Two months ago, the “new” General Motors made possible by government bailouts, theft of shareholders’ equity for forced re-distribution to unions, and managerial change at government’s gunpoint, was held up as shining example of success – it was even repaying its debt to Uncle Sam early.
But the week of the Independence Day, GM announced its urgent need to borrow five billion dollars, to use in re-paying debt (ie. paying its VISA bill with a new MasterCard) and as cash reserves to counter anticipated slumping sales.
As Arte Johnson used to say on “Laugh-In:” v-e-r-y interesting.
If you go to a movie set, you will see perfect-looking streets, each building front rich in detail, looking as real as real can be. Yet its only façade. One thin piece of painted sheetrock propped up. Walk around behind it, there’s nothing there.
That’s GM. State pension funds in 30-plus states people are counting on, upside down in toto by trillions. Obama’s stimulus. There are signs stuck here or there with his logo on them, proclaiming the dirt mound or torn up street his “stimulus at work.” The sign-maker was stimulated. Who else? That’s this entire economy. A façade. Walk around behind it: there’s nothing there. No real job creation, no business investment, no real estate investment, nothing much happening but very un-hopeful hoarding. Where has all the money gone?
There is flight of capital. Companies like Ford and Microsoft moving hundreds of millions of dollars to investments overseas. Mega-investors like Buffett are breaking long-standing, self-imposed prohibition on investing in non-U.S. companies in foreign lands. Insurers and health care companies are quietly buying up land beyond our borders.
A major business story going unreported: the long, long list of iconic American brand companies closing countless stores, shops and restaurant locations here while expanding and opening outlets like mad in other countries. That means they are draining money out of local economies here and moving it over there. Starbucks. Wal-Mart. Etc. Can’t you hear this giant sucking sound?
There is capital on strike. An estimated $2-trillion of excess cash reserves in companies other than financial institutions – although they are hoarding rather than lending, too. And this is calculated from examining big, public companies. As somebody intimately in touch with thousands of small business owners, I can personally assure you, their reluctance to invest or spend is profound, and, in aggregate, they are likely keeping trillions more inactive.