Minyan Mailbag: GM and Globalization
Let's be careful what we wish for.
Sentiment is of course everything, for a company that loses money in its core business with no prospect to EVER increase that share against eventual domination by Chinese automakers (whenever they decide).
They function (like other legacy smoke stackers) to pay pensioners.
Net short General Motors (GM) - this company deserves to go to asterisk land.
Let's be careful what we wish for as GM is symptomatic of the larger globalization picture.
Globalization should have taken decades to work through the global system, but it didn't. Given time to adapt, the U.S. could have adjusted to lower wages and income.
But in the mid 1990's the Fed hit the panic button. It was a catch-22.
If the Fed had allowed a recession, globalization would have slowed to a pace where adjustment could take hold. But we did not have the political will to allow any pain. So the Fed spurred on the credit boom and created $1 trillion in credit a year in the U.S. Asia was allowed to grow rapidly as a result of the U.S. willingness to borrow ever more.
That credit will come home to roost at some point. Companies in the U.S. now must adjust rapidly and default on many obligations like pensions and health care.
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