Auto sales, auto bailouts, auto financing – nothing is at is seems

Researching the murky world of auto bailouts requires a few ground rules at the outset. Recipients of bailouts like to think of a bailout as a grant or giveaway program. In other words, any type of loan is not a bailout since the recipient was obligated to pay it back. On the other hand, absent a rescue loan, those same recipients claim that liquidation would be the result. A credit line, or loan, that would stave off liquidation would certainly seem to qualify as bailing someone out, wouldn’t it? With that in mind, we can look at the credit arms of the Big 3 (now the Big 2 since Fiat owns Chrysler).

As I’ll illustrate further along, Ford Motor Credit exercised multiple loan programs during the financial crisis. Ford Motor Co. likes to claim the company took no public bailout money and has leveraged that claim quite successfully in a public relations ad blitz into increased sales and a very visible division between them and their competitors. Ally Financial, formerly GMAC, is a private company and obtaining records is difficult. They have left a trail, however, and you can draw some viable conclusions accordingly.

In both cases, the public perception is strikingly different from reality. The amount of credit utilized, the sources, and the reasons behind it are not at all what you see on the nightly news. Nor what you hear from the rank and file if you live in the heart of the auto industry as I do. Let’s see if we can clear up some misconceptions.

Ford makes the claim that they didn’t receive any public bailout money at all. They did request a $9 billion dollar credit line from the Treasury.

Ford’s Request:
A “stand-by” line of credit in the amount of up to $9 billion
at Government borrowing rates, for a 10 year term, with TARP conditions,
to support our restructuring, including the acceleration of products
that consumers want and value.

Federal Reserve adding another nail to the coffin

The Federal Reserve is adamant about meeting its mandates so much so that it will utilize whatever statistics make it appear their policies are working. Ask anyone who exists in the real world and they will tell you that the ‘official’ inflation rate as reported each month by the Bureau of Labor Statistics (BLS) through the consumer price index (CPI) is out of whack with what they are paying. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Not to worry. Federal Reserve Chairman Ben Bernanke agrees with you that the core CPI numbers are too unstable and unreliable. Forget the fact that core CPI excludes food and energy prices already, the result was still too high to justify the Fed’s actions. So Bernanke has switched to personal consumption expenditures (PCE) as a baseline for setting monetary policy. PCE is supposed to better reflect changes in people’s buying habits. Historically it runs about 1/3 lower than CPI.

I won’t bore you with all the technicalities involved with the methodology utilized in measuring inflation as you can find it all over the web. Suffice it to say that employing a statistical measure (PCE) that consistently runs 1/3 lower than the previously utilized measure (CPI) which is only a fifth of the real inflation rate as measured by the real feel pain in consumer’s wallets can not lead to anything good. The Fed has a dual mandate of price stability and full employment. Anyone following the unemployment numbers is aware of the fallacy of their measure as well. It only stands to reason that the Fed use artificially low measures of inflation to go along with the massive block of unemployed or underemployed Americans. It’s not at all unrealistic to take the ‘official’ unemployment and inflation numbers and multiply them by a factor of two or three, possibly even more, to get a true picture of our economy.

So why would the Fed engage in such destructive practices? The incessant flooding of the market with liquidity hasn’t seen the corresponding increase in velocity the Fed desires. Simply put, the money isn’t circulating throughout the economy, it’s sitting dormant. The Fed sees this as a problem. They respond to low velocity with further stimuli in a vicious circle of chasing increased economic activity. Economic activity is what fuels the measure of Gross Domestic Product (GDP). Here we go with another misleading measure of the economy. High volumes of economic activity (money changing hands) drives a high GDP number. Along with the artificially manufactured low inflation and unemployment numbers, the Fed wants an artificially high GDP number. This is the broken window fallacy of Keynesians. Economic activity just for the sake of appearing productive doesn’t grow the economy. Only economic activity that increases wealth is productive.

Gas station security guards for Detroit?

Yet another example of the failed progressive experiment in the city of Detroit.

After Wave Of Violence, Councilman Wants Gas Station Security

A standard, poorly thought out reaction to a symptom rather than addressing the cause. Crime is a result of the failure of Detroit. Placing a costly burden on business owners to act as a proxy police force is just that. The result will be less competition and fewer gas station retailers with-in the city who simply will refuse to absorb the cost.

Just amazing that a city with the highest per capita wealth and a population of 2 million in 1950 has now fallen to 700,000 and is the 2nd poorest city in the nation behind only Cleveland. Can you imagine a city of 700,000 residents that doesn’t have a single national chain grocery store? It’s true.

