The Economy – Part 1 – Bailout
The year was 2004.
I was sitting with my friend Joel, and we were drinking strong coffees over at what once was Cafe Basaam’s on 4th and Market. I really miss that place. As we sat there talking about the cars that drove by, and the people with their little yappy dogs, the conversation turned to the state of the global economic crisis, as it usually does.
Had we known that Federal Bailouts would become common reward for bad business back then, I’m sure we would have talked about it. Anyway, something that strikes me as completely and utterly odd is how it has become “okay” for the Federal Government to step up and punish people that have done no wrongs with their decisions, and reward those that have done nothing but attempt to take advantage of a system, to the point where the system allows them to.
I’m talking Federal Bailouts for the American Car Industry and the completely ridiculous housing market life rings.
American Car Industry
First and foremost, it is a fact, without a doubt, that American Car Companies make what can be easily identified as the “Fast Food of Cars”, they’re bad for the environment, they’re not made very well, they include a lot of industry counter-parts, they’re cheap, and made very quickly.
Time is money to the Big 3. In fact, they don’t measure the success of their cars with how well they’re made, just how many they can produce and whatever star crash rating they can brag about. They don’t care about engineering a car that is solid, safe, responsive and efficient.
The Big 3 is concerned with marketing the toys they put in their fisher price interiors, they are concerned with bragging about the few cars they have that are “high MPG” ratings, while they still churn out SUV’s that get 14 to 18 mpg, they neglect what makes a car perform better, and concentrate mainly on what it can make it sell better, while keeping production times low.
These traits are obvious to consumers, especially consumers that have been in or drive BMW’s, Audi’s, Mercedes, even Fiat’s, Renaults, Jaguars…
I’m not saying all European car manufacturers are superior. At this point, I couldn’t give a shit if they were worse, to be honest. Why? Because they’re not asking for my tax dollars to support their bad business decisions. The Big 3 is the reason corporations should not be allowed to get as large as they have, and I wish we, as Americans, would allow them to just vanish. Perhaps we can learn from their mistakes, and pick ourselves up. It’s not like helping out those 3 companies is going to save our economy at this point anyway. Here’s why:
The Housing Industry
How many of you know someone that bought a house with the intention of selling it 18 months later for a X% profit? How many of you were going to do that, and got stuck holding the keys to a house you can’t afford? How many stories have you heard about mortgage lenders lying about consumer incomes to make a sale? How many countries bought bogus loans from American banks as bonds (Look into Norway if you need an example)?
It all started in 2002, for the most part. As part of a stimulus arrangement to keep Americans focused on their pockets instead of the War in Iraq, post 9/11 – the housing market was grossly inflated. No, there wasn’t some vast conspiracy to activate the housing market inflation, it was merely a bi-product of spiraling (upward) B.S. from banks as a result of the Fed’s generous 0% interest rate for their lending.
If you forgot, the auto-industry made bank on this deal too, offering 0% interest rate loans, and selling SUV’s by the “truck load” to us consumers. It worked, we consumed. The only problem? Instead of consuming things with little-to-no resell value; we went on to consuming large order items: Houses, boats, cars – as if we were in Bahrain swimming in money. We weren’t, we still aren’t… and I knew it then, as I know it now.
So, for the housing bailout. Those of you who need it? You chose to live beyond your means, it was a gamble, you lost. It was a risk that should have been avoided, and had you paid attention to something other than your own greedy wants, had you passed up the “for sure thing” you wouldn’t be in the mess you’re in. But you couldn’t, and now you’re knocking on the door of the people that CHOSE to rent, the people that CHOSE to not buy a new car, the people that CHOSE to stay put and wait for the economy to normalize for real.
For those of you who were smart enough (or broke enough) to not make any big purchases over the past 6 years, pat yourselves on the back. Today’s economic crisis isn’t even remotely your fault, and hopefully those around us can learn from the examples laid down the wise investments you did make.
My take
Obviously – Bailouts are horrible. They do nothing for the long-tail of the US economy. They’re short-run fixes for long-term problems, and will come with more pain than reward. The only thing Bailouts are going to achieve is delaying the inevitable… The housing market is going to crumble because it got too greedy; The Big 3 are going to become extinct because they make crappy, inferior products.
It gets worse.
Part 2 of “The Economy” is going to talk about what money and the global market are.
