Another Bad Day Opens in Asia

Asian markets are keying off the ugly day in the US, with deflation fears at the fore and equity markets having broken through the lows of last month, which had been widely touted as support levels. The Nikkei is down 570 points, or nearly 7%.. The Hang Seng is down 5.5%. Mainland Chinese indexes are not faring badly, trading slightly positive or negative. The yen is at 95 to the dollar. Gold is up slightly at $738 an ounce, while Brent crude has fallen to $50.80 a barrel. Dow futures are down 123 and S&P down 16.50.

There is no way to put lipstick on this pig. From Bloomberg:

Asian stocks fell, extending a global rout, as Japan’s exports declined the most in almost seven years and U.S. consumer prices sank by a record…

“It’s the end of the world as we know it,” said Raymond Tang, who oversees $5.8 billion as chief investment officer at CIMB-Principal Asset Management Bhd., a unit of Malaysia’s second-biggest bank. The economic slump is “the worst I’ve seen on a global scale, with no region to help each other,” he said.

The MSCI Asia Pacific Index slumped 4.9 percent to 75.35 at 2:58 p.m. in Tokyo, extending this week’s decline to 9.3 percent. Thirteen stocks fell for each that rose on the measure….

MSCI’s Asian index is less than a point away from its five- year low of 75.19, last reached on Oct. 27, as recessions in Japan and Hong Kong and lower profit forecasts wiped out a 25 percent rally sparked by global interest rate cuts and Barack Obama’s presidential victory in the U.S….

“U.S. consumers have overextended themselves and the consequence of their retrenching is that there’s not going to be any growth for the next five years,” said Takashi Kamiya, who helps oversee some $16 billion as chief economist at T&D Asset Management Co. in Tokyo. “There’s nothing to be positive about.”…

Exports, the main engine of Japan’s economic growth in the past six years, fell 7.7 percent from a year earlier, the Finance Ministry said. The nation’s corporate-bond risk rose to a record after the report, according to the Markit iTraxx Japan index.

MSCI’s Asian index has plunged 52 percent in 2008 as global financial companies’ losses and writedowns from the collapse of the U.S. subprime-mortgage market mounted, eventually toppling Lehman Brothers Holdings Inc. and arresting global expansion. The Asia-Pacific region may grow in 2009 at less than half the pace of the previous two years, the Pacific Economic Cooperation Council said today…..

“Fear has well and truly taken over from greed,” said Rob Patterson, who manages about $2 billion at Argo Investments Ltd. in Adelaide. “We’re seeing undisciplined selling. There’s definitely an element of irrationality to all this.”

The decline in stocks forced Japanese insurers to reduce their full-year earnings forecasts, sending the nine-member Topix Insurance Index down 15 percent, the worst performance among 33 industry groups….

Analysts have cut profit estimates for 48 percent of stocks they cover worldwide, the most in at least 15 years, and more downgrades are likely as the economy slows, JPMorgan Chase & Co. said yesterday.

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  1. doc holiday

    This struck me as right on target, even if it doesn't seem on-topic for Asia and the financial crap storm that travels from country to country.

    Full Metal Coffin

    All three CEOs – Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler – exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM's $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone.

    "We want to continue the vital role we've played for Americans for the past 100 years, but we can't do it alone," Wagoner told the Senate Banking Committee. While Wagoner testified, his G4 private jet was parked at Dulles airport. It is one of eight luxury jets in the GM fleet that continues to ferry executives around the world despite the company's dire financial straits. "This is a slap in the face of taxpayers," said Tom Schatz, President of Citizens Against Government Waste. "To come to Washington on a corporate jet, and asking for a hand out is outrageous."