Violent crime is way up with the city seeing its 50th homicide already in 2012. That’s up 25% from last year.

The Detroit Public School system can claim the worst performing students in the nation. With that feather in their cap, what does the DPS system do? Hand out raises, of course.

The city has been embroiled in a debate as to whether or not to appoint an emergency manager to oversee its finances as the city faces a general fund budget shortfall of $9.5 million by May . They have a financial review team in place and it was told it must comply with the Open Meetings Act and hold deliberations in public. What did they immediately do? Create a sub-committee to hold private meetings as they are not subject to the Open Meetings Act.

Undecided on this election? Not sure which direction the country should follow? Here’s the way NOT to go!

There are no better examples to educate people than something close to home everyone can relate to. I say that because we are constantly being reminded that we are headed toward Greece everyday. They are collapsing under their debt burden and in many respects, the U.S. is already in a worse position than they are. But I don’t believe the majority of Americans take the threat seriously because Greece is such a small island nation and we are a superpower. Apples and oranges. So perhaps a better example is one right here in America. It’s the city of Detroit.

Detroit has been a textbook testbed for progressives for over half a century and has illustrated in the clearest possible terms the guaranteed failure of socialism. It’s fitting that a major plank of the progressives is equality of outcome as opposed to equal opportunity. Detroit has delivered. The following is an article from Jarrett Skorup written for the Michigan Capitol Confidential. He does an excellent job laying out the phenomenal decline of a once great city. With our oh-so-important election coming up, it’s another reminder that we need to change course in America asap.

Detroit: The Triumph of Progressive Public Policy

How did this great city fall so far?

By Jarrett Skorup | Feb. 14, 2012

(Editor’s note: This is an updated version of an article that originally appeared on July 6, 2009.)

Imagine a city where all the major economic planks of the statist or “progressive” platform have been enacted:

• A “living wage” ordinance, far above the federal minimum wage, for all public employees and private contractors.
• A school system that spends significantly more per pupil than the national average.
• A powerful school employee union that militantly defends the exceptional pay, benefits and job security it has won for its members.
• Other government employee unions that do the same for their members.
• A tax system that aggressively redistributes income from businesses and the wealthy to the poor and to government bureaucracies.

Would this be a shining city on a hill, exciting the admiration of all? We don’t have to guess, because there is such a city right here in our state: Detroit

Number of Americans no longer looking for work exceeds the total population of 32 States

This is the era of impossibly large numbers we can’t even comprehend when it comes to our nation’s debt. Another area of confusion is the unemployment situation. The Bureau of Labor Statistics compiles a monthly Employment Situation Summary which gives us the official unemployment number for the nation. It also includes various other statistics, one of which is found in Household Data, Summary Table A. For the month of January, 2012, the number “Not in labor force” is one of those astonishing numbers that’s hard to comprehend. It’s 87,874. Which translated means 87,874,000 million people of working age are no longer even looking for work for various reasons.

Just to clarify, what exactly qualifies as “Not in labor force”? From the BLS, here is the official definition.

Includes persons aged 16 years and older in the civilian noninstitutional population who are neither employed nor unemployed in accordance with the definitions contained in this glossary. Information is collected on their desire for and availability for work, job search activity in the prior year, and reasons for not currently searching

So, you must be of working age, not in prison, not working nor even looking for work.

In an effort to try to get a better perspective of just how large a number this is, I thought I would compare it to something one could visualize easier. That is state populations. Our army of people “Not in the labor force” would exceed the population total of 32 states! Yes, you read that correctly. Here they are based upon 2010 U.S. Census numbers, the latest available.

Wyoming, Vermont, Alaska, North Dakota, South Dakota, Delaware, Montana, Rhode Island, Hawaii, New Hampshire, Maine, Idaho, Nebraska, West Virginia, New Mexico, Nevada, Utah, Arkansas, Kansas, Mississippi, Iowa, Connecticut, Oregon, Oklahoma, South Carolina, Kentucky, Colorado, Alabama, Louisiana, Minnesota, Arizona and Maryland.

The population of all of those states combined is 86,817,688 based upon 2010 census numbers. And the economy is getting better?

GM sets all-time record profit of $7.6 billion. Is it proof the Bush/Obama auto bailouts worked?

GM has announced an all-time record profit for 2011 of $7.6 billion dollars. You will hear that endlessly this year as Obama takes credit for saving the auto companies. So once again we need to take a look back and do some fact checking.

