It has been a year since the implosion of Charlotte-based Wachovia ended up with that banking giant being absorbed into Wells Fargo. Now two more blows may be in the offing. Bank of America, whose name is on everything from their Uptown Charlotte headquarters building to the Carolina Panthers' stadium, is seeking a new CEO. News Talk 1110 WBT is reporting that 98 percent of BoA's business comes from divisions headquartered elsewhere. What's more, the heads of those divisions have no ties to The Queen City. Add to that, the fact that CEO Ken Lewis is stepping down, and it is feared that a new CEO will move the corporate nerve center out of town.
Then today, US Airways CEO, Doug Parker, was in town just a few days after announcing a major downsizing of both routes and personnel. Service is being scaled back, and some cities like Colorado Springs and Wichita, will be eliminated from the airlines flights altogether. There will also be 1000 jobs around the country vaporized by the restructuring. As I have mentioned in the past, US Airways holds a near monopoly on air travel into and out of Charlotte, with other carriers holding a small share of the traffic.
Mecklenburg County has a current official unemployment rate of over 11%. If worst case scenarios become reality for these two major employers, Charlotte and the entire Metrolina region may have an even deeper hole to dig out of. This is a very nice city. It would be a shame to see this occur. As other cities without a great amount of economic diversity, Charlotte's crown as a major banking center may end up being its undoing.
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Tuesday, November 03, 2009
Monday, August 24, 2009
Cash For Clunkers - A Bad Idea
I will admit that I am not an economist, so those far wiser than me can likely refute some of what I say here. Still, with the CARS program, commonly known as "Cash for Clunkers", ending today, it seems a good time to reflect on this government stimulus plan.
When the government bailout of General Motors and Chrysler Corporation took place, I was skeptical. After all, these are companies that had failed for a variety of reasons, most of them self-inflicted. So while I understood the need to try to save jobs, why reward these firms from the public till, for poor management decisions? We had already bailed out the banks, who turned around and rewarded their executive teams with big bonuses from the emergency taxpayer monies. Now we repeat the bailouts for GM & Chrysler?
Then there is the fact that even if these companies survive in the short term, what will change in the long term? What would they do differently than what they had done to arrive at such a sorry state of affairs? The real problem is people are not buying their products in sufficient quantities to sustain their businesses. With unemployment soaring, even if people want to purchase one of their cars, how can they do so? It is a bigger problem than paying the current bills coming due.
So now we come to the CARS program. I understand the desire of the government to get us all into more fuel efficient automobiles. I also understand the fact that this program creates a short-term spike in demand, which is good for the economy in general, and for the automakers specifically. It also is one stimulus plan that actually addresses the demand side of the equation and does something for the average person. But at what cost?
As a matter of principle, I am opposed to taking tax money from all of us to subsidize the purchase of new cars for a few. Why should any of us pay for our neighbor's new vehicle?
I also believe that the program is flawed in that it doesn't have any requirement that the rebates apply only to cars manufactured in the United States. We need to stimulate the economy at home before sending the tax monies to companies in Japan, Korea, and Europe. Sure, our economies are all interconnected, but for our public tax dollars, let's make sure they go to work at home before sending them with an express ticket to Tokyo.
Another issue is that many of the cars deemed to be "clunkers" are perfectly serviceable autos that are much better than many folks can afford to purchase. It seems extremely wasteful to purposefully destroy a perfectly good car that could help someone get to their job. It would be better if these vehicles were donated to charity rather than ruining their engines and crushing them. Sure, it doesn't get them off the road, but they won't last forever anyway. In the meantime, they could do much good.
And what about the parts market that will be negatively impacted by this destruction? Used replacement parts are one way that families can save money on repairs. Is this right to destroy what may be difficult to locate parts? This can conceivably create price inflation for those parts as a function of a more limited supply.
It isn't the proverbial bed of roses for those taking advantage of the program either. In hard economic times, how many people who have their cars already paid for, will rush out to buy a new one under this program, only to lose their jobs and be left without any car at all. Even if they don't become unemployed, a big downside to this is that instead of having a perfectly good auto with no payments and lots of good miles left in them, people now have locked themselves into a new monthly payment.
Then there is the fact that while the program was running, there was an expected spike in demand. But this is just a temporary spike. If someone was going to buy, they would likely do it during the program, and not wait until it expires. Artificially induced demand dries up once the stimulus for the demand ceases to exist. Will people also hold back on purchases waiting for an encore of the program?
Overall, I have come to the conclusion that this is a misguided program that likely began with good intentions, but the net result is not worth the cost.