    Wagoner's private jet trip to Washington cost his ailing company an estimated $20,000 roundtrip. In comparison, seats on Northwest Airlines flight 2364 from Detroit to Washington were going online for $288 coach and $837 first class. After the hearing, Wagoner declined to answer questions about his travel. Ford CEO Mulally's corporate jet is a perk included for both he and his wife as part of his employment contract along with a $28 million salary last year. Mulally actually lives in Seattle, not Detroit. The company jet takes him home and back on weekends.

    >> Those nice jets can't escape the velocity of this storm and I think all three car makers are going under, together… but they probably will morph into one socialized/fascist entity and produce cars with plants in Mexico. If so, I'll boycott them like Hershey Chocolate.

  2. Anonymous

    Great Depression Gre…reat_Depression

    In the Austrian view it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and capital goods. By the time the Fed belatedly tightened in 1928, it was far too late and, in the Austrian view, a depression was inevitable.

    The artificial interference in the economy was a disaster prior to the Depression, and government efforts to prop up the economy after the crash of 1929 only made things worse. According to Rothbard, government intervention delayed the market’s adjustment and made the road to complete recovery more difficult.

    Furthermore, Rothbard criticizes Milton Friedman’s assertion that the central bank failed to inflate the supply of money. Rothbard asserts that the Federal Reserve bought $1.1 billion of government securities from February to July 1932, raising its total holding to $1.8 billion. Total bank reserves rose by only $212 million, but Rothbard argues that this was because the American populace lost faith in the banking system and began hoarding more cash, a factor quite beyond the control of the Central Bank. The potential for a run on the banks caused local bankers to be more conservative in lending out their reserves, and this, Rothbard argues, was the cause of the Federal Reserve’s inability to inflate.

    In opinion, Hayek, writing for the Austrian Institute of Economic Research Report in February 1929 predicted the economic downturn, stating that “the boom will collapse within the next few months.”
    Ludwig von Mises also expected this financial catastrophe, and is quoted as stating “A great crash is coming, and I don’t want my name in any way connected with it,” when he turned down an important job at the Kreditanstalt Bank in early 1929.

  3. eh

    “…with no region to help each other,” he said.

    Once the US and other developed lands go bad the writing is on the wall — there just aren’t enough high-value consumers elsewhere.

  4. Anonymous

    Bravo to Anon at 2:51

    The Austrians have had got economics nailed for a long time. The ponzi scheme that modern finance is won’t last much longer. Each stage requires a greater number of fools to invest and inflate the bubble. More people to buy more cars, more houses, more stuff they can’t afford and don’t really need.

  5. eh

    Considering all the possible/likely aftershocks of a GM bankruptcy, it’s hard to inveigh against cash for GM because Wagoner flies in the corporate jet. And if Congress approved money for the ‘banksters’, then they ought to do the same for GM — at least the GM people produce something. And Wagoner will be gone in any case. Although probably not the jet.

  6. Michael Fiorillo

    Not to justify private jet travel by anyone, especially by the heads of failing companies that seek taxpayer assistance, but it’s a red herring. The real issue is that this crisis is being used to bury the UAW. Unfortunately, it seems to be a bipartisan effort.

    Apparently it’s beyond the pale to offer help to an industry that was merely run by idiots (Detroit), and that still forms the industrial backbone of the country, rather than criminals (Wall St.)

    For those folks who speak of the necessity of bringing down the big 3’s labor costs in line with those of Toyota, Honda, etc., how long do you think those companies will maintain their current pay and benefit structures absent the threat, no matter how remote, of the UAW organizing those plants?

    The only reason those employees in the right-to-work South, free riders who have benefited from the struggles of auto workers in the past, enjoy the standards they do is because of the union. It’s the invisible hand of labor economics: non-union contruction workers here in NYC only make their $15-20 an hour because the organized trades set the scales higher. Non-union factory scales are indirectly set by the UAW and have been for the past 50 years. Watch what happens in the Southern plants if the UAW is no more.

