Monday, June 01, 2009

The Once Mightiest Industrial Company On Earth Declares Bankruptcy

The unwinding of General Motors has been enormous in its scope. GM was always near the top of the largest auto company in Europe. Saab and Opel are to be sold. Pontiac and Saturn brands in the United States are to be sold or closed. Half of GMAC is now owned by Cerberus. And GM's plan is to now import more autos from Mexico and China. Hopefully they'll cost about $3,000 so you can afford one in your new job as head hamburger maker at McDonald's. Because whether you work on Wall Street or in the auto industry, that's probably going to be your next job.

Entire communities have been and will be destroyed due to GM's failure. There is a small community of about 5,000 people near where I grew up. The community was home to an enormous GM plant which at its peak probably employed about 5,000 people from the surrounding area. I would guess about 3,000 people worked there before this crisis started. Millions and millions in taxes are paid annually. Schools were built. Retirements planned. Roads paved. Hospitals built. Now, it is very reasonable this plant will close. Forever. And what will replace it? Unemployement in this county is already nearing twenty percent. Theft and the drug trade have replaced economic opportunity over the last decade. In fact, this once mighty industrial and farming area was recently highlighted in the national press for its rampant drug problems. But, hey, it's all good. How do I know? Because these hard-working people of generally modest means are now on the hook for trillions of dollars by bailing out the criminal activity of Wall Street. By the way, it was these hard working people that built this country. Not Wall Street. Any economist should be able to tell you how capital is generated in the economy.

Still feel good about those muny bonds and Treasuries in your portfolio? It's all good.
posted by TimingLogic at 9:00 AM