Capital comes from saving. Capital is used to invest. Investment creates jobs. Jobs allow people to save more. More capital is invested. More jobs are created. And so on and so forth.
Its not that people shouldn't spend, its that they should spend on the things they need the most. When they spend on useless shit, this is malinvestment. Malinvestment is when you spend wealth on items that provide little value to society. When investment is directed towards items that provide little value to society, the business that creates these items will go bankrupt as they are not able to sell these items in the market place. This is the correction that occurs within the free market that ensures only items that provide value to society are manufactured and sold. How do you know if your product that you have invested your capital provides value to society? Well, society provides value back by purchasing your item. The profit you retain is society saying to you "hey, you did something great for society, do more great things!" If you take advantage of this, you can create more and more value to society. This is how corporate giants like RIM, Apple, Microsoft, and Google do it. If you don't take advantage of this, eventually your business will go bankrupt, and should be allowed to go bankrupt to purge society of your malinvestment. This is how Wall Street and Detroit have done it.
Government has a habit of interfering with this natural cycle under the guise of "saving jobs", even if these jobs provide no real value to society. When government does this, it prolongs the correction and makes it worse as they need to move capital from those who invest their wealth properly, to those who have proven they don't. In this way, government makes those who best provide value to society poorer and less able to invest their earned value into more places they deem profitable. So instead government takes wealth from those that know how to create it and places it in the hands of people who have no idea how to create wealth and then they distribute it where they deem to, or their lobbyists talk them into.
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11 comments:
HiiiiiI! The Chrysler bailout was successful!
Compared to what?
And they're back at the trough looking for more money. Chrysler is backed by an owner that is in no short supply of cash. If Chrysler is such a worthy investment, why don't their owners bail them out?
They paid back the loans in 5 years and posted profits almost within the same period. Success.
1: You do not know what would've happened to Chrysler if they had been allowed to go bankrupt.
2: You haven't addressed why if Chrysler's owner will not bail them out, the tax payer should.
3: Ford is backing out of its request for tax payer money, kudos to them.
"1: You do not know what would've happened to Chrysler if they had been allowed to go bankrupt."
Nor do you. Either way, it doesn't change the fact that there is a successful example of a bailout.
"2: You haven't addressed why if Chrysler's owner will not bail them out, the tax payer should."
I have said it over and over again. Jobs. You just aren't reading with an open mind.
"3: Ford is backing out of its request for tax payer money, kudos to them."
But not because bailouts are inherently a bad idea, but because 700 billion has already be marked to bailout the financial companies. Ford has probably realized that there isn't a lot of money to go around.
"Nor do you. Either way, it doesn't change the fact that there is a successful example of a bailout."
Yes, therefore government should bail-out all failing companies based on this one successful decision.
"I have said it over and over again. Jobs. You just aren't reading with an open mind."
So the government should prop up jobs that the market (society) has deemed to provide no value, and not only that, but they should invest in a company its owner doesn't even want to invest in? Remember, profit occurs when society determines you have created something of value. Chrysler's owners have obviously determined Chrysler cannot provide a decent return on investment, and therefore provides nothing of value to society. I mean seriously, Chrysler vehicles would not be missed, by anyone.
"But not because bailouts are inherently a bad idea, but because 700 billion has already be marked to bailout the financial companies. Ford has probably realized that there isn't a lot of money to go around."
You do understand that there's as much money to go around as the government deems there to be right? There's still $15 billion left from the first $350 billion, plus the second $350 billion that hasn't been spent yet; oh and they can print more if they need to. I'm not sure they can borrow much more, but I'm sure they'll try. Its not as if they're working in a system where they're restricted in how many dollars they give away. Thankfully a couple of repubs are doing the right things for once and are planning on filibustering this $15 billion bill anyway.
I'm not sure what Ford's deal is, but I figure some kind of backroom deal was made with GM and Chrysler.
"Yes, therefore government should bail-out all failing companies based on this one successful decision."
What a silly conclusion.
"So the government should prop up jobs that the market (society) has deemed to provide no value, and not only that, but they should invest in a company its owner doesn't even want to invest in? Remember, profit occurs when society determines you have created something of value. Chrysler's owners have obviously determined Chrysler cannot provide a decent return on investment, and therefore provides nothing of value to society. I mean seriously, Chrysler vehicles would not be missed, by anyone."
Again, you are overemphasized "shitty cars". They were profiting before the double whammy. Of course no one is going to want a fuel-inefficient car when oil prices are high!
