I've decided that this is where I will give voice to the topics that are inappropriate for the Luskwood platform. So, if you're uninterested in politics or financial fortune-telling, you probably shouldn't click the cut.
Remember back in October, when they told us the world was going to end if there wasn't a bail-out of the banks - to get rid of sub-prime mortgages and such? Remember how it had to get done by Tuesday, or the whole financial system would collapse? Remember how taking these "toxic assets" off the banks hands was so important that both presidential candidates had to leave the campaign trail and rush to Washington?
They did rush to pass it. They came up with a $700billion package to buy the mortgages, called the "Troubled Assets Relief Program (TARP)". It didn't stop there. The number of bail out programs has grown. Eleven programs that have spent a total of more than $2 trillion (keep in mind that the world's total GDP is about $42 trillion). The money has been generously doled out to banks, insurance companies and stock brokers.
But then how many of the assets that would spell our financial doom were purchased with those funds?
You said the word of the day! That's right ZERO. Not a single troubled asset was ever purchased by the government. Furthermore, they don't plan to spend our money on that anymore. The money is spent without receiving any goods or services in exchange (not even bad ones).
Now, some of the policy wonks in Washington want to use some of that money to bail out the auto industry, too. Except that it's not the whole industry. It's the three companies that have been compensating their employees more than double the rate of other manufacturers who build cars here in the US.
The main stumbling point is that the amount of money they're asking for would last them a year (maybe two), unless they get their expenses under control. The unions that brokered the current pay scale, are unwilling to renegotiate until the current contract runs out. It's fully within congress' power to vacate that contract, and force the UAW to renegotiate. It's also fairly obvious why they won't.
An ordinary congressman gets $165,000 per year (certain members make more), plus (zero deductible, zero cost) 100% dental, medical, vision and prescription coverage, and retirement at full pay for the rest of their lives after serving for two years. When they're paying themselves that well, it would be very difficult for them to say the UAW workers are making too much.
What I see coming is that these manufacturers (GM and Chrysler) will be allowed to go into a special form of bankruptcy where they can break the union contract without congress taking that action directly. Ford will probably try to rough it until the contract runs out - possibly even buying the profitable parts of the other two.
Who knows, I'm probably wrong anyway, but feel free to add your predictions.