Real World-How many of your longt ime customers are now closed?

-------------------- Another group participant has had the light bulb go on...

A key difficulty in this discussion is what the word "our" means.

A major problem is that it is very difficult to now identify American corporations by their name or headquarters address. By dollar volume and sources of income, many famous corporations are no longer American. Two poster children for this are Caterpillar and Deere, which explain their howls when "buy American provisions" were suggested.

Many more apparently American operations are now foreign owned subsidiaries. This is particularly true in the basic infrastructure materials sectors such as cement and re-bar, thus profits go overseas.

Even more alarming is the apparent use by our planners of an economic model from the 1960s (or even the 50s) where extensive manufacturing still occurred in country, to design the "rescue" operations.

Because there is little to no consumer manufacturing [e.g. clothes, shoes, electronics, furniture, and increasingly automobiles] left in this country, "juicing up" consumer demand through easier credit will not "activate" a high multiplier economic sector [one where the money boosts spending in multiple levels as it changes hands] as it did in the past with several levels of vendors, suppliers and support services, down to the cafes outside the factories. It will however do wonders for China and other areas where the high value added -- high economic multiplier manufacturing jobs are now located.

Which segues into the assumption that more credit is all that is required. IMNSHO the problem, at least over the last two administrations, has been grossly excessive amounts of cheap credit, leading to individual over-consumption, inappropriate lending [i.e. little to no possibility of repayment] and organizational capital misallocation, e.g. "leveraged buyouts." While credit may indeed be the key to recovery, its use must be restricted to mainly productive activities that result in an actual increase in the quality and quantity of goods and services

snipped-for-privacy@aol.com wrote in news:84p6o4941g2erju3hjoa0tqql4t0ilu7l6@

4ax.com:

First off there hasn't been any stimulus bill passed so far. The TARP or "bank bailout" or "Wall St. bailout" as it has become known as is the government investing in or buying a piece of a troubled bank.

To put it in a simplified nutshell the mortgage crisis caused a crisis in confidence in banks and financial institutions who were/are all invested up to their ears in some of this bad debt. This caused a confidence crisis and runs on a couple of banks. This caused the banks and financial institutions to stop lending money and hang on to their cash lest they be the next victims of a run.

The credit freeze causes businesses to not be able to invest, borrow to make payroll, etc.

The government mainly spent the first $350 billion buying preferred stock or debt in these banks. The idea being that government backing would restore confidence and free up credit. In effect the government has become part owners in private institutions.

Now to make an analogy, lets say you own a machine shop and you can get some work that you can profit from. But nobody will lend you the money you need to buy the machine, lets say a Makino HMC, that you need in order to get the work. So the government comes along and offers to buy a piece of your business temporarily, until you can make some money and pay them back.

So you take their money and call the Makino dealer and your customer with the good news. But someone in the press gets wind that you are going to use that money to buy a fancy, expensive, Japanese machine tool and all hell breaks loose.

Next thing you know, powerful politicians are on the phone telling you that you need to go rent an American made Haas and you'd better love it. You tell them that renting a Haas will actually cost you more money than buying the Japanese HMC and will hurt your business. Too bad the pols say, we can't afford the bad PR your purchase is giving us.

And that in a nutshell is the deal. And it's why the government shouldn't be in an ownership position. And why neither you or I or some politician should be telling Citi Group what to do with their money and their business. And it is also why when they come to Washington looking for a handout the politicians need to tell them no.

A legitimate point, if money is given to a machine shop they need to buy the best machine tool for their shop under their particular set of parameters.

My point being: If Haas were to ask for government money they can get in line to make their case. If Makino were to ask for government money they can get in what ever line their country has.

As for the outcry when a recipient of government bailout funds went out and bought a private jet is EXACTLY THE POINT. Just like there was a public outcry when auto company execs flew private jets to DC to ask for money! Had nothing to do with the make of the Jet and everything to do with WASTE, perception and maybe even a feeling of entitlement (on managements part). Private jets are hardly necessary, they are convenient, they are certainly a fabulously luxurious FUN way to travel but hardly cost effective or necessary. If people running publicly traded company and you want to travel in such a manner, fine, use your own money to purchase and operate your own private jet. Privately owned company wants to spend money on private transportation fine, you earned it, you're paying for it, enjoy.

Now add into the mix that they bought a new foreign built private jet. If all things are "near" equal they should have purchased domestic.

I was working for a company making very complex missile components for Raytheon. The EU requires a certain amount of "Domestic" content or else they wouldn't buy Raytheon products. Guess which job Raytheon pulled and moved production to the EU to comply? Ours, and in ten years of supplying Raytheon never a customer reject or a late delivery. They pulled the job because the value allowed them to comply with the EU requirements. The kicker, they ended up paying 300% more for the exact same parts.

If the EU were to pay the same or even a 10-20% premium for domestic content that would make some sense but 300% is not quite fair. Same for here, if the stimulus and bailout packages are to be used for OUR stimulus I would like to see manufacturing go to Anthony's production facilities rather than China or else ware even if we pay a slight (reasonable) premium for domestic.

And why in hell are any of these guys who ran these bailout companies into the ground are deserving of BONUSES.....your contract requires us to pay you a $10,000,000 bonus, here you go instead of cash we are giving you a wheel barrel full company stock worth exactly $10,000,000 when you arrived, it's now worth $1,000 congratulations. The new guy that takes over and helps the company out of the dumps and turns things around is entitled to compensation but not the ones that rode the high flyers into the ground, if anything they should be stripped of their private assets and turned into someone's jail house bitch (role reversal, having done to them what they were doing to everyone else).

Tom

--Got one old customer but he's seasonal. --Got one new customer but I suspect he's a kook. Sigh.

------------------ More light, less smoke and less heat on this topic.

============== How Government Created the Financial Crisis Research shows the failure to rescue Lehman did not trigger the fall panic.

By JOHN B. TAYLOR

Many are calling for a 9/11-type commission to investigate the financial crisis. Any such investigation should not rule out government itself as a major culprit. My research shows that government actions and interventions -- not any inherent failure or instability of the private economy -- caused, prolonged and dramatically worsened the crisis.

------------------

While this article makes some good points, IMNSHO two major contributing factors were the repeal of a number of financial restrictions [Glass-Steagall and the uptick rule] and the failure to generally enforce the remaining restrictions, such as the 10% reserve requirement on the banks.

In any event, it is like the causality chain for an "accident." Interrupt or decouple any of the links and you prevent the "accident."

It is worth noting that the government now has pumped so much money into the system that they are on both sides of an increasing number of "deals." For example Citigroup is a major GM creditor.

To the extent the government "protects" the taxpayer "investment" in GM by going to the head of the creditor line in a bankruptcy, they penalize Citigroup, which is also taxpayer supported. Heads the taxpayers lose, tails the taxpayers lose....

Unka' George [George McDuffee]

------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).