Jan
30
The Affect of the United States Bailout Nationally and Internationally
Filed Under bailout | Comments Off
Andrew Stear asked:
Many people are wondering what caused the recent mortgage crisis in the United States. Was it the failure of Fannie Mae and Freddie Mac? Was it the fact that they were lending to people that had an inadequate means to repay their notes? Or was it a combination of events? More importantly what is the United States doing to stop the panic, and how will it affect international markets?
The record $700 Billion dollar bailout is largely the result of the failure of two of the largest financial lenders in the secondary mortgage industry. The lenders I speak of, Country Wide and Fannie Mae, failed as a result of a sub-prime mortgage crisis in the United States over the past few months. Many thought Fannie Mae would have nothing to worry about because it was created by the federal government. However the lack of oversight and their governance by Washington insiders left them almost above reproach. This proves to be a clear cut failure of the leadership that these two huge mortgage lenders have. The risky behavior that these companies implemented proved to be a huge mistake. And due to the fact that two of the largest mortgage lenders failed, the lending industry itself has slowed to a crawl. One of the reasons was a result of all the foreclosures and bankruptcies occurring in the United States. The other being that the financial institutions no longer trusted the solvency of their business partners. This would eventually lead to the drying up much of the liquidity in the market.
In general, United States mortgage crisis has definitely caused the aggregate financial markets to fluctuate radically. Banking had become a global industry with its web reaching into many countries. Foreign investors are frustrated by the unpredictability of the U.S. economy. Mostly, due to the fact that the United States government has no clear cut remedy for this mortgage crisis. A second thought is should the government intercede in a free market system, or let them fail? The United States Federal Government in order to impede the panic agreed to infuse $700 billion dollars in an effort to bailout the troubled industry. However this bailout will not only affect U.S. markets but will also drastically affect global markets and additionally the results of the bailout are not guaranteed. This has also prompted many other industries to seek governmental intervention in an effort to starve off their losses in a recessionary economy. Who could be next?
Internationally, when news of a potential bailout was heard, international markets fell sharply. The confidence in U.S. markets was shattered, and as a result the Yen and Euro hit all-time highs against the U.S. dollar. The only upside to this was an increased appeal of American exported goods to foreign markets. Some of the major implications of this bailout plan were seen on September 30, 2008. Many markets affected included Japan’s Nikkei Index, China’s Hong Kong Exchange, the London FTSE, and Russian Trading System were down notably at word of the rejected Wall Street bailout. In fact the RTS, dropped so sharply that it suspended trading until further notice, sadly this is not terribly uncommon in Russia. The international markets continued there extreme volatility until a final decision was reached by Congress to approve the bailout. Finally on October 1, 2008 the American Housing Rescue and Foreclosure Prevention Act of 2008 took effect to try and ease the nerves of international investors.
The Canadian and European markets slowly began to rise again after the bailout was secured in writing. The Russian Trading System rose 2.4% to 1,504.20 when the bailout was confirmed. The United States Stock Market of late has also begun to stabilize as well. Foreign investors still remain cautious because the American credit crisis is far from over. Signs of stability were starting to appear, but news of other bankruptcies in the United States may cause another slide in global markets. For example, some major banks in the U.S. have even started to fail like Washington Mutual and not close behind is Citibank. This also leads to an increase in bank mergers and consolidations. And with any merger there always seems to be job losses, thus leading to a rise in unemployment. The cycle of recession has a distinctive pattern. With unemployment rates hitting a 14 year high of approximately 6.5%, the U.S. economy is obviously in shambles and has the potential of heading toward a rough recession. This then leads many to still wonder if the financial bailouts are over or if the U.S. economy can recover successfully.
Darlene
Many people are wondering what caused the recent mortgage crisis in the United States. Was it the failure of Fannie Mae and Freddie Mac? Was it the fact that they were lending to people that had an inadequate means to repay their notes? Or was it a combination of events? More importantly what is the United States doing to stop the panic, and how will it affect international markets?