When the government bailout of General Motors and Chrysler Corporation took place, I was skeptical. After all, these are companies that had failed for a variety of reasons, most of them self-inflicted. So while I understood the need to try to save jobs, why reward these firms from the public till, for poor management decisions? We had already bailed out the banks, who turned around and rewarded their executive teams with big bonuses from the emergency taxpayer monies. Now we repeat the bailouts for GM & Chrysler?
Then there is the fact that even if these companies survive in the short term, what will change in the long term? What would they do differently than what they had done to arrive at such a sorry state of affairs? The real problem is people are not buying their products in sufficient quantities to sustain their businesses. With unemployment soaring, even if people want to purchase one of their cars, how can they do so? It is a bigger problem than paying the current bills coming due.
So now we come to the CARS program. I understand the desire of the government to get us all into more fuel efficient automobiles. I also understand the fact that this program creates a short-term spike in demand, which is good for the economy in general, and for the automakers specifically. It also is one stimulus plan that actually addresses the demand side of the equation and does something for the average person. But at what cost?
As a matter of principle, I am opposed to taking tax money from all of us to subsidize the purchase of new cars for a few. Why should any of us pay for our neighbor's new vehicle?
I also believe that the program is flawed in that it doesn't have any requirement that the rebates apply only to cars manufactured in the United States. We need to stimulate the economy at home before sending the tax monies to companies in Japan, Korea, and Europe. Sure, our economies are all interconnected, but for our public tax dollars, let's make sure they go to work at home before sending them with an express ticket to Tokyo.
Another issue is that many of the cars deemed to be "clunkers" are perfectly serviceable autos that are much better than many folks can afford to purchase. It seems extremely wasteful to purposefully destroy a perfectly good car that could help someone get to their job. It would be better if these vehicles were donated to charity rather than ruining their engines and crushing them. Sure, it doesn't get them off the road, but they won't last forever anyway. In the meantime, they could do much good.
And what about the parts market that will be negatively impacted by this destruction? Used replacement parts are one way that families can save money on repairs. Is this right to destroy what may be difficult to locate parts? This can conceivably create price inflation for those parts as a function of a more limited supply.
It isn't the proverbial bed of roses for those taking advantage of the program either. In hard economic times, how many people who have their cars already paid for, will rush out to buy a new one under this program, only to lose their jobs and be left without any car at all. Even if they don't become unemployed, a big downside to this is that instead of having a perfectly good auto with no payments and lots of good miles left in them, people now have locked themselves into a new monthly payment.
Then there is the fact that while the program was running, there was an expected spike in demand. But this is just a temporary spike. If someone was going to buy, they would likely do it during the program, and not wait until it expires. Artificially induced demand dries up once the stimulus for the demand ceases to exist. Will people also hold back on purchases waiting for an encore of the program?
Overall, I have come to the conclusion that this is a misguided program that likely began with good intentions, but the net result is not worth the cost.
Wednesday, June 03, 2009
Merciful Shopkeep
A store keeper in Shirley, New York showed extreme compassion for the man who tried to rob him. The robber came in wielding a baseball bat, but when Mohammad Sohail pulled out a gun, the man began to cry and plead for mercy. He told Sohail that he had no money and was just trying to feed his family. Sohail gave the man $40 and a loaf of bread with the condition that he never rob again. He also doesn't plan to press charges if police find the robber.
While the robbery was wrong, this is just another tale of hardship from the economic disaster we are dealing with. For the full story, CLICK HERE.
While the robbery was wrong, this is just another tale of hardship from the economic disaster we are dealing with. For the full story, CLICK HERE.
Thursday, December 11, 2008
Hold On!
Well, the UAW and the GOP members of the United States Senate stared each other down tonight, and neither side blinked, thus killing the bridge loans passed in the House today. I fear tomorrow's trading on Wall Street is going to be a free fall. Could the Dow drop to 5000 or below? How many jobs will be lost in the wake of this? It's not pretty. I don't believe the automakers deserve the loans, but for the sake of the greater economy, I think they are necessary to avoid an even bigger disaster than we already have. This is not a pretty picture.
Wednesday, November 19, 2008
Have They Killed The Goose?
A fable attributed to Aesop, from the Sixth Century B.C.E. tells the story of a couple who had a goose that laid golden eggs. They decided to kill the goose to get all the eggs inside it out at once, rather than waiting for it to lay them, only to find no eggs inside the goose. Oh, if only the greedy captains of American industry had heeded the wisdom of this ancient Greek story teller.
