Poll

Just curious as to whether or not the majority think it was a good move.

Yes
10 (35.7%)
No
16 (57.1%)
Too soon to tell
2 (7.1%)

Total Members Voted: 28

Author Topic: Should the government have bailed out GM?  (Read 2232 times)

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Offline Super Dude

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Offline Riceball

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Re: Should the government have bailed out GM?
« Reply #71 on: March 03, 2012, 05:53:27 PM »
As much as I dont like being 'that guy', he's just done exactly what the media he criticised do: selectively quoting data. Tact of the matter re: the labour market is that the labour force (that is, employed and unemployed) hasn't grown in real (people) terms for close to five years...which means that looking at the unemployment rate and jobs growth don't tell you the full story. The labour market is goong through a slow, painful readjustment following the bubble. And car sales? Seriously? They tell you next to nothing about economic activity. Did they come off a low nase? Whats the six month trend? Where were the sales? There could also be latent demand that is just slowly working its way through the system because people just really need a new car.

Upward revision of GDP was (IIRC) all to do with greater inventory accumulation, which will unwind this quarter. Also re: labour market, if participation was at its decade average right now, US unemployment would be at 12.1% and rising, not falling.
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Offline Super Dude

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Re: Should the government have bailed out GM?
« Reply #72 on: March 03, 2012, 07:59:51 PM »
English please? To those last few sentences, not the whole thing.
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Offline Riceball

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Re: Should the government have bailed out GM?
« Reply #73 on: March 04, 2012, 01:36:23 AM »
Haha sorry, I sometimes get a tad technical.

Labour market: As I've said a few times US labour market participation rates have dropped pretty significantly since 2007. Its currently around 63%, where as it was ~65%. Idlf the US was currently at 65%, US unemployment would be closer to 12% not 8% (assuming jobs growth remaind the same). Its why Bernanke and co. aren't happy with the recovery as yet.

Inventories: Inventories are an item in the national accounts (GDP stats) that measure physical stocks of goods (like cars, iron ore or containers of consumer goods). So they are essentially, in a given quarter, stock that is produced but not shipped overseas or sold. Due to the way the national accounts work, stock building (a positive inventories number) adds to economic growth. However, a positive contribution by inventories, by definition, is unwound in subsequent quarters. My issue with quoting the upward revision to growth as a sign that the US economy is on the up un a meaningful way is that the revision was due to increased inventory accumulation, which will mean future growth is somewhat weaker.

Does that do the trick? Econ 101 for the day: done.
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Offline Super Dude

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Re: Should the government have bailed out GM?
« Reply #74 on: March 04, 2012, 08:13:39 AM »
Why does that make future growth weaker though? And hey, weak growth is better than no growth/further recession, isn't it?
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Offline Riceball

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Re: Should the government have bailed out GM?
« Reply #75 on: March 04, 2012, 11:22:31 PM »
Certainly, weak growth is better than nothing, but you can't (and probably won't) have weak growth forever because you don't create jobs in an environment of weak growth. Jobs growth kick starts the economy, because it gets people working and consuming, creating a positive feedback loop.

Its quite an abstract concept, inventories, but essentially the inventory number in the national accoutns represents a "flow" of inventories in a given quarter, so either addition to or subtraction from the total inventory stock (which is something I believe is never really known per se). A build up in inventories, represented by a positive number in the national accounts, will generally speaking preclude negative numbers in the future, which will then preclude positve numbers etc etc as businesses adjust their production levels accordingly. Its called the inventory cycle and its a pretty key pillar of Keynesian economics.
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Offline Super Dude

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Re: Should the government have bailed out GM?
« Reply #76 on: March 05, 2012, 08:03:05 AM »
In your personal/professional opinion, do you think Obama can turn the economy around on his policies? Assuming the absence of political gridlock, of course.
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Offline Riceball

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Re: Should the government have bailed out GM?
« Reply #77 on: March 05, 2012, 07:19:34 PM »
I haven't done one of these in a while ;D And this is largely personal with a smattering of professional (we don't watch the US in great detail).