The record $700 Billion dollar bailout is largely the result of the failure of two of the largest financial lenders in the secondary mortgage industry. The lenders I speak of, Country Wide and Fannie Mae, failed as a result of a sub-prime mortgage crisis in the United States over the past few months. Many thought Fannie Mae would have nothing to worry about because it was created by the federal government. However the lack of oversight and their governance by Washington insiders left them almost above reproach. This proves to be a clear cut failure of the leadership that these two huge mortgage lenders have. The risky behavior that these companies implemented proved to be a huge mistake. And due to the fact that two of the largest mortgage lenders failed, the lending industry itself has slowed to a crawl. One of the reasons was a result of all the foreclosures and bankruptcies occurring in the United States. The other being that the financial institutions no longer trusted the solvency of their business partners. This would eventually lead to the drying up much of the liquidity in the market.
In general, United States mortgage crisis has definitely caused the aggregate financial markets to fluctuate radically. Banking had become a global industry with its web reaching into many countries. Foreign investors are frustrated by the unpredictability of the U.S. economy. Mostly, due to the fact that the United States government has no clear cut remedy for this mortgage crisis. A second thought is should the government intercede in a free market system, or let them fail? The United States Federal Government in order to impede the panic agreed to infuse $700 billion dollars in an effort to bailout the troubled industry. However this bailout will not only affect U.S. markets but will also drastically affect global markets and additionally the results of the bailout are not guaranteed. This has also prompted many other industries to seek governmental intervention in an effort to starve off their losses in a recessionary economy. Who could be next?
Internationally, when news of a potential bailout was heard, international markets fell sharply. The confidence in U.S. markets was shattered, and as a result the Yen and Euro hit all-time highs against the U.S. dollar. The only upside to this was an increased appeal of American exported goods to foreign markets. Some of the major implications of this bailout plan were seen on September 30, 2008. Many markets affected included Japan’s Nikkei Index, China’s Hong Kong Exchange, the London FTSE, and Russian Trading System were down notably at word of the rejected Wall Street bailout. In fact the RTS, dropped so sharply that it suspended trading until further notice, sadly this is not terribly uncommon in Russia. The international markets continued there extreme volatility until a final decision was reached by Congress to approve the bailout. Finally on October 1, 2008 the American Housing Rescue and Foreclosure Prevention Act of 2008 took effect to try and ease the nerves of international investors.
The Canadian and European markets slowly began to rise again after the bailout was secured in writing. The Russian Trading System rose 2.4% to 1,504.20 when the bailout was confirmed. The United States Stock Market of late has also begun to stabilize as well. Foreign investors still remain cautious because the American credit crisis is far from over. Signs of stability were starting to appear, but news of other bankruptcies in the United States may cause another slide in global markets. For example, some major banks in the U.S. have even started to fail like Washington Mutual and not close behind is Citibank. This also leads to an increase in bank mergers and consolidations. And with any merger there always seems to be job losses, thus leading to a rise in unemployment. The cycle of recession has a distinctive pattern. With unemployment rates hitting a 14 year high of approximately 6.5%, the U.S. economy is obviously in shambles and has the potential of heading toward a rough recession. This then leads many to still wonder if the financial bailouts are over or if the U.S. economy can recover successfully.
Darlene
Jan
27
The "what If’s" of a Big Three Bailout
Filed Under bailout | Comments Off
Runyen, Mountz asked:
The condition of our economy today is the worst it has been in decades. The recession can be felt in all levels of the market place, some worse than others. Perhaps one of the most prominent places this recession is taking its toll is in the automotive industry. While the foreign players of this market (Toyota, Honda, etc.) are only recording minor losses, the Big Three are facing the worst financial situations in the history of these three storied corporations. General Motors, Ford, and Chrysler are all experiencing huge setbacks in sales, combined with large costs, which have led to substantial and just about irreversible losses. The CEO for GM, Rick Wagoner, when appearing before Congress about the situation of his company was quoted as saying the situation is a “catastrophic loss.” Chrysler CEO Robert Nardelli had this to say of a potential bankruptcy of the big three; “2.3 million-to-3 million in lost jobs [at the car makers, dealers, suppliers and associated businesses], $265 billion-to-$400 billion in lost wages and $100 billion-to-$150 billion in lost government [tax] revenue.”
It has been estimated that GM’s cash flows won’t last through the end of 2008, and many are skeptical of the lives of the other two Detroit players. With bankruptcy right around the corner for all three players, they have turned to the government for help. The “Big Three Bailout” has been the focus of the news for the past couple of weeks as many know. However, many do not know what positive and negative outcomes would result from the bailout.
