Posts Tagged ‘Economy’

Auto Industry Isn’t the Only Problem in Michigan

Economics, Politics, State Politics | Posted by C.C.Mitchell
Apr 03 2009

Right now the state of Michigan has what is probably the the worst economy in the nation. The unemployment is the highest at over 12%. That’s right 12% in other words 12 out of every 100 people you know is unemployed if you live in Michigan. This is very bad news especially for people like me who live in Michigan.

The largest of concerns in the state right now is that of the auto industry going under. This Titanic of

General Motors Head Quarters

General Motors Head Quarters

industries is sailing towards disaster but the auto industry is just the tip of the iceberg. The President last week said that bankruptcy is the most likely and probably the best option for General Motors and Chrysler. But these options are considered to be catastrophic to these two troubled companies. Both fear that the consumer will baulk at the idea of buying a car or truck from them if they are in bankruptcy proceedings.

One major problem with Michigan’s economy is that it fails in diversification. Michigan has largely depended on the auto industry for decades, probably closer to 100 years would be a more accurate statement. This has been the flagship of the economy and tens of thousands of jobs hang on the auto industry. Not just those employed by The Big Three but by their suppliers as well, if The Big Three go under so do their suppliers. Not to mention the dealerships that stand to go out of business.

As pointed out by Greta VanSusteren of Foxnews textiles industries in other parts of the country make the textiles that go in the interiors of cars. The arm of the auto industry is far reaching. Think about it; I’m sure you will think of some other industries that feel the pinch of the auto industry.

But the problem runs deeper than the auto makers in Detroit, Michigan 10 or 12 years ago was a state known as a job creator according to Steve Moore of The Wall street Journal who spoke with Greta on the subject.

What’s happened in that state - and, by the way, this is an amazing statistic. About 10 to 12 years ago when John Engler was governor, Michigan was one of the leading job creators. And now it is, of course, losing jobs. I think they lose about one job every six minutes in Michigan.

It is just a tragic story, and I think it is a result of too much regulation, overspending, high taxes, and also, Michigan is not a right to work state. And so a lot of factories have moved out of Michigan to states like Tennessee and Texas and Florida.

Governor Jennifer Granholm is of course a big player in the many other reasons why the state is hurting so badly.

Michigan Governor Jennifer Granholm

Michigan Governor Jennifer Granholm

Many other businesses have left the state to establish their operations in states with lower tax rates and therefore higher profits. You are right about the problems in this state.

“And it is interesting because the governor there, Jennifer Granholm, has been governor for almost eight years now, she has been very much like a Barack Obama in her economic strategy - more spending, higher taxes, we’re going to invest in all these programs.

And it has been a complete catastrophe. And my worry is that Barack Obama wants to make America look like Michigan, not make America look like Texas,” said Moore.

To further expound upon the argument I have found statistics showing that the young talent which Michigan needs to succeed are leaving the state in ever larger numbers. The lack of jobs in the state and higher income and property taxes have chased many graduates out of Michigan.

Here is the article from The Detroit News:

In a nutshell it states in one telling clip, “There are more recent MSU grads in Chicago than in any other metro area — including any community in Michigan. While the Windy City has always been a destination for Spartan grads, the number going there — and other vibrant urban centers such as Minneapolis and New York — is growing.

The number leaving the state has doubled since 2001, from 24 percent to 49 percent, according to a school survey.

Michigan-native grads of the University of Michigan are even more likely to leave — 53 percent left in 2008, according to U-M.

By contrast, a similar survey at North Carolina State, found only 30 percent of graduates left North Carolina.

On average nationally, those earning bachelor’s degrees today can expect to earn $900,000 more over their lifetimes than those with only a high school diploma, according to the Census Bureau.

Multiply that by Michigan’s net loss of 18,000 people with college degrees in 2007 alone, and Michigan faces a devastating future loss in tax revenue.

There are many problems with Michigan’s economy, as I said earlier one of them is diversification. Michigan has all its eggs in one basket (The auto industry), if it is to survive and prosper it needs to spread around its potential.

Granholm has made the effort to do so. But this should have been done decades earlier, she is guilty of what every other governor before her is guilty of; running the state with their heads in the sand. I have seen more and more ads as of late to promote the clean energy industry in Michigan and this is a good idea but its a day late and a dollar short.

Michigan’s economy is suffocating under the the blanket of a heavy tax burden placed on the chest of its citizens and its businesses. As more people leave the state in hopes that the grass is greener on the other side of the state line Michigan’s tax revenues plummet.

To continue  on this course is madness. It’s a Cracked…. State?!

