I was just re-reading my earlier post on What is Credit? when this piece of managerial brilliance crossed my desk – GMAC Adds Loans as U.S. Injects $6 Billion to Aid GM. Who else but GM could one depend on to provide a consistent farce?
There is little doubt in my mind that this company ought to go bankrupt (or be forced into bankruptcy – the management needs to be replaced. And the unions – well, forcing this company into bankruptcy might very well mean the loss of a great deal of jobs and the brinkmanship that they have played in this farce wouldn’t be more well recompensed) because it doesn’t seem that its management has a clue about what brought them to the brink in the first place or maybe even left them dangling over a precipice. What brought them to the brink in the first place is the dearth of, nay, absence of profit that the firm chalked up these past years – prudent firms grow profit and trim costs. GM on the other hand does the reverse. What pushed them over the edge is the fact that the a great number of that elusive group called the US consumer is strapped for cash, not credit worthy by reason of being neck deep in debt.
Therefore, GM has decided that its flagging fortunes will be rescued thus:
GMAC will now lend to vehicle buyers with credit scores of 621 or higher, compared with a previous standard of at least 700, according to a company statement. The higher threshold had excluded about 42 percent of U.S. consumers.
The company said it won’t finance
Or why the credit crunch of recent times and its solution(s) seem rather off base:
“There is a strange idea abroad, held by all monetary cranks, that credit is something a banker gives to a man. Credit, on the other hand,is something a man already has. He has it, perhaps, because he already has marketable assets of a greater cash value than the loan for which he is asking. Or he has it because his character and past record have earned it. He brings it into the bank with him. That is why the banker makes him the loan. The banker is not giving him something for nothing. He feels assured of repayment. He is merely exchanging a more liquid form of asset or credit for a less liquid form.”
Henry Hazlitt, Economics in One Lesson.
This is a fundamental issue of what Credit means – in so much as the lender of capital has something to give, the user of capital has also something to offer – this is a transaction of promises. Several aspects of our current situation follow a definition of credit apart from this fundamental transaction – in many aspects, our current situation can be ascribed to a focus on the mechanical aspects of credit transactions.
The solutions engaged in by the Fed also smacks of the same – printing out more money and asking (and when that fails, forcing) the banks to lend it. Lend it to whom? To those who need it (even to survive) or to those who have a track record of value creation? In so far as much, lending takes places or doesn
The meaning of Christmas:
Love, not life, is sacred; Love lends life itself.
Love beggars death in rejection
No greater Love than to envelop rejection, thus extinguishing
Then all birth redeemed, set free
Muse this most radical act: Love risked all,
Set twirling in the cold of one unexpected night.
Tags: Christmas Time, Meaning of Christmas
It is that time of the year where we chart through the snow… No, we never do that. But these are extraordinary times. So I share a couple of charts with you minus the commentary. The lack of commentary is part amazement and part “What the heck does this mean going forward?” – I
A news item today points to the return of an experiment in liberty – Milwaukee neighborhoods could print own money. I love it, absolutely love it.
Residents from the Milwaukee neighborhoods of Riverwest and East Side are scheduled to meet Wednesday to discuss printing their own money.The idea is that the local cash could be used at neighborhood stores and businesses, thus encouraging local spending. The result, supporters hope, would be a bustling local economy, even as the rest of the nation deals with a recession.
If it