First it was investment banks and bad mortgages. Now we find the so-called "Big Three Automakers" on the verge of collapse. Though decades of poor management, taking multiple givebacks by the United Autoworkers Union, building cars that were sub par, and shipping American jobs to foreign nations, these companies find themselves in serious trouble, and could be the the thing that tips us into a major financial depression.
The inept, greedy CEOs of General Motors, Chrysler, and Ford flew in their mulitimillion-dollar private jets to sit in front of our representatives in Congress with their hands out, asking we, the American people, to give them money we don't have, from the public coffers. We find ourselves in a quandry. If these companies collapse, who will build our tanks and other military vehicles? Toyota?
I don't believe we can afford to let these companies collapse, only because of the economic tsunami that would ensue. However, any aid should be predicated upon ousting these inept management teams, requiring the return of jobs to the United States, and a clear plan to bring these companies back to profitability and repay the American taxpayer.
It seems that the entire house of cards is falling apart rapidly. I not only fear for our long term future, but for our short term survival as well. I have never felt this pessimistic about the future of this nation and its people. Many people pointed to the sudden collapse of the Soviet Union in 1989 as evidence of the flaws of the Communist economic system. I find it entirely feasible that we could see a similar collapse of the capitalist system of the U.S., and very rapidly also. This consumer-driven economy cannot forever sustain itself if people don't have jobs.
These clueless executives are more interested in getting free government money to sustain their own lavish lifestyles while changing nothing; rather than creating fundamental change in the way business is done in this country. Mr. Obama, I fear you have been dealt the biggest mess of any incoming president since Franklin Roosevelt, and perhaps since Abraham Lincoln. America is sending you to The White House to effect change. We have never needed it more.
First it was investment banks and bad mortgages. Now we find the so-called "Big Three Automakers" on the verge of collapse. Though decades of poor management, taking multiple givebacks by the United Autoworkers Union, building cars that were sub par, and shipping American jobs to foreign nations, these companies find themselves in serious trouble, and could be the the thing that tips us into a major financial depression.
The inept, greedy CEOs of General Motors, Chrysler, and Ford flew in their mulitimillion-dollar private jets to sit in front of our representatives in Congress with their hands out, asking we, the American people, to give them money we don't have, from the public coffers. We find ourselves in a quandry. If these companies collapse, who will build our tanks and other military vehicles? Toyota?
I don't believe we can afford to let these companies collapse, only because of the economic tsunami that would ensue. However, any aid should be predicated upon ousting these inept management teams, requiring the return of jobs to the United States, and a clear plan to bring these companies back to profitability and repay the American taxpayer.
It seems that the entire house of cards is falling apart rapidly. I not only fear for our long term future, but for our short term survival as well. I have never felt this pessimistic about the future of this nation and its people. Many people pointed to the sudden collapse of the Soviet Union in 1989 as evidence of the flaws of the Communist economic system. I find it entirely feasible that we could see a similar collapse of the capitalist system of the U.S., and very rapidly also. This consumer-driven economy cannot forever sustain itself if people don't have jobs.
These clueless executives are more interested in getting free government money to sustain their own lavish lifestyles while changing nothing; rather than creating fundamental change in the way business is done in this country. Mr. Obama, I fear you have been dealt the biggest mess of any incoming president since Franklin Roosevelt, and perhaps since Abraham Lincoln. America is sending you to The White House to effect change. We have never needed it more.
Monday, September 29, 2008
Failed Oilman Officially Nation's Worst President!
Sometimes the end can come swiftly. I am hoping we are not on the precipice of the end of the United States as we have known it. This abject and total failure of a President who has occasionally sat in the Oval Office over the past eight years has driven the nation into massive debt when he attacked and occupied the wrong nation; gutted civil liberties of American citizens; and now has misled us to the verge of our entire economic system going down and taking us all with it.
Now while I know Bush didn't do it all by his ignorant little self, it has been said when the team is losing, the coach takes the blame. And Bush has been much more than a coach, but more of an active participant, instigator, and cheerleader for the failed policies of his administration.
Now I am no economist, so perhaps the greedy investment bankers have gotten us to the point where without government (us) bailing them out, the economy could sink into the abyss. Or perhaps it is more of Bush's scare tactics, the same tactics he used to convince Congress that we should invade Iraq. The same scare tactics used to spy on innocent Americans. The same scare tactics used to kill habeas corpus and to put people in prison with no charges, no legal representation, and no date for a hearing or release. Maybe the Bush who cried wolf is partially right this time, but who knows?
