The Ostrich Head

Tokyo Electric Power: A history of lies, denial and safety infringements now leads to disaster

    At first it was minor damage.  Then the "possibility" of a release of small amounts of contaminated steam that posed "no significant health risk." 

    Now, as a third explosion rips through Tokyo Electric's reactors and a fourth one catches fire, the company and national authorities continues to deny that there's any significant risk.  They're a bunch of liars.

 

    This isn't new.  A radiation leak at a uranium processing plant in Tokaimura in 1999 that killed 2 and irradiated 600 had the public skeptical about whether Tokyo Electric actually took safety seriously.  Sure enough, in 2002 it came to light that Tokyo Electric Power Company had faked safety reports since the 1980s.  

    In one of the most shocking ones, brought to light by Wikileaks, the company injected air into the containment area of the Fukushima reactor (yup, the one now leaking like a sieve) to artificially lower the leak rate.

    Then in February 2003, eight workers were accidentally sprayed with radioactive water.  Oops.  Wrong hose.

    Senior management was shuffled around, the Chairman was forced out, and the company temporarily closed all 17 of its plants in 2003.

    … and nothing changed.

    This is nuclear power we're talking about.  Not some kid's fun ride that could hurt a dozen people and some bystanders. 

    So the company promised to clean up its act and be safe.  Sure.  For a whole year.

    One year later, in August 2004, blasts of radioactive steam killed four workers and severely burned 7 others.  But the company vowed to make sure its nuclear facilities were actually safe.  I mean, really, really safe.  Especially against radiation leaks in one of the most earthquake prone countries in the world.

    Then, come 2007, the largest nuclear reactor in the world was hit by an earthquake with magnitude 6.8.  That, on the logarithmic Richter Scale, means it was less than 1/100^th the size of the most recent 8.9 magnitude earthquake.  

    Once again, the plant sent plumes of contaminated steam into the air and spilled 317 gallons of contaminated water.  

    The president of the Japan Nuclear Technology Institute was quick to criticize Tokyo Electric: "The plant did an excellent job of ensuring the safety of the reactors."  Say what?  Oh, a minor earthquake the shut them down, caused a fire, and leaked radiation into the sea and atmosphere… ensured the safety of the reactors?

    But to his credit, he did question why Tokyo Power would build a reactor on a fault line.  I think in grade one in primary school my teacher said, "Now remember, children, ever build a nuclear reactor on a known fault line.  And if you do, make damn sure it's earthquake proof."  I think she added, "And don't build it near the coast in the path of tsunamis.  That's a Japanese word, so they must have a lot of them over there."

    Naturally, after the 2007 earthquake, the Japanese government set up a committee to set new guidelines to earthquake-proof the rest of Japan's nuclear reactors.  So the committee set guidelines that looked more stringent, but didn't affect any of the existing plants or force them to increase safety standards.

    One member of the committee, who in a very un-Japanese style outburst, resigned in disgust saying, "The new guidelines are very insufficient and have loopholes."

    His critics responded with their own detailed incident analysis: "The Kashiwazaki plant was just unlucky."

    It also resulted in 50 unlucky cases of water leakage, fire and other problems at the seven reactors.  Well heck, you can't get unluckier than building on an earthquake fault-line.

    Oh, except building in the path of a tsunami.

    Damn unlucky.  A tsunami hasn't ever hit Japan except for an unlucky one in 1993.  And another unlucky one in 1983.  And in 1952, 1946, 1923…  

    But the new guidelines simply ignored the possibility of luck and stuck to proper issues, with the attitude of crossing that bridge when it got washed away.

 

    But back to Tokyo Power and The Authorities…

    According to Cabinet Secretary Yukio Edano yesterday, there's little or no health danger from radiation outside the 12-mile evacuation zone. 

    This is slightly better than Tokyo Electric.  The only thing on its website that would make you even suspect there was a major problem was this little announcement:

At approximately 6:00am, a loud explosion was heard from within the
power station. Afterwards, it was confirmed that the 4th floor rooftop
area of the Unit 4 Nuclear Reactor Building had sustained damage.