Haven't been keeping track in great detail his policies, so I'll rely on these sources:
http://www.nytimes.com/2012/01/25/us/politics/state-of-the-union-2012.html?pagewanted=all
http://useconomy.about.com/od/Politics/p/Obama-State-Of-The-Union-Address-2012-Summary.htm
http://www.whitehouse.gov/the-press-office/2012/01/24/remarks-president-state-union-address

His ideas for changing the tax code to be more inwardly focussed, as in attracting and retaining businesses to the US, is clearly a winner. My question would be has it come too late? Will it be enough to entice companies that have offshored to come back to the US, and is the macroeconomy configured in the correct manner elsewhere (industrial relations, infrastructure etc) in order to bring them back/keep them. I think people-wise, its a no-brainer, but on the infrastructure front there is alot that needs to be done - you've been far too focussed on building the empire that you've let Rome burn, as it were.

A large scale investment program in public infrastructure, similar to what happened following the Depression, could be a good short-term and long-term policy for the US. There's no doubt that you've got the ability, capacity and wherewithall to do it, so just do it.

Re: exports, well duh, you've debased your currency to the point where its much cheaper than it used to be for everyone to buy your stuff. Can't take full credit for that.

Teaching and learning: great policies. There's no detail in his speech, but increasing education and training will practically never harm the economy over the medium-to-long term (unless you rely heavily on cheap unskilled labour, which I don't think the US does). However, the money has to be spent smart, not just thrown at schools/other institutions.

Small business/innovation: See above, don't just thrown money around.

Gas: no brainer. The less reliance on global energy markets, which will become crowded as China, India, Brazil et al develop won't put any downward pressure on global energy prices. I'm reading a book called The Growth Map (probably a good one for the inward-looking yanks to read ;)) that expounds this view quite well and its easily digestable.

Expanding current tax cuts: Probably a good move in light of what I've said previously on the US recovery. But you can't do it forever, and at some point taxes will have to rise to cut the deficit and repay debt - the key is timing. Tax cuts today are just deferred tax increases tomorrow (assuming spending doesn't fall).

Buffet Rule: Why not? Capital gains taxation should be at step rates that work in a similar way to income tax (the higher the gain, the greater the marginal tax rate), with tough regulation so you can't split gains into various companies or entities etc.

Hopefully thats a good summary. Ofcourse, this is predominately rhetoric, isn't it? But its good rhetoric, sensible rhetoric and really does thrown dow the gauntlet to Republicans to support. I can't think of any policy in particular here that is inherently bad for the economy...although as I said reduced taxes today mean increased taxes tomorrow assuming spending remains constant, and there wasn't any real "plan" per se to bring the deficit under control.

Ofcourse, this should happen naturally as the economy improves, but I have a sneaking suspiscion that US budget settings are a bit like an old man in need of a chiro appointment - sure, he can get around with his walking stick, but wouldn't it be so much better if someone got in there and ironed out the issues forcing him to use the walking stick?
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Offline Scheavo

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Re: Should the government have bailed out GM?
« Reply #78 on: March 05, 2012, 07:23:31 PM »
It's sorts sad that the above has basically come to be considered communist or an unrealistic liberal idea.

I still don't agree that participation rates can be used as a monitor of the economy, did you have anything new on that? I thought I remember you saying you were going to be dealing with that soon.

Offline Riceball

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Re: Should the government have bailed out GM?
« Reply #79 on: March 05, 2012, 08:01:56 PM »
My team (I don't mean that as in I'm the boss, I aint, I'm a worker bee lol) are working on a series of papers on participation in the Australian and Western Australian labour market this year; work hasn't commenced yet though. I'm tied up at the moment with my own policy paper (my first major one that I'm lead author on: sovereign wealth funds), a paper on productivity (that I'm contributing to) and our quarterly publications, which is probably why I haven't posted a whole heap recently...it doesn't feel like I have anyway.