The Republican drive to deregulate everything in sight, including these investment banks, has led us to this point. When the history of these times is written, I believe it will make an interesting case study as to how quickly a powerful nation like the United States imploded. I also believe history will record that the Bush administration was not only worse than that of Herbert Hoover, but will rank at the bottom with that of James Buchannan who saw the republic disintegrate as states began to secede from the union, and civil war broke out.
It was largely deficit spending in an arms race that led to the demise of the Soviet Union. I don't think these United States are far from a similar fate themselves.
Sadly, despite Bush's claim that Al Qaeda hates us for our freedom, that is not the problem. Do you think Osama bin Laden was sitting around Tora Bora one day and happened to read the Bill of Rights and think, "Man I hate these people for this. Let's attack them!"? The 9/11 attacks on America were targeted at our economy as much as anything else. The Bush war deficits and the greed of these capitalists have handed the victory to bin Laden. Game over. Please insert $700-Billion to continue playing.
As for today's vote in the House of Representatives to deny the passage of the bailout bill, I believe it to be one of those instances of even some of those members voting against it were hoping someone else would vote for it. They are too concerned with their own jobs to worry about yours and mine. When it gets down to it, if we enter another Great Depression, it is those of us who did nothing wrong who will pay the price. It will be our children and grandchildren who will pay the price; and who will be left to figure out how to fix the mess we are leaving behind.
Regardless of the outcome we have seen that a purely socialist economy doesn't work, and now we see the same thing about an unregulated capitalist economy. As I have often said, some things work better as collectively-provided services (e.g. police, fire protection, air traffic control, national health care, etc.) The unfettered capitalist model eventually destroys the nation by taking from the middle class and redistributing it to the top, until the entire top heavy mess collapses upon itself. If the economy collapses, that will make twice in a mere 79 years. Greed is its own undoing. Though I am an ardent critic of religion, there are some nuggets of wisdom in the various sacred texts. The New Testament book of I Timothy says that "the love of money is the root of all evil." I think we see some of that playing out right before our astonished eyes.
Now while I know Bush didn't do it all by his ignorant little self, it has been said when the team is losing, the coach takes the blame. And Bush has been much more than a coach, but more of an active participant, instigator, and cheerleader for the failed policies of his administration.
Now I am no economist, so perhaps the greedy investment bankers have gotten us to the point where without government (us) bailing them out, the economy could sink into the abyss. Or perhaps it is more of Bush's scare tactics, the same tactics he used to convince Congress that we should invade Iraq. The same scare tactics used to spy on innocent Americans. The same scare tactics used to kill habeas corpus and to put people in prison with no charges, no legal representation, and no date for a hearing or release. Maybe the Bush who cried wolf is partially right this time, but who knows?
The Republican drive to deregulate everything in sight, including these investment banks, has led us to this point. When the history of these times is written, I believe it will make an interesting case study as to how quickly a powerful nation like the United States imploded. I also believe history will record that the Bush administration was not only worse than that of Herbert Hoover, but will rank at the bottom with that of James Buchannan who saw the republic disintegrate as states began to secede from the union, and civil war broke out.
It was largely deficit spending in an arms race that led to the demise of the Soviet Union. I don't think these United States are far from a similar fate themselves.
Sadly, despite Bush's claim that Al Qaeda hates us for our freedom, that is not the problem. Do you think Osama bin Laden was sitting around Tora Bora one day and happened to read the Bill of Rights and think, "Man I hate these people for this. Let's attack them!"? The 9/11 attacks on America were targeted at our economy as much as anything else. The Bush war deficits and the greed of these capitalists have handed the victory to bin Laden. Game over. Please insert $700-Billion to continue playing.
As for today's vote in the House of Representatives to deny the passage of the bailout bill, I believe it to be one of those instances of even some of those members voting against it were hoping someone else would vote for it. They are too concerned with their own jobs to worry about yours and mine. When it gets down to it, if we enter another Great Depression, it is those of us who did nothing wrong who will pay the price. It will be our children and grandchildren who will pay the price; and who will be left to figure out how to fix the mess we are leaving behind.
Regardless of the outcome we have seen that a purely socialist economy doesn't work, and now we see the same thing about an unregulated capitalist economy. As I have often said, some things work better as collectively-provided services (e.g. police, fire protection, air traffic control, national health care, etc.) The unfettered capitalist model eventually destroys the nation by taking from the middle class and redistributing it to the top, until the entire top heavy mess collapses upon itself. If the economy collapses, that will make twice in a mere 79 years. Greed is its own undoing. Though I am an ardent critic of religion, there are some nuggets of wisdom in the various sacred texts. The New Testament book of I Timothy says that "the love of money is the root of all evil." I think we see some of that playing out right before our astonished eyes.
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