Right Wing Nut House

If you’ve been reading a lot about the economic situation here and around the world, you can’t help but be struck by how terrible the future looks to a lot of “experts.”

Is this a function of the media realizing that apocalyptic news sells and less dire forecasts are given short shrift? Or is there really a consensus that we are in for horrible times?

I honestly don’t know enough to say one way or another. Here at home, the massive trouble that CITI is in promises to give us the biggest bailout yet. And there are some “experts” saying that the entire financial industry of the United States will soon be nationalized:

It’s not preferable, but all major U.S. financial companies will eventually be under government control because the alternative is so much worse, Hugh Hendry, chief investment officer at hedge fund Eclectica Asset Management, said Friday.

“All financials will be owned by the U.S. government in a year,” Hendry said. “I bet you.”

Nationalizations take dramatic losses from the private sector and places them on the larger balance sheet of the public sector, he said.

“It’s not good,” but society is vulnerable and society is going to have to intervene, Hendry said.

I don’t know Mr. Hendry from Adam but CNBC thinks enough of him to quote his prediction and include a video of his remarks. Does that make him an expert? Got me.

And its even worse overseas - if you believe the foreign press. Iceland is all but bankrupt, the product of their state bank going belly up. But what about Great Britain?

The scale of our problems has still not been understood. In essence the domestic banks are largely bust. The Government’s £500 billion bailout plan is primarily designed not to keep banks lending to small firms and to homebuyers but to prevent an unimaginable financial calamity.

Banks provide the very foundations and plumbing of the entire economy. A failure of confidence in them could still bring the entire capitalist edifice tumbling down.

It suits ministers, however, to maintain the bogus claim that the bailout is about sustaining bank lending. True, that would be a helpful side-effect, but is not the main purpose. Indeed, a gentle and gradual reduction in the indebtedness of individuals and companies is still needed.

At the risk of hyperbole, we should not be worrying about whether this is going to be a thin Christmas for retailers (it is), but whether Britain and the West are about to plunge into a years-long economic Dark Age - complete with mass unemployment and social unrest.

I don’t think you can get more depressing than that. But how true is it? The Times is a respected publication and all we have to go on if we want to glean the truth out of all this is the reputation of the media outlet from which we are getting this information.

No one denies that there is a crisis. No one is underestimating the potential for catastrophe. My problem - our problem - is that in this, a time when honest appraisals of the situation are needed, we have little or no confidence that our newspapers, radio programs, or the cable newsnets are delivering what they are supposed to be giving us; the facts of the situation and not trying to scare us into buying their product or watching their programs by hyping the bad news.

I think things are as bad as many are saying. But then we get a piece like this from Daniel Gross at Slate.com:

All this historically inaccurate nostalgia can occasionally make you want to clock somebody with one of the three volumes of Arthur M. Schlesinger Jr.’s history of the New Deal. The credit debacle of 2008 and the Great Depression may have similar origins: Both got going when financial crisis led to a reduction in consumer demand. But the two phenomena differ substantially. Instead of workers with 5 o’clock shadows asking, “Brother, can you spare a dime?” we have clean-shaven financial-services executives asking congressmen if they can spare $100 billion. More substantively, the economic trauma the nation suffered in the 1930s makes today’s woes look like a flesh wound.

“By the afternoon of March 3, scarcely a bank in the country was open to do business,” FDR said in his March 12, 1933, fireside chat (now available on a very cool podcast at the Federal Deposit Insurance Corp.’s Web site). In 1933, some 4,000 commercial banks failed, causing depositors to take huge losses. (There was no FDIC back then.) The recession that started in August 1929 lasted for a grinding 43 months, during which unemployment soared to 25 percent and national income was cut in half. By contrast, through mid-November 2008, only 19 banks had failed. The Federal Reserve last week said it expects unemployment to top out at 7.6 percent in 2009. Economists surveyed by the Philadelphia Federal Reserve Bank believe the recession, which started in April 2008, will be over by next summer. (Of course, back in January the same guys forecast that the economy would grow nicely in 2008 and 2009.) But don’t take it from me. Take it from this year’s Nobel laureate in economics. “The world economy is not in depression,” Paul Krugman writes in his just-reissued book The Return of Depression Economics. “It probably won’t fall into depression, despite the magnitude of the current crisis (although I wish I was completely sure about that).”

Is Gross just more levelheaded than the others? He makes a convincing case but so do some of those predicting Armageddon.

I believe this is a crisis of confidence in our media - a result of many years of being conditioned by their biases, by their laziness to remove those biases, and by the nature of the news business itself and what it has become. The left likes to talk about the “corporate media” but it’s actually worse than that. Over the last 30 years, there has been a consolidation of media outlets into gigantic conglomerates while the actual number of independent media channels has dropped precipitously.

It isn’t that they’re “corporate” that makes them suspect, or more accurately, not trustworthy. It is that there are so few alternatives out there. I have no doubt that most publications and TV networks actually make an effort to deliver the news as accurately as they are able - given constraints about needing to turn a profit and stand out from the crowd. But that doesn’t change some basic facts. An empire like Rupert Murdochs’ was unthinkable 30 years ago. Every town over 50,000 or so used to have 2 or even 3 newspapers published daily. (50 years ago it was 4 or 5 dailies). If you want to listen to the radio today, you have 3 or 4 huge companies that own the overwhelming majority of popular local stations. Television has a handful of owners despite hundreds of stations.

No wonder the news sounds so much the same.

That doesn’t solve our problem of knowing who to believe, who to trust in this crisis. I suppose we have to make an effort to get as much information as we can and use our own best judgment as to what we should take away from each news or opinion article we read. This is probably good advice as it relates to any news we choose to digest be it on the internet or through some other media outlet.