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Bankruptcy is Obamas’ Plan for GM and Chrysler

Economics, Politics | Posted by C.C.Mitchell
Mar 30 2009

The Obama administration announced today that the leading possibility for a restructuring plan for General Motors (GM) and Chrysler is Bankruptcy.  The key factor in this plan is to get the UAW

General Motors Corporation
Image via Wikipedia

to agree to an all new labor contract. This will be a very difficult task for GM to pull off as they have been in contract talks for some time and have not met an agreement. All of this comes about on the heels of General Motors’ CEO Rick Wagoner essentially being fired by President Obama.

Bankruptcy, seeming the only feasible option to most advisers  including the President, would split both automakers into “good” and “bad” elements.

The move would in essence split both companies into their “good” and “bad” components. The government would like to see the “good” GM to be a standalone company, according to an administration official. The “good” Chrysler would be sold to Fiat SpA, assuming that deal is completed, this person said.

This Yin and Yang approach seems is the preference of The Obama Administration as The Wall Street Journal points out:

GM looks increasingly like it will be forced into filing for bankruptcy protection, sometime in mid-to-late May, in a plan where the automaker breaks into two companies, the surviving entity a “new GM” that maintains key brands such as Chevy and Cadillac and some international units, say several people familiar with the situation.

Stakes in this new GM could be given to creditors and UAW members. It is also possible the new company could be sold whole or in parts to investors.

Hopefully President Obama will have some pull with his friends at the UAW as the auto makers will need all the help they can get in negotiating a new contract. Under this Yin and Yang Plan the good GM would not have to oblige tens of billions of dollars in retiree and health care expenditures. Those obligations would be held by the other GM element made up of the less attractive parts of GM like Hummer and Saturn as well as other entities such as under performing plants. This element, the bad element would remain in bankruptcy most likely until a buyer is found for it.

Proceeds from the bad GM sale would go towards paying creditors and GM retirees.

Chrysler’s plan is largely centered around the alliance with Fiat and a new labor contract with the UAW and the reworking of debt deals with its’ creditors.

President Obama went on to say that the failure of the auto industry was due to a lack of leadership in Detroit and in Washington that has gone on for decades. In other words he blamed every one that came before him.

I also find it hypocritical that Mr. Wagoner was fired by the President while the UAW President Ron Gettlefinger was left in his position. What about the CEO of AIG? I don’t even know his name, that says something considering today’s media.

It is foolish for any one to believe for even a moment that the United Auto Workers Union isn’t as much to

The United Auto Workers Union

The United Auto Workers Union

blame for financial failures over the past decade or two. We have all heard the stories of the Jobs bank program sapping millions from the corporation every year. The insane benefits workers and retirees receive, and their overblown wages.

President Obama also blundered when he stated “We cannot, we must not, and we will not let our auto industry simply vanish,”  and then a few moments later stated that every one was going to have to bite the bullet: The Unions, the workers, the companies and the creditors were all going to have to make sacrifices, and if they held out indefinitely their may be no more government bailouts.

He just said, “We cannot, we must not, and we will not let our auto industry simply vanish.”  No one is going to believe that the auto industry would be allowed to fail. GM and Chrysler were also given several months to devise a plan that would make them viable again or they would have to give the money back; so what happens? They were given more time after their plans fell short of expectations today.

And why is it so easy for AIG to receive $160 billion in bailout money but the auto industry has to jump through so many hoops to please Washington before they are awarded such a small fraction of the average Wall Street bailout? Maybe its a matter of campaign contributions. Lets face it, GM and Chrysler employ a lot more people than AIG does. There is a lot more to loose in the auto industry than in the financial sector job wise.

When the American people allow The President to fire executives from private sector firms and install such belligerent hypocrisy in policies toward one group over another it is a sign of a Cracked World.

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Geithner and Democrats want to Seize Power Over Fianancial Institutions

Economics, Politics | Posted by C.C.Mitchell
Mar 24 2009
U.S. Department of Treasury headquarters in Wa...
Image via Wikipedia

Today Timothy Geithner asked Congress to give him the authority to seize control over companies that he considers to be troubled. Companies like AIG. In doing so he asked our congress to take another bold step closer to Socialism. Giving the government control over companies that they see unfit to run themselves. When the government is running supposed private companies, and distributing the wealth created by those companies we have socialism.

Geithner argued for such authority during the House Financial Services Committee’s hearing on the handling of bonuses paid to executives at American International Group. FoxNews

The very same bonuses discussed here, that Geithner, Obama, and Christopher Dodd made legal through their sitmulus plan. Dodd placed the clause in the bill after succumbing to pressure from President Obama and The Treasury Department. This is a Power Grab which has been planned carefully. They have built in excuses to ask for the  socialist motion.