    Think you’re seeing collapsing demand and deflation now? Just watch what happens when the Big 3- apparently doomed to have they’re carcasses picked over by private equity parasites such as Mitt Romney/Bain Capital, – and UAW are destroyed. The next step will be to use the crisis facing localities to break the teacher’s unions, which is already happening in DC.

    The UAW among industrial unions, and teacher’s unions among public sector unions, have been the aristocracy – perhaps not the best term – of working people in the US, and their gains have allowed for the creation of the middle class as we know it this country.

    What’s going to happen to finance capital when they they no longer have enough hosts and prey to consume?

  7. Lune

    Thank you Michael! I’m also sick and tired of everyone, including Democrats, accepting this canard about how all of this is the unions’ fault.

    Why is it that when a company is doing well, it’s because of the vision of the CEO, the superior execution of the management, etc. etc., but when the company is failing, it’s because of all the greedy workers and their insistence on expensive health care?

    The failure of the Big Three is solely due to the failure of its management. While the Japanese and European transplants have plants in right-to-work (more like right-to-be-exploited) states which are profitable, they also happen to have profitable factories back home that are highly unionized and that provide far more benefits than the UAW could ever dream of asking.

    The management of the Japanese and European auto companies have figured out how to thrive in their “socialist” home countries; if the Big Three can’t figure out how to provide even the basic obligations that they freely agreed to during their own negotiations, then their management is at fault.

    If the real goal of any bailout of the Big Three is indeed to preserve jobs, which is what every politician says is the goal, then they should use the bailout money to assume pension obligations, then buy out the Big Three (GM's market cap is < $2bil; no that's not a typo) and give away the factories to foreign companies who can run them better with a condition that they honor current employment contracts in exchange.

    If the problem of the Big Three has nothing to do with crappy cars and everything to do with high labor costs as people claim, then the government assuming pension liabilities and selling off assets at a steep discount should be more than enough to offset those high labor costs. And in the process, we'll get management who actually knows something about planning for future technologies and building quality cars that people want to buy, something that will go far further in ensuring a long-term domestic auto industry than merely providing bridge loans to the current crop of incompetent executives.

  8. Richard Kline

    So Michael Fiorillo, I agree with you completely. One sees the anti-labor knives come out here, even in unlikely places. I find it totally disgusting, actually, but what will wipe the smirks off those faces is organizing. The industry _has_ been run by total idiots: they need to be replaced. The unions need to break with management at the Big Three and ask for national takeover. Asking Congress to hand over more money to idiots only makes the deal that much harder to swing given the ‘crush the gold-plated union masses’ rhetoric we hear plenty of at the moment.

    The next several years are going to be much tougher economically than many are still reckoning with. Labor needs to dig in its heals and make an effort, rather than go cap and hand to the handmaidens of the bosses and ask nice. There are going to be many jobs lost, but the present Administration, and more the present and the next Congress, are in principle more amenable to labor _pressure_ than anything we have seen in a generation. So get out there and push, is what I’m sayin’.

  9. Anonymous

    Detroit never had any management. They just caved in to the UAW time and time again. This was okay until the Japanese, et al became competitive, and then dominant, in the market.

    The UAW parasite doesn’t want to face the fact that it has finally killed the host. Get over it. This is another example of Hellers Law: the first myth of management is that it exists.

  10. DownSouth

    Michael Fiorillo,

    Agree completely.

    The first chore is to see the “scientific” theories proffered by the acolytes of the Chicago School and the Austrian School for what they really are: ideology, and ideology in what Robert Heilbroner calls the full “pejorative sense” of the word—“as denoting a set of ideas foisted on the populace by a ruling order in order to manipulate it.”

    What these two scientisms offer us is a totally blinkered version of history and of nature–world views completely disconnected from the real world.

    These two pseudosciences must be debunked and discredited before any meaningful change can come to America.