The pros associated with the bailout are able to bring stability by keeping the same auto market in the United States. GM, Ford, and Chrysler are seeking a total of $25 billion to help re-tool auto plants, which would hopefully enable them to turn the corner and get out of this recession in the auto industry. If the government were to grant this relief we would be able to keep competitive prices in the industry. The biggest issue with the Big Three right now is that they are not producing an overall fleet that is efficient on fuel, thus turning many consumers away in this time of unsteady gas prices. In order for the Big Three to switch to more efficient vehicles, they would need to re-tool their plants to produce more cost efficient vehicles, which does not come at a cheap cost. The re-tooling is completely necessary because without it, they would go under. Hundreds of thousands of jobs and revenue would also be lost and would only contribute further to the already declining economy.
When looking at how consumers would look at the bailout, researchers discovered that eighty percent of consumers would not purchases automobiles from the Big Three if they were to go into bankruptcy. Thus consumers get a feeling of security more with the government’s bailout than if they were to be left to go into bankruptcy. The decrease in the amount of taxes paid by the automakers would be substantial. Not only would the taxes paid directly by the companies decrease but personal income taxes paid by employees would fall as well. It is estimated that the total taxes received by the government would actually decrease by over $40 billion.
Other companies will also be affected by the bailout. Resources used in the construction of vehicles, such as iron framing or copper wiring, would cause those companies to decrease their profits. With less demand from the Big Three companies those companies may even need to decrease their workforces and as a result increase unemployment even more. More unemployment may bring more house foreclosures and our economic standing will only become weaker.
As with all economic dilemmas there are always two perspectives. While there are some beneficial factors that may come with the government’s bailing out the Big Three automobile companies, there are still detrimental reasons why they should not. One of the biggest groups affected by the bailout would be the employees. If the government decides not to bailout the companies, over 240,000 employees directly employed by the company alone will be laid off. The money received will not even be enough to sustain the amount of employees they currently utilize. Compared to foreign automotive companies, the Big Three have almost three times the amount of employees. To compete, they would have to lower costs meaning their labor costs would be one of the first costs to downsize. Many of their unemployed, therefore, would be consumed by the foreign companies. Those employees would then find themselves having to settle for jobs with lower wages and fewer benefits since the foreign companies are not unionized.
Ford, Chrysler, and General Motors will not miraculously be cured of their problems with the acceptance of the bailout either. With the economic condition diminishing daily, many consumers are finding the best ways to save as much as they can, however they can. Gas prices are one expense that consumers feel they have control over and in which they feel they can save the most. Therefore, the demand for vehicles with low gas mileage will never benefit the Big Three companies when most of the vehicles they sell are not gas efficient. There is no sign of the economy’s downfall turning anytime soon either. Families, who can not afford Big Three automobiles today, will therefore be unable to afford them even if the companies are bailed out. Other families who could afford their cars are saving more which is leading them away from The Big Three signature vehicles, the more expensive trucks and sport utilities vehicles. Even after consumers became more savers than spenders, General Motors, Ford, and Chrysler stand by their gas guzzling trucks and overly expensive SUVs while the own executive spend lavishly themselves. When meeting in the capital to discuss the bailout, each executive took their own private jet on the expense of the company while the plan they came with was not prepared and future initiatives were not even evident. If the government does decide to correct their spending mistakes, who is to say they can even reduce their spending when they show no interest while on the brink of bankruptcy.
With there being both good and bad points to both sides of the story, the relief lies in the hands of the government. With both sides having strong arguments and reasons for either supporting the company of letting them crash and burn, both have the best interest of the country at heart. The security of the employees, those of the Big Three and other related companies, the consumers and the government welfare itself all are being accounted. One group not being considered is the Big Three chief executive officers and other executive board members. While everyone else is suffering, all of them are living uninterrupted lives. With no plans of making dramatic changes to the demand of the consumers due to higher gas prices or making changes in their own useless spending, the CEOs are the only ones that should not get any sympathy.
With all the opposing information, the government is uncertain as to how to proceed. Should they shell out a little more relief (a little in the reality that they have already planned out relief of over $700 billion) or should they let the Big Three crash and burn and move forward from that? What they decide is out of our hands, but we as taxpayers must be prepared to either pay more for our vehicles if the Big Three go under, or pay a little more in taxes for their relief and essentially stabilize an uncertain market.
