Bailouts Explained

That is simple humor for a simple mind.

That is simple humor for a simple mind.

Glad you enjoyed it. ;-)

I do agree that it's not very compelling, though. The argument seemed to amount to "if we bail out Detroit, at least get cars for our money". It's true but beside the point - Toyota sells better cars for less money anyway, with no need of bailouts.

There's only one good reason for rescuing any company in this crisis: the fear that if they collapse, it will hurt the overall economy so much that it's worse than the cost of the bailout. I'm willing to believe that this is true for car companies (I've heard various scenarios), but it has absolutely nothing to do with whether they sell cars or derivatives.

Screwed again by geo-locking. Was it a good video? :-)

#2, uh, you missed it. The argument is that Detroit sells tangible goods. Wall street does not. Detroit is understandable to common sense. Wall street is not. Detroit's losses are traceable. Wall Street's are not. But Wall Street got the big money because otherwise our congress-critters would run the risk of looking stupid when they fail to properly analyze Wall Street, but they can make reasonable attempts to analyze Detroit.

Simplistic. Perhaps. A grain of truth. Perhaps. But really good for a two minute analysis.

My first American car was also a Gremlin. At 300 miles the interior trim was already falling off. Brakes were either locked or free. I got headaches from the out-gassing from the interior plastics. But, as John says, it did at least get me around LA.

The argument is that Detroit sells tangible goods. Wall street does not. Detroit is understandable to common sense. Wall street is not. Detroit's losses are traceable. Wall Street's are not. But Wall Street got the big money because otherwise our congress-critters would run the risk of looking stupid when they fail to properly analyze Wall Street, but they can make reasonable attempts to analyze Detroit.

This still doesn't seem like an argument in favor of bailing out Detroit. It's a reasonable argument that the auto industry can be analyzed and that Congress therefore ought to be able to figure out whether a bailout is justified (whereas for Wall Street they just had to take someone else's word for it). However, Stewart's "give them the money" conclusion just doesn't follow. Just because you're willing to trust potentially biased sources regarding something that's beyond your power to analyze, it doesn't follow that you should be equally happy to trust potentially biased sources regarding something you can indeed understand.

I agree that it's quite a good two-minute analysis, except for the last few sentences.

Winawer: ditto, except :(

It's not an argument for the bailout, or against - it's a comedic framing of how the players in the drama appear to be really (or subconsciously) presenting their 'serious' take on the issues. Or, that both issues are being argued trivially.

The Way We Live Now
The Remedist
By ROBERT SKIDELSKY
Published: December 12, 2008

Among the most astonishing statements to be made by any policymaker in recent years was Alan Greenspan's admission this autumn that the regime of deregulation he oversaw as chairman of the Federal Reserve was based on a "flaw": he had overestimated the ability of a free market to self-correct and had missed the self-destructive power of deregulated mortgage lending. The "whole intellectual edifice," he said, "collapsed in the summer of last year...."

Keynes wrote that a "sound banker" is one who, "when he is ruined, is ruined in a conventional and orthodox way." (Today, you might add a further convention -- the belief that mathematics can conjure certainty out of uncertainty.)...

I'd say part of the point is that people are beginning to question if the bailout of Wall Street was justified, because the companies are not lending money like they said they would if the liquidity problem was solved. Are we getting anything for that money? Or are we just helping out people who are still rolling in dough from the profits made selling those instruments? There is little evidence that financial markets have loosened up. Haven't you gotten the new mailing telling you what your credit card company thinks is a "normal" interest rate these days should you be foolish enough to borrow from them?

The issue with Detroit is also a much bigger deal than just Michigan and Ohio, but some of the politicians talking about letting the Big Three go through "reorganization" have no clue what the effect would be on their southern states. You see, Detroit can compete right now if it used bankruptcy to shed its pension and retiree medical costs by turning them over to the pension guarantee fund. However, that would mean disaster for Florida and Arizona and other retirement havens, because those people (including a huge number of retired executives and engineers, not just "labor") would suddenly be very poor and dependent on Medicaid for health care.