Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Lee Lichterman III who wrote (7594)	11/24/1998 12:44:00 PM
From: Liatris Spicata	Read Replies (2) \| Respond to of 9980

Ok L3- Now that I, and more importantly, people I revere like Milton Friedman, are not being accused of "ranting", I'll try to respond with tact. But first let me assure you Sir Ronald Reagan did no such thing as you accuse him of doing- it would have been antithetical to what RR stood for. Carter was pres when C got a government backed loan. David Stockman was the only member of the Michigan delegation to vote against the bailout, and he joined the Reagan Administration from day one. <<but when you are about to eliminate the jobs of thousands of workers, have fired the old inept management and brought in new visionary leadership as Chrysler did, why not give it a try?>> The entire premise needs examination. Yes, it is possible there would have been more layoffs had C gone through bankruptcy proceedings, although that is not a given. Ford, GM or AMC might have benefited and increased their workforce. But take the worse case: liquidation. C's assests would have been sold to more presumably successful management, who would have needed workers to staff their new assets. Probably C, under Iacocca and Lutz- make that Lutz and Iacocca- would have gotten away with operating under Chapter 11 and would have been out of it in a few years. Not obvious to me that additional layoffs would have been required- remember, C cut its work force drastically in the 1980s. As to "why not give it a try", well I think there are several good reasons. First, it is morally wrong. It is wrong to use the coercive instruments of the state to tax the waitress making $5.00 an hour (or the basketball star making millions, for that matter) to rescue highly paid auto workers, their managers, and their shareholders/bondholders. It would be no more ethical to issue a Treasury bond- and so incur a debt on people not yet born. It is simply not a legitimate exercise of government power, which people of my persuasion believe is there to protect the shores, maintain a police force, and maintain a judicial system. Beyond the moral case, bailing out failed companies is simply bad economics. It amounts to the allocation of capital by government, which, as you can imagine, does not make its decisions on such matters based purely, or even primarily, on what makes economic sense. (Can you imagine the shenanigans that Sleazebag Bill and his lovely lil' wife whose "friends" slipped her a cool $100,000 under the guise of rigged commodity schemes would play if they had that that power? Check out Indonesia if your imagination falters.) Capitalism imposes a sometimes harsh discipline on businesses, but the economic consequences of using government to moderate that discipline will be far worse than letting bankruptcies run their course. Bankruptcies, while an unpleasant side of economic life, serve their purpose well. True, with C, the government made out well financially. It also set, or at least solidified, a bad precedent by which financially distressed companies can use the political system- and lining the pockets of sleazy politicians like Sukarno and the Clintons- when they fail to meet the test of the market. I for one will never accept the idea the huge corporations should have access to government bailouts, while the little guy gets to see the bankruptcy judge- or would you also propose bailing out the corner grocery store when it fails? Said littleguy, or course, gets taxed to pay for these bailouts. <<Therefore the Govt. will have to do it>> Check your premises. For the right price, assets in Asia will be bought up- in fact, that is happening. I do not wish to discuss the IMF bailouts, but suffice it is to say that serious, intelligent spokesmen for the cause of free minds and free markets have addressed the evils of IMF bailouts. And no, governments may be careful about whom they bail out, but political influence will always compete with sound economic judgement in their decision making process (yeah, that can also affect Citigroup's calculus, but Citigroup must answer for its actions based on economic values). Government decisions on the allocation of capital will reward FOG (Friends of Government) and punish the "outs". I suggest you learn more about the dynamics of capitalist systems. I am certainly not the most articulate spokesman for liberty, but I could point you in a constructive direction if you want to continue this dialog privately. Regards, Larry