"You do understand that there's as much money to go around as the government deems there to be right? There's still $15 billion left from the first $350 billion, plus the second $350 billion that hasn't been spent yet; oh and they can print more if they need to. I'm not sure they can borrow much more, but I'm sure they'll try. Its not as if they're working in a system where they're restricted in how many dollars they give away. Thankfully a couple of repubs are doing the right things for once and are planning on filibustering this $15 billion bill anyway."
No, they were asking for 15 billion in addition to the 700. That 700 can only be spent on financial companies (I'm operating on the assumption that everyone thinks inflation is a bad thing, thanks).
Those couple of filibustering republicans will be defeated by a couple of Republicans whose constituents are complaining about the economy or by a couple of Republicans who are willing to wheel and deal their votes for other concessions. That's how politics works.
"What a silly conclusion."
Yep and its all yours.
"Again, you are overemphasized "shitty cars". They were profiting before the double whammy. Of course no one is going to want a fuel-inefficient car when oil prices are high!"
Their shipping jobs over seas was the only thing keeping them afloat.
"That 700 can only be spent on financial companies"
Bush and Paulson can spend that on whatever they want. In fact, with the bailout failing, the fascist Dems are calling for Paulson to permit them to spend money from the 700 on the big three. Democracy turned down their request, so they go to the money Czar to over rule the public, GREAT!
"Those couple of filibustering republicans will be defeated by a couple of Republicans whose constituents are complaining about the economy or by a couple of Republicans who are willing to wheel and deal their votes for other concessions. That's how politics works."
You obviously don't know how a filibuster works then. AND republicans generally represent districts in the south where people don't make as much as the union workers in Detroit. Not only that, the bill did fail in the senate. The reason given by the repubs was that the union wasn't willing to lower wages to match those of the workers in toyota and honda factories in the south. Guarantee if you took a poll of workers in detroit, they would've taken the wage cuts to keep their jobs, most people would if they knew their employer was going bankrupt otherwise.
"Their shipping jobs over seas was the only thing keeping them afloat."
Justify creating slaves by paying slaves. I love it.
"Bush and Paulson can spend that on whatever they want."
Really? They can just spend it on anything they want? Even when it is suppose to be spent on the financial companies?
"In fact, with the bailout failing,"
Loans for the car companies; probably a bailout for the financial companies.
"the fascist Dems are calling for Paulson to permit them to spend money from the 700 on the big three."
Um, at least the Dems' central reason for action is nationalism, they ain't "facists". Look it up.
"Democracy turned down their request,"
No, an inability to loan that much money turned down their request. 700 is huge. It is almost as much as is spent on social services.
"so they go to the money Czar to over rule the public, GREAT!"
I think "Czar" is an exaggeration at this point.
"Justify creating slaves by paying slaves. I love it."
No, just explaining how the Big 3 have been able to stay "competitive".
"Really? They can just spend it on anything they want? Even when it is suppose to be spent on the financial companies?"
You should read the news more. People are up in arms because they haven't made a decision yet on if they are going to do this or not. The repubs are being painted as being the bad guys for representing their constituents for once and turning down the bailout, and the nationalist dems want the decider to decide to use the bailout money.
"No, an inability to loan that much money turned down their request."
Well the government didn't have the 700 billion either, they're just going to print or borrow it. They could have done the same with the 14 billion, but the senate voted it down. The people spoke.
"I think "Czar" is an exaggeration at this point."
Obama should stop exaggerating.
"No, just explaining how the Big 3 have been able to stay "competitive"."
With a positive spin. That's called indirectly supporting wage slavery.
"You should read the news more. People are up in arms because they haven't made a decision yet on if they are going to do this or not. The repubs are being painted as being the bad guys for representing their constituents for once and turning down the bailout, and the nationalist dems want the decider to decide to use the bailout money.
"
The Republicans could filibuster it, but I don't think they really believe their own rhetoric. They know how money works. The auto jobs create tens of millions of jobs for Republicans and Democrats a like. And no, the bailout is not a question of nationalism. It did not start out as a nationalistic sentiment. Only an economic one.
"Well the government didn't have the 700 billion either, they're just going to print or borrow it. They could have done the same with the 14 billion, but the senate voted it down. The people spoke.
"
But they haven't done that yet, eh? If they borrow it, then that money is real money and hence WILL NOT CAUSE INFLATION>
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