The auto bailouts, as they are known, were bridge loans extended to GM, Chrysler and their financing arms. What was their purpose?  To prevent the auto companies from going into bankruptcy. As you’ll recall, they did anyway. So on its face, the claim of any bailout success is false. Bankruptcy, or restructuring, means a company has failed and needs protection from its creditors under bankruptcy law. GM and Chrysler clearly failed by going bankrupt so any claim of success due to the bailouts is a lie pure and simple.

The claim that is often made is that by extending the bailout funds, the Treasury rescued the companies from completely failing and thus saved over 1 million jobs. Some industry reports claimed 3 million potential job losses throughout the entire supply chain.  What happens when a company files for bankruptcy protection? They are allowed to reorganize under the protection of law which is exactly what they did. Going bankrupt doesn’t mean all the factories close, the dealerships, the suppliers and other vendors, etc. That’s called going out of business, liquidation,  a completely different scenario than bankruptcy. GM and Chrysler weren’t planning on going out of business, they were trying to avoid bankruptcy, so the claim of saving over a million jobs is unsubstantiated.

Now, what is the administration and the bailout defenders claim? That due to the credit crisis brought on by the recession, there would be no credit lifeline for the auto companies and they would just be allowed to fail. Accordingly, we had to tap the TARP funds to provide that lifeline no one else was capable of providing. They were needed to provide operating cash and loan funds for consumers. The claim is always made that total liquidation would occur without allowing for the likelihood of reorganization under bankruptcy protection. Scaremongering is certainly nothing new with government when it needs to put forth an agenda item and repayment of union support in the Obama election was on that agenda.

U.S. is talking deal with the Taliban – I thought we didn’t negotiate with terrorists?

The more things change, the more they stay the same. All throughout the 1980′s, the CIA funded the Mujahideen, predecessors to the Taliban, through Operation Cyclone. In the mid 90′s, the roles reversed leading up to 9/11 and the Taliban became the enemy. Now the Taliban have plans for retaking control of Afghanistan once the NATO pullout is complete by 2014. Low and behold, we are once again negotiating with the Taliban. The catch is this is being negotiated with the backing of Pakistan. For that to happen, the U.S. needs to get out-of-the-way, thus the accelerated timeline for our withdrawal. Defense Secretary Leon Panetta announced the new 2013 objective to the surprise of our allies including Kabul. What he didn’t say is what is becoming obvious. Karzai is going to be ousted. Absent NATO and the U.S., the Taliban will eventually retake control of the country and with the blessing of Pakistan. Iran isn’t at all comfortable with this. Somewhat ironic since they were complicit with the U.S. in installing Karzai as President. Will Karzai be allowed to stay on as a figurehead leader with the Taliban in control? No one knows how it plays out once ISAF withdraws, but that isn’t the point of this post anyway.

This is not to say the rules won’t be different this time. The Taliban provide the desired stability in the region that Afghanistan’s neighbors prefer. They will have to make a deal with the U.S. to swear off on Al-Qaeda and to enact reforms on things like the abuse of women. But the key for all parties is stability of the region and despite the obvious distaste for the Taliban, they are best suited to develop the next stage in the Great Game, which is to expand the infrastructure of the country to market the natural resources of the entire Caspian Sea region. There are volumes of evidence to support it.

For instance, Assistant Secretary of State for South and Central Asian Affairs Richard Boucher made this statement in a 2007 speech.

So, one of our goals in trying to work in Afghanistan is to stabilize Afghanistan, so it can become a conduit and a hub between South and Central Asia so that energy can flow to the south. Ideas and goods can flow to the north. People can move back and forth. Intellectual influences can move back and forth. And so that the countries of Central Asia are no longer bottled up between two enormous powers of China and Russia, but rather they have outlets to the south as well as to the north and the east and the west.

I think as we look at this region strategically we are trying to change the outlook, the ways of doing business, the opportunities for every country in the region.

Mexico tells Obama/Holder No Mas!

Via the Guardian – http://www.guardian.co.uk/world/2012/feb/17/no-more-weapons-billboard-us-mexico

The Mexican president, Felipe Calderón, has unveiled a “No More Weapons” advertising board, made using crushed firearms, near the US border and urged the US to stop the flow of weapons into Mexico.

The board, which is in English and weighs three tonnes, stands near an international bridge in Ciudad Juarez and can be seen from the US.

Calderón said its letters were made with weapons seized by local, state and federal authorities.

