Tuesday, December 10, 2013

The "We Lost $10 Billion Bailing Out GM" Nonsense

By, Chris Rossini

Well, it's official. The U.S. government sold its remaining shares of bailed out GM yesterday.

Treasury Secretary Jack Lew says: "...this important chapter in our nation's history is now closed." I say it's more like a blot in the nation's history. The only way I'll concede that it's an "important chapter" is if we're referring to crime story.

GM's Chairman said: "We will always be grateful for the second chance extended to us and we are doing our best to make the most of it." Well, a second chance was not "extended" by those who were forced to pay the bill. GM received hot money so that they could save their business, plain and simple.

A headline that I keep seeing in the mainstream media is that "We lost $10 Billion Bailing Out GM". In other words, the difference in what the government paid for the GM shares versus what they sold them for equaled a $10 billion loss. And since the mainstream media always equates the government with "us," it means "we" lost the money.

Oh really....There's much to be said about such claims.

First of all, the government most certainly is not "us". I never authorized the government to bailout a crony corporation with my money. In fact, I didn't even hand over my money voluntarily to the government. It was taken from me (and millions of others) with the threat of force if we didn't hand it over.

In addition to not authorizing the bailout, "we" also did not authorize the government to take a $10 billion loss. And speaking of that loss....Is it really just $10 billion? Does a dollar from 2009 have the same purchasing power as a dollar in 2013? Have we forgotten about a major character in our crime story known as The Federal Reserve?

Furthermore, now that this "important chapter" is over, can I cash out my portion? Even though the government lost $10 billion, I definitely would like to put my money elsewhere. Can I cash out?

What if the government were to realize a $10 billion gain on the sale? Would I be able to cash out then? Could you, dear reader? "We" are the government right? Perhaps I didn't fill out the right form....I don't know.

Finally, the losses incurred by U.S. taxpayers is not $10 billion. In truth, the losses are incalculable. It's impossible to know the true damage caused. You see, when the money was extracted from us by the government, we had different plans as to what it would have been used for.

I have a lot of wants on my list, and there are plenty of people who would have profited by satisfying my wants. Unfortunately, those win-win transactions were snuffed away by force. And that's just me. Multiply those unseen opportunities by a couple of hundred million.

The carnage is even worse than that!

A major element of the free market (of which, the U.S. has less and less of) is that those who fail to satisfy consumers profitably must surrender their assets to those who are succeeding at providing consumers with what they urgently desire. We don't live in the Garden of Eden. Resources are scarce. The market forbids wasting resources on the creation of things that people don't want.

GM failed miserably. Their assets should have been sold off, and placed into better hands. However that did not happen. Instead, government used our money to keep the poor stewards of GM in business! So "we" also suffered from this backwards and bizarre process.

Once again though, our losses are incalculable. The fact that GM's resources could have been in better hands, and that we could be reaping the benefits now go unseen.

What a terrible "chapter" in U.S. history. But let's hope, and do our best, to make sure that the book itself has a happy ending.


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7 comments:

  1. This was vote-buying at its worst. A bankrupt GM would have meant thousands of pink slips for overpaid UAW members, the vast majority of whom are Obama supporters. That's the only calculation this White House considers. Sound economic and moral principles are not on their radar.

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  2. One can not save what is already dead.
    .
    Zombie 101.
    .
    I'll never buy a Bail-out buggie.
    (unless forced to ala obamacare).

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  3. Thank you, sir, for another perfect essay! Yet more reading material for my group of high schoolers (timely too, they had a lively debate on the 21st century American bailouts today).

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    1. I love the idea that high schoolers will be exposed to the ideas expressed here at EPJ. Fantastic, Chris!

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  4. "The market forbids wasting resources on the creation of things that people don't want.

    GM failed miserably. Their assets should have been sold off, and placed into better hands. However that did not happen. Instead, government used our money to keep the poor stewards of GM in business! So "we" also suffered from this backwards and bizarre process."

    There is no justification for bailouts. Now that that is out of the way, you've written a carefully worded non-statement about General Motors. Have you nothing to add about the eighty-odd years of government regulations leading to the GM bankruptcy? I know it's easy to knee-jerk something about government bailouts and cronyism. It's not easy (or worthwhile, apparently, to the anti-GM bandwagon) to put the bailout into context. So I suppose that's why you didn't attempt to justify your claim that GM makes products that people don't want to buy.

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