    Don’t expect them go go away without a fight, though. As Eric Hoffer said: “Absolute faith corrupts as absolutely as absolute power…. A doctrine insulates the devout not only against the realities around them but also against their own selves. The fanatical believer is not conscious of his envy, malice, pettiness and dishonesty. There is a wall of words between his consciousness and his real self…”

  11. DownSouth

    Michael Fiorillo,

    Agree completely.

    The first chore is to see the “scientific” theories proffered by the acolytes of the Chicago School and the Austrian School for what they really are: ideology, and ideology in what Robert Heilbroner calls the full “pejorative sense” of the word—“as denoting a set of ideas foisted on the populace by a ruling order in order to manipulate it.”

    What these two scientisms offer us is a totally blinkered version of history and of nature–world views completely disconnected from the real world.

    These two pseudosciences must be debunked and discredited before any meaningful change can come to America.

    Don’t expect them go go away without a fight, though. As Eric Hoffer said: “Absolute faith corrupts as absolutely as absolute power…. A doctrine insulates the devout not only against the realities around them but also against their own selves. The fanatical believer is not conscious of his envy, malice, pettiness and dishonesty. There is a wall of words between his consciousness and his real self…”

  12. Anonymous

    Why are we talking about the UAW in a story about Asia?

    Look at the bright side: even after falling 10% in 3 days, the Hang Seng is still well above the lows reached at the end of October. If you have some cash you won’t need to touch for 20 years, the next year or so is the opportunity of a lifetime.

    Warren Buffett ended up making a fortune from the 1973-74 recession. And yet during this time, he badly underperformed relative to the S&P 500 index, even as late as 1975 (S&P 500: +37%, Berkshire Hathaway: -5% in that year).

  13. wintermute

    Citigroup are on the brink – sooner than we all might have thought!

    Earlier this week Bloomberg news remarked that if the Citi share price dropped below $8 they might have a run on the bank by international depositors. Remember that Citi has a huge international deposit base.

    Right now the shares have fallen below $6 (Thursday morning EST).

    Another working weekend for Paulson & co coming up!

  14. Anonymous

    The real issue is that this crisis is being used to bury the UAW.

    LOL! GM is bankrupt in all but name. A fed bailout only forestalls bankruptcy for a year or two.

    When GM goes bankrupt, and either folds completely or re-orgs, the UAW is toast. That’s why the UAW is begging for the bailout, trying to mantain their vegetative state. It’s the end game of all worker’s guilds throughout human history.

  15. DD

    Yeah, OK…the relationship b/w the automakers and UAW is reasonable, viable and in no need of reform….and this is all a big ruse to rework the labor contracts.


    And the following exchange with regards to the “Job Bank” from yesterday’s testimony is also completely irrelevant to the matter at hand:

    “How can you come before us, Representative Corker directed to both Nardelli and UAW chief Ron Gettelfinger, and ask us for $25 billion if you’re asking taxpayers to fund this sort of activity?

    Corker’s question prompted an odd scene in which Nardelli was forced to explain to Gettelfinger, as both sat at the witness table, that what Corker meant was the following: When Chrysler plants are idled because they are not making vehicles, Chrysler is still required to pay its UAW workers 95 percent of their wages.

    Gettelfinger stumbled a bit and offered that those wages are actually the workers’s “unemployment.”

    ‘There is no other business in this country where that would be tolerated,” Corker said. “I understand Mr. Gettelfinger has done a good job on behalf of all workers not working and being paid.”

    Sen. Chris Dodd (D-Conn.), the committee chair, picked up the union’s cause after Corker finished, however, saying of the practice of paying workers at idle plants: “I don’t think that’s outrageous at all. The assumption that you just get rid of [workers] without considering their needs,” he asked trailing off.”

    Gimme a break.

  16. S

    Citi valuation and velcoity of declines have an errie feel to them. Wow this is a huige deposit bae. FBR saying the banking system needs $1-1.2T in common equity the gov needs to directly inject into the firms ASAP. TAll these estimates are just that.