“Dear friends of the United States, Mexico needs your help to stop this terrible violence that we’re suffering,” he said in English during the unveiling ceremony. “The best way to do this is to stop the flow of automatic weapons into Mexico.”

Before unveiling the billboard, the president supervised the destruction of more than 7,500 automatic rifles and handguns at a military base in Ciudad Juarez.

He said more than 140,000 weapons had been seized since December 2006, when he launched a crackdown against drug traffickers. More than 47,500 people have been killed since then.

Ciudad Juarez, where more than 9,000 people have died in drug-related violence since 2008, is one of the cities most affected by the violence.

The Mexican government said a federal prosecutor assigned to a northern state had been detained on suspicion of protecting the brutal Zetas drug cartel. The attorney general, Marisela Morales, said the federal prosecutor, Claudia Gonzalez, had been sent to prison. She did not say when Gonzalez was detained or give any further details.

Gonzalez was based in the city of Saltillo, the capital of the border state of Coahuila. The state, which borders Texas, has seen a spike of violence as the Zetas and Sinaloa drug cartels fight for control of smuggling routes into the US.

Army Lt. Colonel report contradicts U.S. progress in Afghanistan

Lt. Col. Daniel Davis is a 17 year Army veteran. He just returned from his 2nd Afghanistan tour. He has published a report that is his personal assessment of the Afghanistan war. It’s not classified, however, he has also published a second classified report which he has submitted to members of Congress. These reports are very damning to the federal governments assertions about the progress of the war. He claims we have been purposely misled in overstating our success. This paragraph sums it up quite well in questioning how is it even feasible we haven’t defeated such an inferior enemy.

The United States, along with over 40 NATO and other allied nations, possess the most sophisticated, powerful, and technologically advanced military force that has ever hit the field of combat. We have the finest and most well trained Soldiers that exist anywhere; we have armored vehicles of every type, to include MIA2 Main Battle Tanks; artillery, mortars, advanced rockets, precision guided missiles, and hand-held rocket launchers; we have a wholly uncontested air force composed of NATO’s most advanced ground attack fighter jets, bombers, AWACS controllers, spy planes, signals-interception aircraft, B 1 bombers, attack helicopters, and massive transport jets to ferry our troops and critical supplies where they are needed; we have thousands of unmanned aerial drones both for intelligence collection and missile-launching; we have a helicopter fleet for personnel transport and attack support; we have an enormous constellation of spy satellites; logistics that are as limitless as the combined weight of the industrial world; we have every technological device known to the profession of arms; we are able to intercept virtually every form of insurgent communication to include cell phones, walkie-talkies, satellite phones, email, and even some ability to eves-drop on otherwise private conversations; a remarkably capable cohort of intelligence analysts that arc as educated, well trained and equipped to a degree that used to exist only in science fiction; and our various nations have the economic wherewithal to spend $10s of billions each month to fund it all. And for almost 10 years we have pitted this unbelievable and unprecedented capability against: A bunch of dudes in bed sheets and flip-flops.

Read the entire report here – http://www1.rollingstone.com/extras/RS_REPORT.pdf

You can read the report and draw your own conclusions as to its validity. I reference it in this post merely to point out my continued assertion that we have never been fighting in Afghanistan in order to win a war. Go here, here, here, here, here, here and here if you wish to read any of my previous posts on this issue.

Lt. Col. Davis has been there. Does he have some agenda? I have no idea. He is in no way promoting what I am. His concern is clearly for the wasted lives of the soldiers in a war we have no intention of winning. That’s certainly a worthwhile reason all by itself. His claim is that the Taliban have been steadily gaining strength since 2005 and will surely take over control upon our exit. I contend we were there all along for strategic purposes to promote our national energy policies in the interest of our national defense and his report is just more reinforcement of that.

The State of the Police State

Can you name the country with the lowest violent crime rate in the world? Perhaps a tyrannical regime in which the people are ruled with an iron fist and fear any reprisal from violence? A strong police state nation in which crime is simply not tolerated? You may be surprised to learn it is a country that doesn’t even have a full-time standing army. Yes, it’s Switzerland.

Why is this the case? Because Swiss citizens are well-armed and well-trained in how to use their weapons. From a BBC report which you can read here, comes this statement.

The country has a population of six million, but there are estimated to be at least two million publicly-owned firearms, including about 600,000 automatic rifles and 500,000 pistols

Every male Swiss citizen serves in the military for a short time each year for the better part of their lives. They keep their rifles at home. Women are encouraged to own a firearm, but not required. The point is that deterrence works wonders. Gun crime rates are so low that statistics aren’t even kept.