 After usage, fuel is stored in a pool designated for spent fuel.
Plant conditions as well as potential outside radiation effects
are currently under investigation.

TEPCO, along with other involved organizations, is doing its best to
contain the situation. Simultaneously, the surrounding environment
is being kept under constant surveillance.

 

    Talk about forthcoming!

    Meanwhile, the USS Ronald Reagan, operating 100 miles away -- eight times as far as the evacuation zone -- had to reposition because crew members were exposed to radiation.  

    A reporter friend of mine fresh from Japan once told me, "You can call up a Japanese in an office building with smoke billowing out of his window and he'll still insist that there's no fire and everything's under control.

    Well everything seem to be under control right now, according to the authorities.  They may change their tune at the first sign of a mushroom cloud.  Maybe.

 

  Update:  Not an effing chance.  Now, far greater levels of radiation are being found in water and the government's telling people, "But it's still safe for you.  Just not for babies."  But this is a one off.  Apparently there was a natural phenomenon that caused this.  Yup, the Science Ministry blamed it on the rain.

 

    And to make sure people know they're in no real danger, they raised the decontamination threshold from 6,000 cpm to 100,000 cpm.  Say what???

    That's the equivalent of raising the safe blood alcohol content for driving from 0.06% to 1%.  It's ludicrous.  It's insane.  The lies and the coverups are getting worse.

    Two nuclear plant workers were hospitalized with radiation injuries.  One wonders if they had been within the decontamination threshold.  

For news on the coverup and how bad this is really going to get, have a look at http://thekeytoeternity.blogspot.com/2011/03/worlds-worst-nuclear-disaster-newly.html

 

    Second update:  The Japanese government 

SEC brings a harsh judgement against arms dealer Adnan Khashoggi

    Bad boy Adnan Khashoggi, the Saudi arms dealer who negotiated the arms sales to Iran in the Iran-Contra affair, has finally been brought to justice by the ever-vigilant SEC.

 

Let me give you some background:

    Having started his career as an honest businessman, brokering arms deals in the Middle East for Lockheed Martin, Raytheon, and Northrop-Grumman, and investing in diamond mining in the Central African Empire, Khashoggi became the world's richest man in the 1980s.  (It was his yacht below that was used in the James Bond film Never Say Never Again.)

    However, business wasn't always good.  His Triad Holding Company, for example, went bankrupt after he was indicted for using it to channel money for the Iran-Contra deal.  Fortunately, he made his $4 million bail thanks to his friend, Peter Munk, chairman of Barrick Gold.  Barrick Gold, which was founded by Khashoggi in the first place, is also deep into illegal government activity.  He still held onto his Barrick Gold shares though -- despite them being held as collateral for the arms deal.

    Business was good for a while, having helped out his good friend Imelda Marcos hide her gold and assets -- legally according to the verdict.

    Having got off that one, Khashoggi started another business, called GenesisIntermedia, a telemarketing company.  This was during the .com boom. 

    The stock was the best performer in 2000 despite losses of more than $17 million on just $229,000 revenue.   

    However, it wasn't the best performing stock for no reason.  And this is where Khashoggi began breaking the law.  Didn't see that coming did you?

 

    A well known financial commentator, Courtney Smith, helped push this stock on CNBC, Bloomberg, and elsewhere, for a tiny $1.1 million fee. 

    Having pushed the stock from $1 a share all the way up to $17, Khashoggi paid off some brokers to borrow his stock and lend it to Deutsche Bank Canada to the tune of $130 million.  (Yup, the very same company with internet revenues of less than half a million.)

    Under this scheme, Deutsche borrows the stock and pays Khashoggi the value of the shares.  Or, to put it another way, Khashoggi gets the cash for his shares without having to sell them and give away his game.

    After 9/11 his stock crashed and he owed Deutsche Bank Canada and other brokerages $130 million.  Naturally, GenesisIntermedia went belly up and Khashoggi made out like a Saudi oil tycoon.  Deutsche Bank and a few securities companies were left holding the baby.  Khashoggi made the $130 million disappear -- cleverly done considering the FBI was watching every international bank transfer at the time!