Louise
The condition of our economy today is the worst it has been in decades. The recession can be felt in all levels of the market place, some worse than others. Perhaps one of the most prominent places this recession is taking its toll is in the automotive industry. While the foreign players of this market (Toyota, Honda, etc.) are only recording minor losses, the Big Three are facing the worst financial situations in the history of these three storied corporations. General Motors, Ford, and Chrysler are all experiencing huge setbacks in sales, combined with large costs, which have led to substantial and just about irreversible losses. The CEO for GM, Rick Wagoner, when appearing before Congress about the situation of his company was quoted as saying the situation is a “catastrophic loss.” Chrysler CEO Robert Nardelli had this to say of a potential bankruptcy of the big three; “2.3 million-to-3 million in lost jobs [at the car makers, dealers, suppliers and associated businesses], $265 billion-to-$400 billion in lost wages and $100 billion-to-$150 billion in lost government [tax] revenue.”
It has been estimated that GM’s cash flows won’t last through the end of 2008, and many are skeptical of the lives of the other two Detroit players. With bankruptcy right around the corner for all three players, they have turned to the government for help. The “Big Three Bailout” has been the focus of the news for the past couple of weeks as many know. However, many do not know what positive and negative outcomes would result from the bailout.
The pros associated with the bailout are able to bring stability by keeping the same auto market in the United States. GM, Ford, and Chrysler are seeking a total of $25 billion to help re-tool auto plants, which would hopefully enable them to turn the corner and get out of this recession in the auto industry. If the government were to grant this relief we would be able to keep competitive prices in the industry. The biggest issue with the Big Three right now is that they are not producing an overall fleet that is efficient on fuel, thus turning many consumers away in this time of unsteady gas prices. In order for the Big Three to switch to more efficient vehicles, they would need to re-tool their plants to produce more cost efficient vehicles, which does not come at a cheap cost. The re-tooling is completely necessary because without it, they would go under. Hundreds of thousands of jobs and revenue would also be lost and would only contribute further to the already declining economy.
When looking at how consumers would look at the bailout, researchers discovered that eighty percent of consumers would not purchases automobiles from the Big Three if they were to go into bankruptcy. Thus consumers get a feeling of security more with the government’s bailout than if they were to be left to go into bankruptcy. The decrease in the amount of taxes paid by the automakers would be substantial. Not only would the taxes paid directly by the companies decrease but personal income taxes paid by employees would fall as well. It is estimated that the total taxes received by the government would actually decrease by over $40 billion.
Other companies will also be affected by the bailout. Resources used in the construction of vehicles, such as iron framing or copper wiring, would cause those companies to decrease their profits. With less demand from the Big Three companies those companies may even need to decrease their workforces and as a result increase unemployment even more. More unemployment may bring more house foreclosures and our economic standing will only become weaker.
As with all economic dilemmas there are always two perspectives. While there are some beneficial factors that may come with the government’s bailing out the Big Three automobile companies, there are still detrimental reasons why they should not. One of the biggest groups affected by the bailout would be the employees. If the government decides not to bailout the companies, over 240,000 employees directly employed by the company alone will be laid off. The money received will not even be enough to sustain the amount of employees they currently utilize. Compared to foreign automotive companies, the Big Three have almost three times the amount of employees. To compete, they would have to lower costs meaning their labor costs would be one of the first costs to downsize. Many of their unemployed, therefore, would be consumed by the foreign companies. Those employees would then find themselves having to settle for jobs with lower wages and fewer benefits since the foreign companies are not unionized.
Ford, Chrysler, and General Motors will not miraculously be cured of their problems with the acceptance of the bailout either. With the economic condition diminishing daily, many consumers are finding the best ways to save as much as they can, however they can. Gas prices are one expense that consumers feel they have control over and in which they feel they can save the most. Therefore, the demand for vehicles with low gas mileage will never benefit the Big Three companies when most of the vehicles they sell are not gas efficient. There is no sign of the economy’s downfall turning anytime soon either. Families, who can not afford Big Three automobiles today, will therefore be unable to afford them even if the companies are bailed out. Other families who could afford their cars are saving more which is leading them away from The Big Three signature vehicles, the more expensive trucks and sport utilities vehicles. Even after consumers became more savers than spenders, General Motors, Ford, and Chrysler stand by their gas guzzling trucks and overly expensive SUVs while the own executive spend lavishly themselves. When meeting in the capital to discuss the bailout, each executive took their own private jet on the expense of the company while the plan they came with was not prepared and future initiatives were not even evident. If the government does decide to correct their spending mistakes, who is to say they can even reduce their spending when they show no interest while on the brink of bankruptcy.