    Then we get Hubbard with yet another editorial in the FT saying we need to cram down rates (Kohn the old fool saying we need to look at other Quant easing techniques) to prop housing prices. I am embrarrased for Columbia University (not that bollinger isn’t bad enough).

    We appear to have hit terminal velocity. Scary.

  17. doc holiday

    The Union Gig & The Industrial Age have great places in history, but Darwinism and evolution trumps them both. The times they are a changing …

    How will unions influence policy in places like Mexico, which more than likely, is where this reorganization is headed?

    The BIG 3 corporations will simply morph into a new stronger entity and use cheaper labor, tax subsidies and robotic computers and then re-tool to be much more efficient (building more efficient hybrid cars).

    In this game of economic chicken, workers will be displaced in one place and in another place, opportunity will be engineered. It doesn't take a rocket scientist, auto engineer or CEO to realize that Toyota has a superior model in place that was up and running in America, vitrually overnight! They built a factory at light speed and then produced high quality cars that people pay top dollar for.

    The demand for affordable quality cars is the driver for future cash flow and success, and the recent cash burn and mis-management of these corporations and the lack of vision will force drastic evolutionary changes. If there is any fairness in this mess, I hope that the majority of management ends up in the same conforming unemployment line that Joe The Janitor waits in.

    The sentiment of fairness or justice is as difficult with this situation, as with the subprime bubble, i.e, we have a long list of people who are unaccountable for their actions, e.g, the people that are greedy that wreck the game for everybody — and that includes everyone from a CEO to a janitor.

    Capitalism as we have known it, from The Industrial Age until now has survived as a viable structure for society, but there has been a collective effort from top to bottom to undermine reality and to believe in too many illusions, like a CEO making hundreds of millions in compensation, and assembly line workers making $70 and hour; both are wrong, both are unfair and they both contributed to the collapse of the system.

    … and that concludes my sermon today, because this could go on for 5000 words, and I'm just gonna get pissed off and say something really fuc-ing stupid which will then piss off Yves and then what?

  18. Lune


    If you believe in free markets, then what is wrong with the UAW negotiating as hard as it can for the workers it represents? If this was a really bad deal then the management should have fought against it. In capitalism, there is no “fair price”, only what you can convince a buyer to pay.

    I won’t argue the economic “fairness” of paying people not to work (although there might actually be such a case: auto workers are highly trained and productive, and if you expect to restart the plant in a few months, it’s probably far cheaper to keep your experienced workers around rather than rehiring new guys). I’m merely arguing that the UAW decided to negotiate for such provisions and got them. What’s wrong with that?

    That said, is it really all that uncommon to be paid while not working? Perhaps for a blue collar working stiff, but plenty of lawyers get paid retainers to hang around in case they’re needed, and CEOs are frequently provided with lavish “pensions” essentially paying continued salary and extensive perks such as the use of corporate jets and housing even after they’re retired and ostensibly will no longer provide any sort of service to the company. And how about corporate directors who are paid millions to be flown to a lavish meeting 4 times a year to rubberstamp the CEO’s recommendations?

    Regardless, in negotiations between auto companies and the UAW, there is only one government interest at stake: to ensure that both sides of the bargaining table have essentially equal power to advocate for their interests, and that there are no govt based advantages to tilt the scale in one way or another. After that, let the market work. What 2 private parties negotiate among themselves in a free market is not the question. In that sense, after nearly 30 years of union busting and erosion of collective bargaining rights, I highly doubt anyone would claim the govt unfairly favors labor these days.

    And if I was Chris Dodd, I would have said “Hey, the union’s job is to look after its workers interests. It’s the management’s job to look after the company’s health. If the management negotiated a poor deal for themselves, tough shit.” (Yes, if I were a standing Senator, I’d say the s-word on national TV :-)

  19. DD


    I’m not criticizing the UAW for negotiating the Jobs Bank Deal. I’m criticizing the inane analysis provided by Michael—that you agreed with— that… “The real issue is that this crisis is being used to bury the UAW.”

