The Economy and the Auto Bailout
Dec 11, 2008
Posted by Jody Eisenman | Filed under auto bailout
Unfortunately, the US economy continues to get demonstratively worse. The number of Americans filing for unemployment hit the highest level in 26 years. Yields on some US treasuries are at their lowest since 1929. As prices continue to decline, US household net worth declined by 4.7% in the third quarter according a Federal Reserve report. Wall Street is pretty much doom and gloom as bonuses get cut and layoffs continue. As the credit markets continue to remain tight, it seems very likely that bankruptcies on Main Street will increase. What this means in terms of an eventual recovery is debatable. However, it would seem that there will a lot less players in the game once the music starts again. If you like to read bearish predictions, please clink the following link from CNN Money: 8 really, really scary predictions
The Auto Bailout is still on the front burner. Although a bill has passed the house, the senate is balking over approval. One telling fact is that in 2007, both GM and Toyota sold almost the same number of cars (roughly 9 million). However, Toyota earned roughly $17 billion, while GM lost money. Therefore, many legislators (as well as a majority of the public) feel that a bailout will only prolong the inevitable unless there are major changes in the business plan. Normally, one could wait until the new congress is seated where the Democrats would have more voting power. However, it seems, at least in GM’s case, that they will not have the luxury of waiting this long.