    Now what Khashoggi did was illegal.  As were the actions of the Deutsche Bank employee who circumvented the safeguards, other principals of the company, and Courtney Smith.  The SEC went after them with the speed of an oak tree.

 

    This month, however, the SEC finally brought them to justice. 

 

    As a result of this fraud, Richard Evangelista, who enabled the $130 million stock lending fraud was fined a hefty $40,000 in settlements and penalties.

    But Khashoggi didn't get away anywhere near as lightly as that.

    Nope, the arms broker, in a settlement with the SEC, agreed to a five year officer and director ban in return for the SEC dropping all charges, fines, and penalties.

    And you think that's stiff?  The SEC managed to get even more from him than that.  Khashoggi even had to agree to an order preventing future violations.  Take that!  Now it's illegal and, and... you promise not to do it again too.  So there!

 

Cheers,

 

Peter

A quick look at Climate Change, global warming, actual science

...and threats to the Consensus that Climate Change is real and that carbon dioxide is creating global warming

 

Because without Consensus, scientific conclusions could be subject to public scrutiny.

 

While Al Gore isn't quite ready to turn in his Nobel Prize for Global Warming, there has been a recent major setback:

 

              The earth has cooled down.

 

Ok, so it's now "Climate Change" but the data still shows the earth is warming up and is at its hottest since the Jurassic era right?  Um... this chart doesn't seem to agree with that...

This isn't some prank chart from the coal lobby.  This is the ACTUAL chart form the IPCC's 1990 report.  Clearly, this didn't make the headlines.  So they reinterpreted the data to create this one 11 years later:

 

So, the same data shows that the earth is now much warmer than it was when Vikings settled Greenland.  So why aren't crops growing on Greenland now?  Because it's still too bloody cold.

You may wonder how they got this chart.  Here's an example of the data they used from northern Siberia covering the last 4,000 years:

 

There isn't much of a trend other than the fact that the magnitude of temperature swings seems to have declined in the past 100 years -- obviously not good headline material for climate change. 

So, what to do? 

Well, like any good scientist, you'll get data from hundreds of different sources, correlate it, manipulate it, magnify it, selectively include it, and -- if you have half a brain -- cover your tracks.

Here's a good example of data collected from tree rings.  The guys who made the chart for the IPCC's 2001 report clearly had PhDs in bullshit and are probably being scouted for the Department of Labor's Bureau of Statistics:

 
 

Obviously, the suggestion that the earth is cooling even with all that "greenhouse gas" being emitted isn't very useful.  So from mid century the tree ring data was thrown out and actual measured data was used instead.

Funnily enough, the temperatures measured by thermometers actually rose over the past 50 years.  The fact that 92% of these thermometers  in the US and 41% worldwide are located at airports --  where traffic is up over 5,000% and surrounding areas built up -- was conveniently ignored.

Ok... so that's for temperature... and "Six degrees could change the earth."  What claptrap.  Then there's a few other goodies that found their way into the IPCC's report:

·        The glaciers in the Himalayas will melt by 2035,     

·        40% of the Amazon rainforest will be destroyed in the next 30 years,

·        With the oceans rising at 1990 rates, Tuvulu will sink beneath the ocean within 50 years,

·        The frequency of storms over the past 30 years has increased dramatically.

·        The average ocean temperature is rising

Here's a lesson on how to create these dramatic statements from real facts, with deletions in red and insertions in blue:

·        The glaciers in the Himalayas will melt by 20350, according to a hiking magazine

·        40% of the Amazon rainforest will be destroyed in the next 30 years by loggers, according to the World Wildlife Fund.

·        With the oceans rising at 1990 rates, Tuvulu would will sink beneath the ocean within 50 years, but at today's slowing rates it will probably take centuries.

·        The frequency of storms over the past 30 years has decreased, but reporting on them has increased dramatically.

·        A five year study of ocean temperatures has shown that the average ocean temperature is cooling rather than rising

 

Ok.  So that sorts out the headline grabbing stuff that gets the report onto Fox News.  Now, the more important thing is creating a carbon trading industry and selling the idea that CO2 is bad. 

