>If you really want to do a piece-by-piece critique of the
>article as oppose to just acknowleging that it was written by
>sombody that was persuing their own interests - feel free.
I can't promise anything as I have to work in the morning and have had a 12 pack so far, but I will do what I can.
>On March 15th, 2005, (the ides of March) we may have just
>witnessed the beginning of the death of our financial system
>as General Motors stock took a nosedive from $34/share down to
>It does not seem like much (GM down just over 10% in one day),
>but as of March 17th, the stock is down to $28.35, and the
>market cap is down to $16 billion. (GM is down nearly 18% for
First of all this is all speculation. Until the presentation of GM's numbers for the first and second quarters of this year this guy is going off of inference and implication. And while your and his handy response is some Enronian like scheme of debt hiding, you can't hide the amount of money this guy is talking about.
>What does this mean?
>GM's stock price decline is like a dagger right into the heart
>of the U.S. financial system, and the dollar itself!
While GM is a large company (the largest American car maker I believe) and his implication is possible, its worse than the worse case scenario... its like the worst case scenario without anyone saying "Hey... guys! This is really bad!" What this guy is proposing that is going to happen is the equivalent of a truck going down a mountian, and no one having the simple forsight to even press the brake a little.
>Why did it happen?
>Apparently, someone in power did the equivalent of shouting
>"the emperor has no clothes" and people woke up, and are
>beginning to see more clearly! The media decided it was time
>to expose the truth that GM is nearly insolvent, and will
>expect to lose $1.50/share in the first quarter alone!
>But the story is worse than that! GM has $300 billion in debt
>...and has a market cap, now, of $16 billion. See the problem
>there? The bondholders could buy the company nearly 20 times
>over if they used their money to buy stock instead of loan it
>to the company. The implication is clear--that GM is headed
>towards bankruptcy, and will default on the bondholders, who
>will then own a company worth less than $16 billion dollars!
Again, as I just said, what this paragraph implies is that GM if the situation is as bad as they say it is, that GM isn't going to do anything to try and soften the fall, or even more importantly any creditors of GM are going to try to soften the fall.
Well, what will happen? The creditors of GM will break their necks to refinance and reorganize GM's debt into a manageable situation. Why? Because companies that go into bankruptcy don't pay back debts like companies that don't go into bankruptcy.
While these numbers may just be out of my ass, if I remember correctly debt repayment of companies that go into bankruptcy is something like 31%. Now, if you're a creditor to GM, you want to get more than just 31% of your investment back. You want to get all of it back and then some.
So what do you do? You change the payment schedule, you adjust the interest rate and you consolidate some of your credits with GM to make sure that it can pay you back. You might shake up the board, and insist that someone representing you is the chair or something like that... but under no circumstances do you want GM to go bankrupt... why? Because you'd have to write off 300 billion dollars in debt.
>For every one point that interest rates rise, refinancing GM's
>debt will cost an additional $3 billion in annual interest
>payments -- money that they clearly do not have! Where is GM
>going to get another $3 to $6 to $9 billion as interest rates
>rise by 1%, 2%, and 3% more? Selling cars? Nope. Selling
>stock? Unlikely in this market! Borrowing more? From who? The
>U.S. government itself is propping up this bond market, and
>there are no buyers even for U.S. bonds, and there haven't
>been for months now!
Conjecture and bullshit this paragraph is says wise Yoda.
First of all to expect that the debt repayment would stay the same in a worst case scenario is ignorant (see last paragraph) further, where is he getting this expectation that we are going to raise interest rates by 3%?
And as for buyers for US Bonds, hes basically lying. US bonds are still rated at buy, and he had better hope that there are buyers for US bonds, otherwise the interest rates he hints at would already be through the roof, making his house payment unpayable (see my last post to FireBrand)
>$300 billion going belly up is a big enough event to topple
>the U.S. government! How so? It will shake the confidence in
>the entire financial system. Companies as big as GM are not
>supposed to go bankrupt in our "normal" world. They are
>"supposed" to be "too big to fail".
Again, all hyperbole and bullshit, this guy is speculating so much I want to call him a 49er and try to sell him a pair of jeans. While a GM bankruptcy is a bad bad situation, it won't wreck the federal government, and the entire financial system. Will it cause a big shock (again, even postulating that it could happen) yes. Will it destroy the government?
Not in your or mine own wildest dreams.
The Federal Government can bail out GM if necessary. Thats what happens when you can talk about trillions of dollars in debt and have it only be 4.6% of your GNP.
>The value of the "official" U.S. gold hoard of 261 million
>oz., at $440/oz. is only a mere $115 billion.
What does this have to do with anything? This guy is simply trying to scare y'all into some 'Deep Impact' like fear that we are going to be destroyed by the restructuring of GM's debt. And first of all it won't happen, and secondly the goverments gold hoard doesn't matter because we haven't been off the gold/silver/anything standard for years.
Now, does this create a tricky situation? Yes. It basically means that the green in your wallet only has value because you and others think it does.
Now if other countries thought that the dollar didn't have value, you know what would happen?
Life would resemble the dark ages over night.
And there are enough smart people working in the global financial markets who if only for selfish self preservation can't let that happen. So... again... its not gonna happen like this Chicken little wants you to think it is.
>See what this $300 billion blow-up will mean? Imagine the
>financial chaos as a pile of wealth almost three times larger
>than the current value of the U.S. "official" gold hoard
Who gives a fuck about the US gold hoard? Like I said earlier, our gold hoard doesn't have anything to do with our currency, and what really matters are the T-bills owned by China, Japan, American citizens and the EU. This guy is a fucking sham, and I feel like I Am wasting my time with this pitiful shit.
>The annual deficit is around $700 billion. How will the U.S.
>government sell bonds to finance the deficit if bondholders
>are getting wiped out?
>If the government can't sell bonds while running a deficit,
>then the government must simply be printing money to fund the
>deficit--and they are, as can be seen in the rate of growth of
>the money supply, M3! Therefore, inflation is raging, and
>interest rates must keep pace, which is why GM is doomed!
The government is selling bonds. China continues to buy mountians of American debt. This guy is a fucking sham.
>Interest rates must head up, as confidence in the U.S. dollar
>bond market will be shaken like a tree in a hurricane!
Ooooh! Now he gets all poetic and shit! Like a tree in a hurricane! Isn't that just heavy imagery.
What this guy is basically saying is that the world is going to knowingly toss itself into a global economic catastrophy that we can't even use the depression of the 30's as a sounding board on. What this guy is saying is that all of the American bond holders are going to bankrupt the American government first at their own peril, and secondly at their neighbors peril.
So, lets get in on some doomsday shit...
Lets say that GM does file for bankruptcy, and in a failed attempt the American government fucks up the dollar while trying to buy out GM's debt. In a run China, Korea and Russia sell call in their t-bills. The run on t-bills results in this guys fucking apocalyptic 90% fall in the Dollar.
As I am sure you know being all educated and everything... China's currency is tied to America's. Now the compexities of this, and how it has pushed us into our current position is heavy, but they couldn't just say overnight "well... the Yuan (Chinas currency) isn't tied to the dollar any more" so... in result, China's currency would fall by 90% likewise.
Bankrupting them too.
Would you willingly bankrupt yourself?
I didn't think so.
This guy is a fucking sham.
S.ean | Geezers need excitement. If their lives don't provide it they incite violence. Common sense. Simple common sense.