    It’s absurd ideological tripe that the Big 3 is merely engaging in some sort of brinksmanship to negotiate—or extort—a better deal. What are you going to tell me next—that this is all a big ruse so the Big 3 can avoid fuel efficiency mandates because the Big 3 doesn’t believe in global warming?

    I do suppose, however, that if the Big 3 does get a better deal for itself, then by your reasoning they should be commended because–as you say:

    “Hey, the corporation’s job is to look after its shareholders’ interests. It’s the union’s job to look after the worker’s health. If the UAW gets screwed in bankruptcy—because it was obstinate in holding onto it’s unworkable contract for themselves, tough shit.”

  20. Lune

    (My apologies to Yves and the other readers for continuing an off-topic conversation, but I hope they don’t mind as long as we keep the argument interesting and don’t devolve to flames and name-calling :-)

    doc holiday-
    In your post, I get a certain sense of inevitability that despite whatever good might have come from unions, those days are over thanks to circumstances beyond our control and we just need to accept our fate and move on to the big unemployment line in the sky.

    Nothing is further from the truth. The fact that the Big Three can move their factories to Mexico or somewhere else and engage in labor/environmental/regulatory arbitrage is not some accident or inevitable force of nature. It was the deliberate goal of the numerous multilateral and bilateral trade agreements negotiated by our government.

    After all, one could make the same argument about the knowledge industry: how can microsoft or hollywood expect to protect their copyrights in the face of unregulated DVD factories in China? Better to give up and move on to something else right? Except that’s exactly what we expect and fight damn hard to do. Indeed, we fight for them so hard that in the case of patent-protected medicines, we essentially tell developing countries that they need to accept a certain number of preventable deaths (from people unable to buy patent-infringing local copies of expensive foreign drugs) within their population in exchange for the benefits of lowered trade barriers.

    Our current trade system places high priority on the protection of intellectual property and free capital flows while placing no priority on labor standards or environmental protection.

    That’s fine: it’s what we as a country have chosen to do. But protecting IP is as difficult and “unnatural” as enforcing labor standards. Yet through hard work and careful negotiation, we’ve been largely successful in maintaining a healthy IP industry in this country. And similarly, if we as a country believe that protecting the bargaining power of labor is a good thing to do, then we can accomplish that as well. If Mexico is willing to enforce drug patents at the risk of their citizens dying, they’ll surely be willing to enforce labor standards at the risk of losing a few jobs. It’s up to us as a country to decide that that’s worth fighting for.

    One final point: you mention the Japanese. The poster child of their current success is the Prius, an innovative, fuel efficient car that even today has a waiting list of willing buyers. It was conceived, designed, and produced in Japan. Every single one of them comes from a factory in Japan, a factory that is unionized, pays good wages, ensures job stability, and provides benefits far in excess of what the UAW has been able to negotiate here in the U.S. If the death of the union is a foregone conclusion, as inevitable as the force of gravity, someone needs to tell Asia and Europe, who seem to be able to compete world wide without dismantling the labor protections they’ve deemed important.

  21. Lune


    I apologize for the confusion. While I do believe there have been certain companies (namely the airlines) that frequently use bankruptcy primarily as a means to force labor concessions that they can’t get at the bargaining table, I don’t think that’s the primary reason why GM and the others are predicting bankruptcy. The Big Three are going bankrupt because they’re running out of money and can’t survive. You’re right in that regard. But my concern is that the bailout will occur on the backs of labor.

    As for your last paragraph, I’d like to make 2 points:

    1) I believe that current government policy favors management over labor (especially bankruptcy codes that IMHO make it too easy for companies to break labor contracts and raid pension funds, and trade agreements that allow corporations to use labor arbitrage), so I don’t think there’s a symmetry of power that’s essential for efficient negotiations in a free market.