The very basis of any decent carbon trading industry is the idea that CO2 is like uranium or mercury -- it stays resident and dangerous for decades. 

A quick search of the database showed that 35 previous studies had incorrectly found that the maximum time CO2 resides in the atmosphere is less than 15 years, with the average just 8 years.

Obviously, more work was needed.

The IPCC commissioned a new study which broke new ground in terms of the scope, the expense, and the manipulation of data.  Suddenly, CO2 doesn't get recycled every 8 years.  It now takes 100 years.  Holy climate change Batman!  Call up the FDA and get it classified as a Level 3 Health Hazard. 

 
 

WARNING: if you do come into contact with this level 3 health hazard through, say, breathing, here's what you should do (copied and pasted from the New Jersey Department of Health carbon dioxide factsheet:

Eye contact: Immediately flush with large amounts of water for at least 15 minutes, lifting upper and lower lids.  Remove contact lenses, if worn, while flushing.  Seek medical attention.

Skin Contact: Quicly remove contaminated clothing.  Immediately wash contaminated skin with large amounts of water. 

Inhalation: Remove the person from exposure.  Begin rescue breathing (using universal precautions) if breathing has stopped and CPR if heart action has stopped.  Transfer promptly to a medical facility.

Incidentally, carbon monoxide -- which actually IS a hazardous and dangerous gas -- only gets a 2.3 on the health hazard rankings!

 

So, now we have "climate change", shocking facts being caused by climate change, huge amounts of CO2 being emitted, and an expensive study showing that the Level 3 Hazardous Gas remains in the atmosphere for 100 years.  Damn we're doing well.  All we need now is to prove that the increase in atmospheric CO2 is what's actually causing global warming as measured by all those overheated thermometers at airports.  This sounds difficult to prove, but there's actually a pretty simple methodology to apply here:

Call it a greenhouse gas.  And GREENHOUSE GASES CAUSE GLOBAL WARMING.  Repeat it enough times and you'll begin to think that greenhouse gases cause global warming.  Go on.  Give it a try.  It's hugely scientific (this was so successful that the US government did the same thing for 9/11 and Iraq).

Of course, we could try to reduce emissions of the three main greenhouse gases:

·        Nitrogen

·        Oxygen

·        Water vapour

But I suppose we have to start with what's possible.

All that's needed now is for the governments of the world to set up Departments of Climate Change!

Only joking.  No government's THAT ridiculous.  Nor wasteful.

 

Cheers,

 

Peter.

 

 

 

  
  
 

The idiocy of government sponsored energy savings

I’m visiting my parents’ place in Melbourne and was hit by the garish colour of fluorescent bulbs everywhere.  What the hell happened?

It seems that the Australian government, in its enduring wisdom, is offering a cash rebate if you swap your old power hungry incandescent light bulbs with hideous power efficient ones.

As with every bold government initiative, this one has created new employment digging holes and filling them in.

My parents were visited by a pair of Indians from one of the new companies that swap out your incandescent bulbs for fluoro spirals, take your old light bulbs, and claim the cash from the government.  My parents lost all their friendly 2,300K lighting and are now subject to 6,500K lighting, which is so bad that it makes normal fluorescent strip lighting seem super friendly. 

The company cleverly visited during the brightest daylight hours, so when my parents checked the lighting it seemed fine. 

Evening came as a total shock.

They now have to try to buy a bunch of new incandescent bulbs to replace the repulsive fluorescent spirals.  Better be quick too... they are flying off the shelves and not being replaced because they are soon to be outlawed.

Imagine that?  A black market for lightbulbs!

The net result of the government action is that a Chinese company has sold a bunch of cheap light bulbs to Australia, unemployed underpaid Indian electricians got a few hours of pointless work (yes, you got that right: ONLY certified electricians are allowed to be involved in the difficult and dangerous employment of light bulb changing), and new demand has been created for incandescent bulbs. 

What scares me here is that this is probably one of the best and most successful programs the government has ever wasted tax payer money on. 

In the US, where there seems to be even more stupidity and less oversight it must be going out of control.

