Filed under: auto bailout, auto industry, automakers, bailout, bailouts, Barack Obama, Chrysler, Congress, Credit Crisis, DEBT, deflation, Dictatorship, Dollar, Economic Collapse, economic depression, Economy, Empire, Fascism, general motors, global economy, GM, GM bailout, Great Depression, Greenback, hyperinflation, income taxes, Inflation, Nazi, obama, socialism, Stock Market, tax, Taxpayers, US Economy, Wall Street
Taxpayers will lose on auto bailouts
CNN Money
September 9, 2009
Much of the money given to General Motors and Chrysler to prevent them from collapsing will never be recovered, according to a report released Wednesday by the Congressional Oversight Panel.
“Although taxpayers may recover some portion of their investment in Chrysler and GM, it is unlikely they will recover the entire amount,” the report says, citing estimates from the Treasury Department and Congressional Budget Office.
The oversight panel, headed by Harvard University professor Elizabeth Warren, was created by Congress last year to oversee the $700 billion Troubled Asset Relief Program.
GM and Chrysler were each teetering on collapse this spring when the Obama administration effectively forced both automakers into bankruptcy, lending them enough to survive. Both have shed billions of dollars in debt and are now rebuilding.
All told, since late last year, the government has provided or pledged the two companies, icons of American manufacturing, more than $60 billion in aid.
Treasury estimates that about $23 billion of initial loans to the two companies “will be subject to ‘much lower recoveries,’ ” the panel’s report says. In particular, $5.4 billion of loans to Chrysler are “highly unlikely to be recovered,” it continued.
“The initial loans made last fall as the industry was imploding and when no restructuring plan was in place are not likely to be repaid in full,” Warren said during a conference call with reporters.
How much of the remaining funds will be recovered is impossible to predict, Warren said, because the loans have been converted to stock.
“The American taxpayer is now an equity investor in Chrysler and GM,” Warren said. “And the return on its investment depends on what those companies are worth in a year or two.”
The government owns 10% of Chrysler and 61% of GM.
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Barack Obama accused of making ‘Depression’ mistakes
London Telegraph
September 7, 2009
History repeating itself? President Obama has been accused by some economists of making the same mistakes policymakers in the US made in the Great Depression, which followed the Wall Street crash of 1929.
His policies even have the potential to consign the US to a similar fate as Argentina, which suffered a painful and humiliating slide from first to Third World status last century, the paper says.
There are “troubling similarities” between the US President’s actions since taking office and those which in the 1930s sent the US and much of the world spiralling into the worst economic collapse in recorded history, says the new pamphlet, published by the Institute of Economic Affairs.
In particular, the authors, economists Charles Rowley of George Mason University and Nathanael Smith of the Locke Institute, claim that the White House’s plans to pour hundreds of billions of dollars of cash into the economy will undermine it in the long run. They say that by employing deficit spending and increased state intervention President Obama will ultimately hamper the long-term growth potential of the US economy and may risk delaying full economic recovery by several years.
The study represents a challenge to the widely held view that Keynesian fiscal policies helped the US recover from the Depression which started in the early 1930s. The authors say: “[Franklin D Roosevelt’s] interventionist policies and draconian tax increases delayed full economic recovery by several years by exacerbating a climate of pessimistic expectations that drove down private capital formation and household consumption to unprecedented lows.”
Although the authors support the Federal Reserve’s moves to slash interest rates to just above zero and embark on quantitative easing, pumping cash directly into the system, they warn that greater intervention could set the US back further. Rowley says: “It is also not impossible that the US will experience the kind of economic collapse from first to Third World status experienced by Argentina under the national-socialist governance of Juan Peron.”
The paper, which recommends that the US return to a more laissez-faire economic system rather than intervening further in activity, has been endorsed by Nobel laureate James Buchanan, who said: “We have learned some things from comparable experiences of the 1930s’ Great Depression, perhaps enough to reduce the severity of the current contraction. But we have made no progress toward putting limits on political leaders, who act out their natural proclivities without any basic understanding of what makes capitalism work.”
The authors of the pamphlet, Charles K. Rowley and Nathanael Smith, give their views.
Argentina’s Economic Collapse
noworldsystem.com 