With there being both good and bad points to both sides of the story, the relief lies in the hands of the government. With both sides having strong arguments and reasons for either supporting the company of letting them crash and burn, both have the best interest of the country at heart. The security of the employees, those of the Big Three and other related companies, the consumers and the government welfare itself all are being accounted. One group not being considered is the Big Three chief executive officers and other executive board members. While everyone else is suffering, all of them are living uninterrupted lives. With no plans of making dramatic changes to the demand of the consumers due to higher gas prices or making changes in their own useless spending, the CEOs are the only ones that should not get any sympathy.
With all the opposing information, the government is uncertain as to how to proceed. Should they shell out a little more relief (a little in the reality that they have already planned out relief of over $700 billion) or should they let the Big Three crash and burn and move forward from that? What they decide is out of our hands, but we as taxpayers must be prepared to either pay more for our vehicles if the Big Three go under, or pay a little more in taxes for their relief and essentially stabilize an uncertain market.
Louise
Jan
25
John K asked:
I just had an offer on a house accepted so I’ll be in escrow very shortly. Once that happens, I will be watching interest rates closely for the best time to lock. What I’d like to know is whether I should do that before the bailout passes or after?
I just had an offer on a house accepted so I’ll be in escrow very shortly. Once that happens, I will be watching interest rates closely for the best time to lock. What I’d like to know is whether I should do that before the bailout passes or after?
Thanks.
Robin
Jan
13
With Freedom and Bailout Funding for All
Filed Under bailout | Comments Off
Kevin Broersma asked:
With Liberty And Bailout Funding For All
Author
KWBroersma
Over the past couple of months we have seen a rash of federal programs begin to take shape, for the preservation of huge corporations in desperate need of financial stability. We’ve got the mortgage crisis, as well as the “Big Thee” auto makers of the U.S. “Chrysler, Ford, and GMC”, who romanced the government by flying their corporate jets to DC at the price tag of $20,000 per jet for fuel costs alone. And now Matt Hartwig, a spokesman for the RFA. (Renewable Fuels Association) has stated that his Association has been speaking with President Elect Barrack Obamas team and other members of the staff at “Capitol Hill”, and that they are providing “Them” with some ideas on “how to craft the language of an economic recovery package”. A recovery package that would entail a $1 Billion credit facility that would allow producers to continue funding their current production and operations, and a $50 Billion federal loan guarantee program to finance investments in new renewable fuel production capacity, and supporting infrastructure. And a requirement that auto makers that receive federal aid, only produce models that can run on any blend up to 85% Ethanol, beginning with the 2010 model season.
Now, in my opinion there are a couple major problems with the deal that the RFA is putting forth for Obama and his team to consider. Over the past thirty years or so, the development of ethanol has pretty much been proven to be failure across the board and the reason for that is, when you make a gallon of ethanol it takes a whole heap of corn. In an effort to get an idea of how much corn it would take to get a gallon of ethanol, I stopped by healthandenergy.com where I read an article written by David Pimentel a Cornell University Agriculture Expert and I read his studies about the downfalls of producing ethanol. From his studies we know that it takes about 26.1 lbs of corn to produce 1 gallon of ethanol, and we also know that unfortunately ethanol provides fewer BTUs than fossil fuels, ethanol produces 77,000 BTUs and fossil fuels produce 131,000 BTUs. So then we have a huge loss of 54,000 BTUs when you make the switch to ethanol, and since ethanol takes more energy to produce than the energy that it contains, you have to pretty much double your fuel intake to get the same results as you would with fossil fuels.