I used to look down on people who tried to avoid their civic duty of paying tax to fund worthwhile government programs (not that I have ever paid tax), but over the years they have gained my full respect. 

To change the subject completely, does anyone want some 14 watt 6,500K spirals?  I’ll be heading back to Bangkok with a bag full.

Cheers,

Peter.

Geithner to adopt bankrupt firms’ plan to regulate derivatives

    Geithner, knowing full well that he isn’t qualified to actually regulate anything (isn’t that the SEC’s job?) has turned to four experts:  Credit Suisse, Goldman Sachs, JP Morgan, and Barclays Plc.  These banks have all demonstrated their ability to fully understand the risks of derivatives and are models of conservative banking and fiscal responsibility except that:

Goldman Sachs received a $10 billion bailout directly from the government and, while maintaining it had nothing to gain by its independent advice, advised the government to bailout AIG for $180 billion.  AIG promptly paid $13 billion to Goldman.  It helps of course when the CEO of AIG was a former director of Goldman, and was appointed by the former Treasury Secretary Hank Paulson who was a former CEO of Goldman.  After receiving the handy $13 billion from AIG, Goldman crowed about how it was so financially responsible that it could repay the TARP funds early.  Thanks Tim!  After giving such blatantly self serving advice to the government that benefited nobody but itself, secretary Geithner is rushing back to Goldman for even more independent advice.

Barclays narrowly avoided getting a bailout from the UK government, which would have involved taking on subordinated debt and preferred shares at a hefty cost of 11% per year.  Instead, the bank courted the states of Qatar and Abu Dhabi for $7.3 billion in convertible preferred shares and subordinated debt paying a ridiculous 14% interest.  The management considered this a better option for shareholders because it avoided the executive compensation limits that the UK government was trying to impose.

JP Morgan was one of the first in line when the TARP funds became available and received $35 billion off the top to shore up its derivative losses.  Meanwhile, other banks further down the foodchain that went bankrupt due to the mortgage crisis were told to get screwed. 

Credit Suisse was forced to arrange its own $10 billion bailout from the same Middle Eastern sources that Barclays tapped.

    Having received advice from the experts, Geithner is now considering a few wise moves in regulation, such as:

    Making the Federal Reserve the regulator

This makes sense because the banks own the Fed, so there won’t be any conflict of interest.  The SEC seems to have missed this job because it failed to notice a $50 billion ponzi scheme and lost all credibility.  The Fed, on the other hand, failed to notice the entire banking system it was supposed to regulate going bankrupt to the tune of $12.5 trillion -- the equivalent of 250 Madoffs -- and actually GAINED credibility. 

    Increasing capital requirements for banks, corporations, hedge funds, and energy companies that trade in the OTC derivatives market.

Who ever heard of capital requirements for hedge funds?  And for energy companies???  In fact, the only corporations that are set up to meet any sort of capital requirements are banks such as Goldman Sachs, Barclays, JP Morgan etc.  The rest will be barred from trading in the OTC derivatives market except by paying commissions to banks such as... ah, I get it... great objective advice wasn’t it?

    Having OTC traders report to the Fed

This is probably the most blatant power grab by the banks.  ALL traders in OTC derivatives, such as hedge funds and energy companies, would now have to report everything to the Federal Reserve.  From being a simple bank-owned and operated money printing machine, the Fed will become the de facto regulator of industry, hedge funds, pension funds, and securities companies.

 

    The final version of the draft legislation hasn’t yet been released -- except to bank which are working on it to ensure that it is as fair as possible (to banks).

    Once it does go through, American corporations won’t be able to enter into hedging contracts without paying commissions to banks for execution.  No wonder banks make up such an outlandish percentage of US market cap -- they own the market!

 

Two more banks fail

    Two Illinois banks, Strategic Capital Bank and Midland States Bank, were shut down by regulators on Friday.  In the first 18 weeks of this year, 36 banks have now failed.  The steady stream of two banks a month hasn’t slowed down at all.  There were still 76 banks undercapitalized based on the updated regulatory capital guidelines as of March 31.  There are now 74 and falling.