But somehow, I can’t escape the feeling that our media is letting us down in this crisis and that I am probably not the only one disappointed in their performance so far.

This blog post originally appears at The American Thinker 

With all this free money floating around and every CEO worth his salt lining up at the government trough ready to bury their faces and feed heartily on the taxpayer’s generosity, I think it’s time we began to look around and see what other companies - past and present - we should also claim to be “Too Big To Fail!”

For instance, a prime candidate for a government bailout would have to be John Jacob Astor’s American Fur Company. Sure it’s been bankrupt for 160 years but I didn’t see any limitation attached to that bailout bill, did you? Hell, if the Medici’s had an American subsidiary we could probably bail out that Renaissance era company too.

The fact is, the American Fur Company failed and it’s your fault. Tell the truth now, when was the last time you bought a beaver hat? Don’t you realize that thousands of fur trappers have been thrown out of work because you selfishly decided to be a slave to fashion rather than thinking of those trappers, trading post managers, export facilitators, dock workers, and ship captains who lost their jobs as a result of the switch from beaver pelts to silk in hat making?

And, of course, you know where that silk is coming from, right? This may have been the first instance of a Chinese attack on our economy. Haberdashers, seduced by cheap imports of silk, ought to be ashamed of themselves. The American Fur Company must be saved else we will lose our competitive edge in the world’s fur trade. Then there are the national security implications which are just too horrible to contemplate.

So we should give some of that $700 billion in bailout money to the descendants of John Jacob Astor and power up the fur trading business again so we can all buy a stinky, misshapen, butt-ugly hat made from the skin of cute little beavers who are trapped in steel jaws that, when sprung, clamp down on their leg, forcing the helpless creatures to either gnaw off their own limb or die a slow death by starvation. But if it will save American jobs, it will be worth it, right?

Similarly, we could save the “Big Three” American automobile manufacturers who have run into a skein of bad luck recently. Of course, that streak of bad luck has lasted 35 years and for all practical (and aesthetic) purposes, the US auto industry has been dead since then. But if we’re going to save The American Fur Company, we might as well try and pump some life into the moribund car manufacturing sector, right?

Actually, this might prove to be a bigger trick than trying to make beaver hats all the rage again. This is because there is a reason that Detroit has lost its positions as the Mecca of car manufacturing; they make sucky cars that no one wants to buy.

The Big Three can complain all they want to about the high cost of union benefits, unfair competition (Translation: It is unfair the Japanese are smarter, more innovative, and more quality conscious than we are.), and “green” regulations that add cost to their products. They are basically calling the American consumer stupid for actually wanting nice looking, trouble free, fully functional, safe, and adequately serviced autos. The gargantuan salaries paid to auto execs have not produced one single model that can outsell the Toyota Corolla.

For all their redesign, retooling, rethinking, and re-inventing the “corporate cultures” in Detroit, they have accomplished nothing in their efforts to compete with Japanese manufacturers. The excuse used to be that their plants were so much newer than ours. That is no longer the case as the average American auto assembly plant is almost just as recently built as the average Japanese plant. It’s not the age of the plant that matters anyway. It’s how the cars are built. And the Japanese have embraced new techniques, new technologies that give them a leg up in the competition.

Then it was the excuse that Japanese workers make much less than American unionized workers. That may have been true at one time but today, it is very close and getting closer all the time. The difference today is almost entirely due to health and pension benefits. But instead of losing market share because of this, the Japanese have been steadily increasing their sales numbers.

Face it. Detroit is in a fix of its own making. Shortsighted managers, unions who still believe that benefit packages should reflect 1970’s realities, a stubborn resistance to higher CAFE standards that would allow them to compete with the fuel efficient Japanese cars, and an inability to figure out how to make a decent profit on smaller cars. The fact that the enormous falloff in sales of SUV’s and other big car, high profit models was entirely predictable, the Big Three got caught with their pants down when gas prices got so high, people were paying a third of their weekly paycheck to fill up.

Despite all - failure at every level including executive, manufacturing, marketing, and labor - we are now supposed to rally around the cry “Too Big to Fail!” and hand these incompetents $25 billion (for now - more later, I promise you).

I say no way.

President-elect Obama wants to nationalize the auto industry:

Top advisers to President-elect Barack Obama are helping to draft an auto industry rescue plan that would bring new government oversight, including the possibility of an auto czar who could ensure the money was being used wisely.

Aides said Obama is also open to an oversight board that would perform the same function as one individual. The proposals come as the estimates of the cost to fix Detroit’s three largest automakers continue to mount.

“Certainly he wouldn’t believe in it being a blank check,” said an Obama adviser, who spoke on condition of anonymity due to not being authorized to speak publicly on the topic. “He wants oversight to be making sure the auto companies have figured out how to become viable, ongoing concerns.”

Let’s be clear here. This would not be a “temporary” solution. Government “ensuring the money is spent wisely” sounds an awful lot like being able to approve or veto business decisions. If that’s the case, why shouldn’t the government be able to fire the boobs who are currently in charge and replace them with people they think could do a better job?

The point isn’t how much money they need or how much government control would be involved. The fact is that these companies are as dead as John Jacob Astor’s American Fur Company and for similar reasons; an inability to adapt to changing market conditions and create a product that enough people want to buy in order to make the companies profitable. There’s a reason no one buys beaver hats anymore. And its the same reason that no one wants an underpowered, ugly, cramped Chevrolet Aveo.

I feel sorry for the thousands of workers who would lose their jobs if these companies went belly up. But the fault does not lie with the American taxpayer who those representing the workers and executives of failed companies want to saddle with their inadequacies.

We aren’t going to start the fur trading industry again by asking taxpayers to fund a rebirth. Neither should we try and restart the American automotive industry by asking taxpayers to save something that’s already dead.