You borrowed HOW MUCH to invest in buggywhips!?!

Let's see, you just gave up 700 billion to "rescue the banking system", but that's OK, because they promised they were only using it to buy troubled loans, which might even make a profit, and of course then it would be paid back. Right? Well, maybe not, but nobody's saying, and you're not allowed to ask. That's about $2,500 of your or your children's wealth, so shouldn't you be entitled?

Of course, now that the barn door is open, the pigs are crowding around the trough. US auto makers are claiming that since they're "too big to fail", they should get at least $25 billion of it. Now, they slit their own strategic throats in the '70's, and what amounts to a twitching corpse is asking for another year or two of life-support money, otherwise "millions" will lost their jobs. Oh, really?

In the 1960's, the steel business in Pittsburgh was blowing out so much soot you couldn't see across the street. Pictures taken at noon on the street looked like night scenes. But there was money being made. Eventually, inefficiency and high costs ruined the domestic steel business, Pittsburgh lost a ton of jobs, the locals had a real tough decade, and the business went to Japan, China, Brazil and who knows where. Visit the place now and it's all clean and shiny; the economy is much more diverse, the air is fresh, and high-schoolers look forward to something else than a job at the mill.

So. GM makes cars, rather dull cars for the most part, at a labor cost of $73.00 per hour. That's not what the union workers are getting paid--it includes the lifetime medical benefits of retirees and the job banks where union members make 90% of their pay while they wait to go back to work. That's $73.00 per hour to make a Buick. Toyota, Honda, and Nissan's plants in the US make cars at a labor cost of about $43.00 per hour.

$30 difference!

So, we should "lend" them some billions to keep doing the same thing? What would you do? How about this idea: Let them go bankrupt and operate in receivership until they can do one of the following: 1) Make more interesting, efficient cars at lower cost or 2) sell their plants and other assets to the Japs, who have already shown they can do it. What would be the results of that? Well, we wouldn't want another Pittsburgh, would we?

Original post blogged on Dodgy Business.