In a nutshell Geithner wants the same power the FDIC holds over failed banks all for one person to control.

Geithner is asking that the treasury secretary be granted unprecedented power, to take control of a major financial institution and run it. The treasury chief is an official of the administration, unlike the FDIC, which is an independent regulatory agency.

Under this authority the treasury secretary would have extraordinary power. The ability to take over and a run a major financial institution. Even the FDIC is an Agency, meaning a group of people not just one person. Not to mention the fact that he is using AIG as a reasoning behind the request. The AIG scandal was caused by the government in the first place. It is also prudent to acknowledge that unlike the FDIC, Secretary Geithner  would be able to manipulate nondepository financial institutions, or those that do not accept deposits like insurance companies and brokerage firms. Its not just about protecting the depositors savings here.

These guys want control over companies that they may not be qualified to operate. Who says that Mr. Geithner, or any other future Treasury Secretary knows anything about running an insurance company?

What makes these officials think they are capable of running any company at any time better than the people who are already running it, even if they’re running it in to the ground?

The biggest problem I have with this idea is that once again the government wants to interfere with business and try to be all things to all people. They want all encompassing power over all facets of our economy and our lives. They wanted to control the census, now they want to control the financial sector.

This is Socialism any way you slice it.  These companies should simply be allowed to fail and none of these issues would be at hand. There would be no AIG bonuses and no need for a new sweeping power for the treasury secretary.

Socialism is un-america! Do you hear that Speaker Pelosi? Socialism is un-american!

In a little over 60 days this new government has orchestrated the bonus payments to top AIG executives (in exchange for campaign contributions); passed the largest spending bills in the history of our nation; restructured income taxes to redistribute wealth; and now they want to SEIZE CONTROL of private businesses and finacial institutions.

Barney Frank stated that AIG may have guarenteed the bonus payments but they can not guarentee that  these executiveskeep their jobs. He then went on to point out that the government owns 80% of AIG.

They want to decide who gets fired at these companies.

Barney Frank forgot one thing if the government owns 80% of AIG it means that the tax payers own that 80% not him and his cronies.

This is just another power grab by the left.

Here is food for thought: How will it be determined which companies should be taken over by the government?

Chew on that and remember, It’s a Cracked World, this could happen to you!

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FDIC S.O.L.? Could FDIC go Broke?

Economics | Posted by C.C.Mitchell
Mar 06 2009

Is it possible that the FDIC (Federal Deposit Insurance Corp.) could go bankrupt? The concern has escalated as more reports indicate a larger number of banks crashing in 2010 than as of recent.

FDIC  insured banks have always offered the piece of mind that if anything ever happened to a bank your savings would be safe under the umbrella of The FDIC. Just a few short years ago FDIC covered accounts up to $100,000, an amount more than sufficient for the average citizen to have their entire savings covered by the insurance. Last fall the coverage was expanded to $250,000 because the banking crisis was applying pressure to small businesses many of which had holdings above and the $100,000. This expanded coverage however puts more stress on the funds of the FDIC.

In response to the impending insolvency of the FDIC, Sheila Bair the FDIC chairman announced the approval of a one-time emergency fee along with other assessment increases on the banking industry. Naturally the bankers were furious, small community bankers can’t help but feel that they are paying the price for the greed and incompetence of Wall Street bankers. Not to mention the fees could eat up from 50% to 100% of their 2009 earnings. Of course these arguments will fall on deaf ears, as will the arguments of the bank customers as we will ultimately pay these additional fees; the banks will surely pass them on to us anyway.

The fees proposed by the FDIC would generate $27 billion by the end of 2009. The FDICs coffers were emptied of almost half its funds in the final quarter of 2008; the fund lost $15.7 billion, falling from $34.6 billion to $18.9 billion.

The FDIC has access to $50billion form the Treasury Department, but Chairman Shiela Bair said,  “Banks, not taxpayers, are expected to fund the system”, and that asking tax payers to flip this bill would give a black eye to all banks and not just the ones that are in trouble and going bankrupt which is causing the depletion of FDIC Funds in the first place.

This news does not bode well for the economy in general. It is sure to bring down consumer confidence; some may even move to withdraw their savings out of fear of loosing it if their bank fails.

But would the government even let the bank insurer go broke?

Most think not, especially when the problem can be fixed without the redirecting of any more tax dollars.

That being said, what would the effects of an FDIC failure be were it to happen?

For all the riches of banks and insurance companies, it takes a Cracked World to see a broke insurer of banks. Think of the irony.

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