And producing ethanol is only one failure among many, the mere cost of using the ethanol that we have produced in the united states already, has driven the price of food in Mexico upward considerably. Since we know that America will not allow an ethanol producer to cover 97% of it’s land area with corn fields, just so we wouldn’t have to purchase corn from other areas to have enough to supply the US with fuel. We need to consider the idea that ethanol is not the energy savior that we have been looking for. And now that we have about 30 years of scientific data that tells us that ethanol is not, nor will it ever be a good alternative to current fossil fuels, those producers want the US Government to give them $1Billion to pay their bills now, and a further $50Billion to help them grow later. I think that this “Idea” that the RFA is pitching on capitol hill is nothing more than proof that the “Bailout Package” is just a new and stupid way for the US government, to throw money away. I think that the worst part of the RFA pitch, is that they want the Government to make a rule that says, that any auto manufacturer that receives aid from the Federal Government, can only produce vehicles that run on an 85% ethanol blend or higher. My friends this is a horrible business plan. We are talking about a business that has a 30 year failure rate, and a business that knows it. They already receive a huge portion of their funding through Federal subsidies, and now all they need to do to complete their free ride, is force the American people to purchase their products by making US auto makers produce cars that only run on their products. That’s not “Free market” business, that’s not the American way. When did we become a society that rewards failure? For instance, earlier this week Bush and the capitol hill club decided that the best way to move foreword with the bailout package for the “Big 3” was to allow them to have it, as long as they promise to write a business plan that will turn their profitability around within 90 days.
Now I generally don’t have much faith in the US government running businesses, and forcing practices on large companies, because I believe in freedom. I don’t want big brother government to tell me which TV to purchase, or which light bulb to buy for that matter. But more and more as we move forward, our government is finding new and glorious ways to purchase our freedoms, and take them away from us. If we allow our government to continue this kind of spending, spending on businesses that have nothing more than failure to bring to the table, we will be in more “Horrible standings” than if we had let those companies alone to begin with. People seem to think that these auto makers are just to big to fail, and that if we allow their failure, we allow ourselves to fail as a nation. Friends, we cannot let ourselves believe this nonsense. We cannot nationalize a business just because it is failing, it will continue to fail. I think we all know what needs to happen with these three auto makers… We need to allow them to go bankrupt! From what I have seen in the mass media, there is a huge fear that once these guys go bankrupt, we will never see them again! That is just not true, and we can see the evidence in other companies that have gone bankrupt. For instance, Texaco Oil went bankrupt and bounced back stronger than ever, Pacific Power also, and if you still don’t believe me look at Brown and Coles Stores here in Whatcom county. Brown and Coles went bankrupt not too long ago, they trimmed off the fat, looked at their interests and labor contracts, and hit the reset button. And guess what? We still get to enjoy shopping for good deals at all Cost Cutters, and Food Pavilions all over the county. The simple truth is this. If we really want to do these companies that keep failing some good. We need to allow the market to run it’s course! If these companies go bankrupt, I know exactly what will happen! They will go to bankruptcy hearings, just like everyone else has to, while there they will look over their financial interests and labor contracts. They will cut the fat off of some of their contracts and entitlement programs, liquidate the fat that they trimmed off, and then get right back to work. It has been proven time and time again, all over the free market system. I say that if you want to help these companies, fine! Let the free market and bankruptcy courts deal with them, but don’t let these companies take our nation down with them. If we allow these kinds of things to keep happening, I can guarantee you, that the “Big 3” are not the only businesses, that the government will find in this market to dump all of our resources into. Using the government to pay for our mistakes isn’t being responsible… It’s just passing the bill over to Daddy at the restaurant. And someday, daddy’s going to run out of money.
Arnold
With Liberty And Bailout Funding For All
Author
KWBroersma
Over the past couple of months we have seen a rash of federal programs begin to take shape, for the preservation of huge corporations in desperate need of financial stability. We’ve got the mortgage crisis, as well as the “Big Thee” auto makers of the U.S. “Chrysler, Ford, and GMC”, who romanced the government by flying their corporate jets to DC at the price tag of $20,000 per jet for fuel costs alone. And now Matt Hartwig, a spokesman for the RFA. (Renewable Fuels Association) has stated that his Association has been speaking with President Elect Barrack Obamas team and other members of the staff at “Capitol Hill”, and that they are providing “Them” with some ideas on “how to craft the language of an economic recovery package”. A recovery package that would entail a $1 Billion credit facility that would allow producers to continue funding their current production and operations, and a $50 Billion federal loan guarantee program to finance investments in new renewable fuel production capacity, and supporting infrastructure. And a requirement that auto makers that receive federal aid, only produce models that can run on any blend up to 85% Ethanol, beginning with the 2010 model season.