    2) That said, since those rules won’t be changing anytime soon, under the rules we have today, I highly, highly favor GM and the others going bankrupt, even understanding that that will lead to less jobs / poorer-quality jobs. Precisely because I believe in free markets and if GM and UAW couldn’t figure out a way to compete together against other companies, they need to face the consequences. If GM goes into bankruptcy, I’m willing to accept whatever a bankruptcy judge decides to do with the UAW contracts.

    But… if the government decides to intervene, then I absolutely expect all of the bailout money to go to the twin goals of protecting jobs and promoting a long-term healthy domestic auto industry. Those are the only two goals that the government should spend taxpayer money on. Whether those jobs and that domestic industry remain under Big Three management or Eur/Japan management shouldn’t be a concern (and indeed I’d favor foreign ownership since the Big Three have proven so incompetent so far). That’s why I proposed using the bailout money to takeover pension plans and then give away the Big Three’s assets for free to whatever company is willing to keep the factories running while maintaining the current contracts.

    The free market’s one thing, but if we’re going to spend $25 bil on socialism, let’s at least spend it on socialism for the workers…

  22. DD

    Lune–we have found some common ground here. Ideologically driven conspiracy theories like the one posed above are terribly annoying.

    I apologize if I misunderstood your position and appreciate your measured and reasoned response.

    I agree–IF we are going to have socialism, then for goodness sakes, a person should be able to go to the freaking doctor and 10 to 20 to 30 years of hard work is deserving of a damn pension.

    The UAW, though, isn’t doing its constituency any favors if it expects what is in essence a 95% unemployment benefit.

    Time to go now…and ponder what happens if C actually does swirl down the toilet.

  23. doc holiday


    That was an intense reply. I don’t know if I should thank you or curse you.

    I think there is a sense of inevitability in this evolution, which is related to the obligation of how far society has to go to subsidize systems and structures that are inefficient? A state of socialized welfare is somewhat counter to capitalist Darwinism, where the market determines success and failure. The car business is over-leveraged and poorly run, but the same can be said for many things relating to our infrastructure. We are at a generational crossroad, where the journey has ended and now we sit here on the road wondering how we got here.

    Synthetically propping up whip and buggy industries or tossing some random percentage of GDP at bailing out wagon wheelwrights is a way to save the past and to not embrace the future. Saving Detroit is all about clinging to the past and holding on to the same mistakes and then being caught in a catch-22 loop that will bring us back to where we are, sitting here with deja vu (all over again).

    The reality is, business cycles often displace old outdated skills as society moves on with some form of new innovative adaption. It is lamentable that people are often forced into change and to remain in a lifelong mode of being competitive, but there is a sense of inevitability within the motions of progress.

    IMHO, the notion of union strength in numbers (solidarity) is totally negated by the reality of global production and the ability of manufacturing plants to be adaptive and highly dynamic and efficient — versus being stagnate or static and existing in only one place, like Detroit. The consolidation of old world industry and the attraction to employment and population is reminiscent of shoe factories in New England and a wide range of textile manufacturing from the days of Oliver Twist — but as you recall, those days are over and there was not an effort by society to save outdated technology.

    Thus, government as we know it, will be fascist and obviously back a corporation, because of tax revenues and structure, and that collusive partnership will help create jobs. The current problem in Detroit is not going to be solved by a bailout, because The Big Three have no motivation or incentive to make a better product

    Sermon 1.2

    Your ball dude, I’m burned out and will find clarity and specifics later…

  24. Michael Fiorillo


    You completely misconstrue my point: it’s not a conspiracy to bury the UAW, it’s a consensus, albeit one that is tiptoed around by our betters when they are speaking in public.

    What precisely do you think the Mitt Romney’s and Richard Shelby’s of the world mean when they speak of lowering wage rates? Factor in the gravitational pull upon management for absolute – or as close as they can get – control of the work process, and you have a dynamic that spells union busting, which is what we have here.