As part of these quarterly publications though, I'll be writing our global economic update section for our main publication and I'll be focussing on the US labour market, so I'll hopefully be able to give a few more insights then*.

Yeah, the US political system seems quite abstract to me - these are just good policy ideas, not communist, not even socialist really, just good ideas. Libertarianism is becoming a problem for policy making, no doubt.

EDIT: But you are right, they can't be used as an indicator per se - its not like GDP or job creation or something. But it fits into a narrative on the economy which is overlooked far too often IMO.
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Offline Super Dude

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Re: Should the government have bailed out GM?
« Reply #80 on: March 05, 2012, 08:42:57 PM »
My team (I don't mean that as in I'm the boss, I aint, I'm a worker bee lol) are working on a series of papers on participation in the Australian and Western Australian labour market this year; work hasn't commenced yet though. I'm tied up at the moment with my own policy paper (my first major one that I'm lead author on: sovereign wealth funds), a paper on productivity (that I'm contributing to) and our quarterly publications, which is probably why I haven't posted a whole heap recently...it doesn't feel like I have anyway.

As part of these quarterly publications though, I'll be writing our global economic update section for our main publication and I'll be focussing on the US labour market, so I'll hopefully be able to give a few more insights then*.

Yeah, the US political system seems quite abstract to me - these are just good policy ideas, not communist, not even socialist really, just good ideas. Libertarianism is becoming a problem for policy making, no doubt.

EDIT: But you are right, they can't be used as an indicator per se - its not like GDP or job creation or something. But it fits into a narrative on the economy which is overlooked far too often IMO.

Understatement of the decade. :lol Anyway, you just laid a brick of stuff so I can't really make many in-depth comments, but on the whole I found it interesting to read.

Might as well ask an economist: do you think shifting to renewable energy sources will relieve the pressure currently and soon to be facing the world energy market?
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Offline Riceball

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Re: Should the government have bailed out GM?
« Reply #81 on: March 05, 2012, 08:53:08 PM »
Without a global price on carbon emmissions, no. I'm not really into climate change policy and the like (I leave it to the pros), but I can't see how you can achieve meaningful change without putting a price on the emmissions created by oil, coal etc that is high enough to drive innovation. Either that or it becomes so scarce that the carbon price becomes meaningless in the context of energy prices - in so far as the incentive to innovate is created that way.

Will that be the trigger? As in, will sky high traditional energy prices push companies this way without a price on emmissions...I've gotta say thats more likely to happen than a global carbon price. Which is a shame, because the scrambling to find a solution will cost more than pre-emptively moving to find a solution.
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Offline Super Dude

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Re: Should the government have bailed out GM?
« Reply #82 on: March 05, 2012, 09:05:42 PM »
Unfortunately I think I have to agree with you, more unfortunate still that policy solutions like cap-and-trade met the axe, because policies like those could've gone a long way towards making emissions pricing actually pretty accommodating to the industries in question. And what with companies like GM pouring millions if not billions into think tanks bent on denying climate change, we might just have to wait till we hit rock bottom. I'm just hoping rock bottom doesn't mean waiting until we really fuck ourselves over.

But what I was referring to actually was just the market pressure that I anticipate will come with new markets in China, India, Brazil and co. It's great that their energy economies are growing, but we'll suck the world dry before we even realize what's going on. It'd be great if we could make the renewable energy shift before that so a diversified global energy market could emerge, in which we can limit our environmental impact by buffering ourselves with clean energy and not have to totally strike off dirty energy.