Now, in my opinion there are a couple major problems with the deal that the RFA is putting forth for Obama and his team to consider. Over the past thirty years or so, the development of ethanol has pretty much been proven to be failure across the board and the reason for that is, when you make a gallon of ethanol it takes a whole heap of corn. In an effort to get an idea of how much corn it would take to get a gallon of ethanol, I stopped by healthandenergy.com where I read an article written by David Pimentel a Cornell University Agriculture Expert and I read his studies about the downfalls of producing ethanol. From his studies we know that it takes about 26.1 lbs of corn to produce 1 gallon of ethanol, and we also know that unfortunately ethanol provides fewer BTUs than fossil fuels, ethanol produces 77,000 BTUs and fossil fuels produce 131,000 BTUs. So then we have a huge loss of 54,000 BTUs when you make the switch to ethanol, and since ethanol takes more energy to produce than the energy that it contains, you have to pretty much double your fuel intake to get the same results as you would with fossil fuels.
And producing ethanol is only one failure among many, the mere cost of using the ethanol that we have produced in the united states already, has driven the price of food in Mexico upward considerably. Since we know that America will not allow an ethanol producer to cover 97% of it’s land area with corn fields, just so we wouldn’t have to purchase corn from other areas to have enough to supply the US with fuel. We need to consider the idea that ethanol is not the energy savior that we have been looking for. And now that we have about 30 years of scientific data that tells us that ethanol is not, nor will it ever be a good alternative to current fossil fuels, those producers want the US Government to give them $1Billion to pay their bills now, and a further $50Billion to help them grow later. I think that this “Idea” that the RFA is pitching on capitol hill is nothing more than proof that the “Bailout Package” is just a new and stupid way for the US government, to throw money away. I think that the worst part of the RFA pitch, is that they want the Government to make a rule that says, that any auto manufacturer that receives aid from the Federal Government, can only produce vehicles that run on an 85% ethanol blend or higher. My friends this is a horrible business plan. We are talking about a business that has a 30 year failure rate, and a business that knows it. They already receive a huge portion of their funding through Federal subsidies, and now all they need to do to complete their free ride, is force the American people to purchase their products by making US auto makers produce cars that only run on their products. That’s not “Free market” business, that’s not the American way. When did we become a society that rewards failure? For instance, earlier this week Bush and the capitol hill club decided that the best way to move foreword with the bailout package for the “Big 3” was to allow them to have it, as long as they promise to write a business plan that will turn their profitability around within 90 days.
Now I generally don’t have much faith in the US government running businesses, and forcing practices on large companies, because I believe in freedom. I don’t want big brother government to tell me which TV to purchase, or which light bulb to buy for that matter. But more and more as we move forward, our government is finding new and glorious ways to purchase our freedoms, and take them away from us. If we allow our government to continue this kind of spending, spending on businesses that have nothing more than failure to bring to the table, we will be in more “Horrible standings” than if we had let those companies alone to begin with. People seem to think that these auto makers are just to big to fail, and that if we allow their failure, we allow ourselves to fail as a nation. Friends, we cannot let ourselves believe this nonsense. We cannot nationalize a business just because it is failing, it will continue to fail. I think we all know what needs to happen with these three auto makers… We need to allow them to go bankrupt! From what I have seen in the mass media, there is a huge fear that once these guys go bankrupt, we will never see them again! That is just not true, and we can see the evidence in other companies that have gone bankrupt. For instance, Texaco Oil went bankrupt and bounced back stronger than ever, Pacific Power also, and if you still don’t believe me look at Brown and Coles Stores here in Whatcom county. Brown and Coles went bankrupt not too long ago, they trimmed off the fat, looked at their interests and labor contracts, and hit the reset button. And guess what? We still get to enjoy shopping for good deals at all Cost Cutters, and Food Pavilions all over the county. The simple truth is this. If we really want to do these companies that keep failing some good. We need to allow the market to run it’s course! If these companies go bankrupt, I know exactly what will happen! They will go to bankruptcy hearings, just like everyone else has to, while there they will look over their financial interests and labor contracts. They will cut the fat off of some of their contracts and entitlement programs, liquidate the fat that they trimmed off, and then get right back to work. It has been proven time and time again, all over the free market system. I say that if you want to help these companies, fine! Let the free market and bankruptcy courts deal with them, but don’t let these companies take our nation down with them. If we allow these kinds of things to keep happening, I can guarantee you, that the “Big 3” are not the only businesses, that the government will find in this market to dump all of our resources into. Using the government to pay for our mistakes isn’t being responsible… It’s just passing the bill over to Daddy at the restaurant. And someday, daddy’s going to run out of money.
Arnold