalue the dollar more, which will inevitably drag down the world economy more.

Want a solution? Tell the government to stop spending so much freaking money!

It really shows the influence of the US economy.

A lot of countries around the world were doing just fine. No bad mortgage problem, no massive national dept, no failing auto industry, etc.

However as soon as the US overstretched itself and collapsed, most other countries started having problems.

Maybe the rest of the world should have more of a say in reforming the US financal system

Well, it's really a domino effect. Major countries like the EU, Japan, the Middle East, and China depend greatly on our economy. But those places are regional powers and have severe impacts on the countries around them. The result is a ripple effect, kinda like an economic roller coaster.

"Maybe the rest of the world should have more of a say in reforming the US financial system."

No, no, no, that is the absolute worst thing that could happen. The fact that foreign economies are somewhat dependent on ours shows how strong our system has been overall, and how much better it is - because we have more economic freedom here than anywhere else (while it lasts, until we foolishly give it away).

The problem is with governments trying to meddle in the free market. Our US government should have less of a say - part of our problem is that they've been micro-managing for years and think they can fix it when cyclical events occur. They're just winging it, as analysis of the recent attempts to bail it out can attest.

They've been promising more and more money to bail out various industries with more and more to come. Where does it end - when our money is worth next to nothing due to the inevitable devaluation that will occur with printing phony money or issuing more debt? Who's going to buy it? China, who already owns a ton of it? Our dollar is backed by nothing tangible but the strength of our economy and our productivity. If that stops due to reduced incentives of individuals to produce, then we'll have true equality -- we'll all share misery equally.

"No, no, no, that is the absolute worst thing that could happen. The fact that foreign economies are somewhat dependent on ours shows how strong our system has been overall, and how much better it is - because we have more economic freedom here than anywhere else (while it lasts, until we foolishly give it away). "

Strong? No, just big.

Better? No because it's failed due to lack of regulation and greed (and stupidity).

With freedom comes responsibility and one only has to look at recent events to see that the government, the banks and the general population lack the responsibility to maintain a solid financial system.

All have been spending like a drunken lotto winner in Vegas with no clue how they will pay for it in the end. The current system is based on how much can I make in how short of time with no thought of the long term consequence.

I agree bailouts aren't the answer but rules must be in place to make bailouts unnecessary in the first place.

You shouldn't need rules to tell banks not to lend money to people who can't afford to repay it but it seems you must.

You shouldn't need rules to tell people not to borrow more money then they can afford to pay back but it seems you must.

You shouldn't need rules to make a government not spend more money then the countries economy can generate but it seems you must.

There a lot of countries that don't have these problems and they have a better financial system then you do.

If you think there's a lot of corporate and Wall Street greed, there's more than enough in Washington to exceed it. That is the seat of power to control, influence, and make policies to control the behavior of others. And they don't have the accountability of market economics. They have the power to tax and suck up wealth from those who produce it. It is why our constitution puts so many limits on the power of government - it stipulates many more things that government cannot do than those it can. But we haven't been following its principles for generations, and that is why our government's tentacles extend in so many areas now.

With freedom does come much responsibility. And that includes the freedom and responsibility to fail without expecting a handout from taxpayers.

The US government is the entity that pressured banks and other lending institutions to lend money to people who couldn't pay them back. Thus, the subprime loan.

Our Federal National Mortgage Association (FNMA, a.k.a. Fannie Mae) and Federal Home Loan Mortgage Corporation (FHLMC, a.k.a. Freddie Mac) were directed by Congress, for political reasons, to increase their portfolio of subprime loans to 50%. As long as there was someone to buy them (Fannie & Freddie), financial institutions kept making the bad loans to avoid the oppressive hand of government. And why do we have two government sponsored entities that were created to do pretty much the same thing? Could it be a touch of bureaucratic redundancy?

Have you ever heard of the Community Reinvestment Act of 1977? It all started there. http://en.wikipedia.org/wiki/Community_Reinvestment_Act
It's a whole slew of regulations gone mad. And we think more of this meddling is going to help? And the very ones whose policies screwed up the financial systems are the ones too many of us are still entrusting to fix it??

It is our idiot Congresspeople and past willing executives in the White House that keep spending money. Because they're buying votes for one group of voters with money from another. And those who vote for them don't care as long as they're getting some freebies (they think). Well there's no free lunch, and the time is coming (or already has) to pay for these reckless practices.