    With bank failures being a leading indicator of economic recovery, it does make government claims that the economy is bottoming look like the brown stuff that comes out of the rear end of a bull.

 

Cheers,

Peter.

Mortgage lending: The criminally insane leading the incompetent

 

Freddie Mac, the world’s second most bankrupt listed entity (after Fannie Mae), last week eliminated many fees to lenders that compensate for risks of low credit scores or small equity stakes -- and urged other lenders to follow suit.

 

This is the largely the same management team that steered Freddie to a $25 billion loss in the third quarter last year. 

 

The reason for the losses was a failure to use information on credit scores and equity stakes to manage the risk -- most commonly done through charging fees to offset the risk.

 

Now, having partially fixed the system that didn’t manage risk and encouraged moral hazard, Freddie is trying as fast as possible to unfix the system.

 

The reason is pretty simple: there aren’t enough buyers out there at current prices so to move to equilibrium, they have to either let prices fall or expand the number of willing buyers. 

 

“No deposit?  No problem.  We’ll call your first payment the deposit.”

 

“Only temporary part time work?  Don’t worry about a thing: we’re willing to waive the mandatory first year payment insurance fee.”

 

There are three major problems with embarking on this course of action:

 

1. It will reduce profits for Freddie and therefore reduce payments to its owner, the US tax payer

 

2. It may not work and housing prices will fall anyway.

 

3. It may work and keep the bubble partially inflated… only to deflate further down the road.

 

At least Fannie hasn’t followed her brother’s lead.  Hopefully other banks will try to maximize profit rather than let themselves get blown around by political brain-farts.

Geithner: Global stimulus plans may need extension

That’s right folks.  Not only have the US stimulus plans been too small and the record $3.6 trillion budget been way too tiny, but the rest of the world’s governments are failing in their duties to spend tax payers’ money in unprecedented levels as well.

The big problem is that US tax payers are saving their money.  This is great for the long term US economy, but really bad in the short term (i.e. the coming election cycle).  The government can’t tax savings, but by god can it spend them!

The even bigger problem for the US government is that other countries’ stimulus packages are smaller than America’s.  If these prove to be more effective, Geithner will look like a complete idiot.

Whereas the US $800 billion wastes 4.7% of US GDP, Germany, France and the UK are only willing to waste 1% of their GDP -- and probably on stuff like infrastructure rather than sod and government department headquarters.

The other problem is that the Europeans seem willing to let companies go bankrupt.  This of course is the main reason for having recessions: lose the deadwood and new shoots will appear.

The trouble is, markets never get things quite right: often the companies that are important to the national well-being (GM, Citigroup, AIG) are the ones that go bankrupt by mistake, while others fluke it through good management. 

What you really need here is government intervention and good judgment.

Leave it to the bureaucrats.  They KNOW how to distribute wealth better then the market.  And don’t let conservative politicians and tax payers interfere with the spending by asking where it’s going. 

My favorite quote on the subject comes from Canada’s Prime Minister Stephen Harper on his $30 billion stimulus bill:

“We cannot have the opposition in parliament replacing bureaucratic red tape with political red tape.”

Exactly.  We need both.

 

Cheers,

Peter.

GDP -- the metric that got hijacked into stupidity and meaninglessness

Gross Domestic Product has become the one and only metric that anyone cares about these days, although it’s actual meaning has become completely FUBAR.

If you actually read the three words, you’ll notice that the word “service” isn’t included.  But as “stuff” became cheaper compared to “services”, two economists at a restaurant started arguing about whether they were buying food or paying for the service.

From that point on, GDP became “Gross Domestic Production of Goods and Services”, although how the hell service is “produced” beats me.

But the importance of including services in the GDP numbers was absolutely essential, politically, as US companies stampeded into China and the only “Production” left was McDonalds, the defense industrial complex, the minting of ever larger numbers of banknotes, and a car industry on life support.  

Importing became as American as apple pie.  Especially as most apples are now imported from China.  

But it didn’t affect GDP did it?  