    You also misunderstood me when you said that the Big 3 are behind this attempt to kill the UAW. That’s an untenable position on it’s face; whatever their personal feelings and preferences, auto management knows that they need the UAW’s pull – such as it is – with the Democratic Party.

    It should go without saying that the government should not release a nickel until the Big 3 reconfigure their product line and make plans to re-tool for a future based on more energy-sustainable technologies. But again, was it the auto workers who made the decisions on design and marketing for the past forty years?

    My final question has still not been answered by those who trumpet a race to the bottom here and around the world: who’s going to buy your junk and pay your mutual fund management fees when they’re living in their cars and eating spam for Sunday night dinner?

  25. doc holiday

    Speaking of buying junk, check this out:

    B.C.’s recycling industry hit by global slowdown

    For certain materials, there is no market, so people who are collecting the recyclable materials just can’t sell it to anyone,” Welman told the CBC.

    Some goods are fetching only a third of the price they did in September; some recycling companies are laying off workers and others have stopped collecting certain types of plastics altogether.

    Welman said the recycling council is holding a special meeting on Thursday with industry members to brainstorm about what to do next.

  26. Lune

    Doc holiday-

    I think comparing horse and buggy to unions is an imperfect analogy. One is a product, another is a social structure. While I readily agree that a horse and buggy are less efficient than cars as a form of transport, I’m not so sure that the union has been superseded by some other structure as a mechanism to counteract the inherent asymmetry of one employer bargaining with a thousand individual employees.

    Furthermore, the products that are made by the Industrial Age-era corporations of yesteryear are still being made and consumed, unlike the horse and buggy, and typically using the same form of production that has existed for decades. It’s just that the production has been relocated elsewhere.

    I fully agree with you that products, specific technologies and skillsets, etc. fall by the wayside by the inevitable march of progress. But the social structures (I use that term broadly to include legal and political structures) such as the union, the corporation, the trade treaty, etc. have survived for hundreds of years, and will likely outlast us.

    The death of the union in America has not been because we Americans now find the idea of labor protections or collective bargaining antiquated. Nor has it been obsoleted by better forms of organization that allow us to pursue those goals more efficiently. It’s because for the past 30 years (and perhaps longer), the corporate world in our country, along with the political leaders in their pocket, have decided that such ideals should take a backseat to the pursuit of corporate profits and the protection of the rights of capital and property.

    It’s therefore no surprise that we have managed to empower and protect the rights and privileges of American corporations (a structure even more ancient than the union) around the world in the face of foreign competition, while not doing the same for American labor. This was not inevitability nor progress. Just a change in priorities. It is not an easier or harder task to protect labor vs protect capital in the global marketplace. It just matters which one (I believe we can do both, BTW) you wish to pursue.

    So the real question to ask, Doc, is has American society truly made such a choice? Do the majority of Americans — including our corporate execs, who once upon a time actually believed it was in their interest to have well-paid workers — believe that labor interests should be subjugated to corporate and capital interests? If that’s the case, then unions indeed are no longer needed. But I suspect that most Americans don’t believe such a thing, and corporate apologists mask their debasement of labor in the rhetoric of inevitable progress rather than admit the truth that they’ve carried out a massive change in priorities that most people probably wouldn’t agree with.

    All this being said, I do believe corporate america will very quickly realize the importance of paying their workers well. As Michael has mentioned repeatedly, who do they think will keep buying their stuff if no one has any money to do so? The general consensus in the past (before Reagan) was that wage growth (not inflation, but sharing productivity gains with workers) was an essential part of growing the economy as that was the only safe way to increase consumption. But that consensus changed, and it was felt that one could hold down wages while still increasing consumption (thereby maximizing profits) by fostering increases in asset values and debt. Now that we are seeing a rapid unwinding of that debt and a destruction of asset values that weren’t sustained by underlying incomes, perhaps our economists will realize once again the value of wages in growing an economy…

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