The sooner that lawmakers get their hands out of the free market, the better off we'll be. Alas, we've gone too far down the road for that to ever happen. I'm not suggesting no regulations. But we don't need more; we need less.

It's a myth that many other countries have a better financial system than we do. If they did, why are they being dragged down now? In 1998, the Asian financial crisis didn't greatly affect us -- because we have a diverse and market oriented economy (or used to have more of one than we're likely to have in the future). People have short memories, which is a mighty convenient situation for politicians to take advantage of.

The rules you're suggesting result in less financial freedom, less wealth produced, less opportunity, lower quality of life, and more oppression. Central planning doesn't work, and never has. It is why Commmunism and Socialism fail to produce prosperity for all, although they both make such utopian promises.

"Central planning doesn't work, and never has. It is why Commmunism and Socialism fail to produce prosperity for all, although they both make such utopian promises. "

Free for all doesn't work either although it makes a lot of great promises too.

Neither extreme does. It's never black and white, it's always somewhere in the middle... a balance between rules and freedoms.

As for why we are being dragged down by the US collapse? ... because we sell a lot of stuff to the US. That's the only reason.

"Free for all doesn't work either although it makes a lot of great promises too."

How do you know this? Have you ever experienced it? Is there an example of this NOT working? And don't you DARE say that us American's experienced a "free for all" under the Bush Administration. Bush did NOT deregulate anything. If anything, he did MORE regulation.

No one has ever experience true free market capitalism because it has never existed in a true form. There was a brief period of existence for a true free market immediately after the American Revolution, but it didn't take long for the British mercantilists (whom we had just fought a war of secession from) to seize control of a central government and exploit the people by the creation of a central bank and statist policies. No other country has lived under free market economics.

Central planning is flawed because it can't take into consideration individuals. It's always about special interests. Get enough people together and you can change policy for your own ends. Which inevitably leaves other less-fortunates with no representation. There's no emphasis on community nor on neighborhoods nor on state rights or even municipal rights. It's all controlled by a bunch of bureaucrats in a single city. So tell me: why do you think a group of a few people are so adept at leading you and your town even though that group is hundreds or thousands of miles away?

"It's never black and white, it's always somewhere in the middle."

By making that comment you're effectively turning your view into an "extreme". Saying that one thing is absolutely wrong but that your theory is absolutely right is doing exactly what you're speaking out against.

Besides, this "mix of philosophies" hasn't gotten us very far, now has it? Look at the mess the central banks have gotten us in. Look at the amount of money (taxpayer money, I might add) that the federal government spends to "keep our economy afloat". None of that works. It's proven. The likes of Paul Krugman and Lord Keynes have been proven wrong. Keynesian economics is flawed because it always focuses on special groups over others and always focuses on the short-term results rather than long-term consequences. Which is why we're finally seeing those consequences NOW instead of years ago.

This economy will tumble more and it has NOTHING to do with allowing people the freedom to control their own economies. It has everything to do with the government listening to special interests and catering to one over the other, thus making corrupt and short-sighted policies that reflect it.

"You shouldn't need rules to tell banks not to lend money to people who can't afford to repay it but it seems you must."

Uh, are you aware that the Federal government has had rules on the books for decades leading up to the current crisis that basically say that mortgage lenders MUST lend to borrowers who likely cannot repay?

Are you aware that the Federal government has two monstrously large entities that bought billions of these bad mortgages, as a matter of government policy, thereby creating a perverse incentive for mortgage lenders to generate a even more bad loans?

Many things can correctly be said of this current crisis, but calling it a failure of an unregulated, free market is simply wrong.

+1 gossard.

You touch on a very valid point: the fact that the government (through subsidies) has instigated and perpetuated the financial mess we're in. The mandatory buying up of sub-prime loans by government agencies leads to more subsidizing. And more government subsidizing means the increased demand for socialism. After all, the people are right when they ask the question "why should capitalists benefit from taxpayer money?". So in reply, the government will end up running itself as a business instead.

Anyone who has read Henry Hazlitt, Murray Rothbard, Ludwig von Mises, and others will understand what I'm talking about. And to those who haven't read these, I suggest you take a chance and do so.