Take a nylon stocking for example.  Some Chinese company manufactures a stocking and sells it for 20c to a US importer.  This has added 20c (less the cost of raw materials) to the Chinese economy. But at the US end, it is branded, warehoused, transported, advertised, marked up, and retailed for $5.  So that 20c Chinese stocking added $4.80 to the US Gross Domestic Product -- even though it wasn’t a US product to begin with.  

Each time a factory closes and moves production overseas to produce it more cheaply, prices come down, demand rises, and GDP increases.  

The whole US retail industry has become a mere service for Chinese manufactures and “contributing” up to 25 times the GDP created by the production by not actually producing anything.  

This is all thanks to credit, of course.  If the US had to actually produce something to trade with China and Japan, wages would have to drop to make actual “production” price competitive.  

The whole “service” industry, which is as bloated as a week old corpse, would have to shrink to the point where it provides the services required rather than the services that credit cards and national debts can support.  

Ironically, as real Gross Domestic Production increased, the shrinking of the bloated corpse would make reported GDP numbers actually shrink and the politicians would think we had a crisis on our hands.

As usual, they would revert to stupidity.

“Quick, spend more, import more!”  After all, the more the US imports on credit, the stronger the reported GDP numbers.  

How’s that for a meaningless metric?

 

Imagine if you measured your household this way?  If you measured your household success by your family’s “Gross Domestic Production of Goods and Services” you wouldn’t bother trying to save money.  You’d look at ways to simply “do stuff”, no matter how pointless, to increase GDP.  

“Hey Randy, my family GDP grew by 11% this week.  We dug ten holes in the back yard and filled in the nine we dug last week.”

“Well done Hank.  We’ve been even more productive.  My wife hired this Mexican guy to dig our holes now.  We spend our time naming and branding them, which doubled their value. Our GDP is now up 120%.”

Maybe not a precise metaphor, but you get the idea.

 

Incidentally, US GDP fell by 6.2%.... it would have been 7.3%, but for the positive contributions by “services” and federal government.  

The US taxpayer bailed out GM (again), but what about the parts suppliers?

    GM, the car maker that produces more cars than it can sell at a higher price than it sells them, clearly needs to go bankrupt.  Ok, so it’s an American icon and gets bailed out.  

    But how about the little guys?  The suppliers.

    The treasury department is working on a plan to bail out the entire industry -- over 4,000 companies -- and prevent them from going bankrupt.  Now there’s an idea.

    The market for cars has shrunk and will go on shrinking as the baby boomers retire and commute on foot between their retirement homes and the Vietnam Veterans’ Club.  They don’t need new cars every five years (not that anybody really does, but that’s not the point).

    So Detroit has been making too many cars.  By definition, the parts suppliers have been making too many parts.  The whole industry has to rationalize down to the size of the market through mergers and bankruptcies.  

    But the thought of a company going bankrupt and people losing their jobs is so repugnant to us (and especially politicians) that we want to do something to help them.  

    But I’m not volunteering to pay for it, and fortunately I’m not a US tax payer, so the government can’t conscript me into paying for it either.  I feel for the US tax payer.

    What seems to be missing here is even a passing consideration that perhaps a wave of bankruptcies is EXACTLY what the industry needs.  

    When a manufacturer goes bankrupt, nothing actually disappears from the economy.  The machines are still there, the skills are still there, and the reduced demand is still there.  

    If creditors liquidate the company, someone can buy half the machines, hire half the workforce, and create an efficient business model.  Meanwhile, the other half of the machinery is recycled through selling it to someone else or melted down and turned into useful stuff.  Similarly, the half of the workforce that’s no longer needed are available to other industries to do real work.

This is called “capitalism” and “free markets”.  

    Everything seems to indicate that the government wants to turn back the clock on production and hope demand returns.  

    It’s like a mousetrap producers in London.  London has a mouse problem and mousetraps are in huge demand.  Then one day Dick Wittington arrives back from Siam, let’s the cat out of the bag, which then eats half the mice, and demand for mousetraps drops by 50%.  

    Does the government step in and try to support the whole industry to prevent bankruptcies, even though it’s as clear as day that it’s now a bloated corpse?  

    What happened to governments sticking to governing?  Oh… they got concerned with GDP…