I'm personally actually thinking about making a career out of working for an energy or car company and showing them that their business model can actually benefit from making the shift. I've sorta come to realize that change isn't gonna come from government, and the people can't do shit, so I gotta turn to the businesses themselves.
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Offline Scheavo

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Re: Should the government have bailed out GM?
« Reply #83 on: March 10, 2012, 02:15:29 PM »
Will that be the trigger? As in, will sky high traditional energy prices push companies this way without a price on emmissions...I've gotta say thats more likely to happen than a global carbon price. Which is a shame, because the scrambling to find a solution will cost more than pre-emptively moving to find a solution.

Couple of things I figured you might be interested in:

The latest job reports shows a decrease in long-term unemployment, i.e increase in our workforce.

And secondly, I can't remember what economist it was, but he was talking about gas prices and GM on TV the other day. He made a great point, in that the fuel efficiency is new cars, being built in the US today, are much much higher than they were four years ago (thanks in part to Obama administration policies), which is helping spur their purchase by people, and which of course spurs their production and manufacturing. Two years ago, when I bought my current used 1996 car, it got better mileage than numerous hybrids on the market. Now, it gets worse mileage than most new non-hybrids. The American car market is changing, it's changing quickly, and the direction it's changing is good for the future of the American car industry.

Most of that is market forces, but you can't overlook government influence, especially not when were' talking about GM and Ford. I also remember the news conference, where industry leaders were thankful for the EPA in standardizing fleet efficiency standards, but which also mandated we start putting our energy into making cars more efficient, and not necessarily the one with the most cupholders, storage space, power, or other things which can't negatively effect other people.

Offline Super Dude

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Re: Should the government have bailed out GM?
« Reply #84 on: March 10, 2012, 03:09:41 PM »
Will that be the trigger? As in, will sky high traditional energy prices push companies this way without a price on emmissions...I've gotta say thats more likely to happen than a global carbon price. Which is a shame, because the scrambling to find a solution will cost more than pre-emptively moving to find a solution.

Couple of things I figured you might be interested in:

The latest job reports shows a decrease in long-term unemployment, i.e increase in our workforce.

And secondly, I can't remember what economist it was, but he was talking about gas prices and GM on TV the other day. He made a great point, in that the fuel efficiency is new cars, being built in the US today, are much much higher than they were four years ago (thanks in part to Obama administration policies), which is helping spur their purchase by people, and which of course spurs their production and manufacturing. Two years ago, when I bought my current used 1996 car, it got better mileage than numerous hybrids on the market. Now, it gets worse mileage than most new non-hybrids. The American car market is changing, it's changing quickly, and the direction it's changing is good for the future of the American car industry.

Most of that is market forces, but you can't overlook government influence, especially not when were' talking about GM and Ford. I also remember the news conference, where industry leaders were thankful for the EPA in standardizing fleet efficiency standards, but which also mandated we start putting our energy into making cars more efficient, and not necessarily the one with the most cupholders, storage space, power, or other things which can't negatively effect other people.

It's funny, I was just learning this in Environmental Econ. :lol
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Offline Riceball

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Re: Should the government have bailed out GM?
« Reply #85 on: March 10, 2012, 09:04:51 PM »
It's too Sunday-ie right now to do econ...I'll take a look at this tomorrow morning.
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Offline Riceball

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Re: Should the government have bailed out GM?
« Reply #86 on: March 11, 2012, 06:49:35 PM »
Ok so my take on the latest jobs report:

This is likely to be what happens quite regularly over the next few years - increase in jobs & increase in participation = no fall in the unemployment rate. I've only had a look at the media release, and it appears that the amount of jobs created = the amount of people entering the workforce which left the number of unemployed unchanged and therefore the unemployment rate practically unchanged (it probably fell by a couple of basis points, but not enough to change the decimal). Long-term unemployment remained broadly unchanged, which at a high level would indicate that these people were not recipients of a job - ofcourse thats not the case but we don't get granular level data like that. So its a good report, in the main.

And re: Government & markets, naturally that kind of thing will happen when incentives are offerred, its just that the market is a stronger, more broadbased motivator than cash handouts/carrots & sticks.
I punch those numbers into my calculator and they make a happy face.

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