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Sun Nov 09, 2008 at 10:07 PM PST

Obama's Cushy Deck Chair

by Rail Electrification

 I should say first that I'm absolutely delighted by Barack Obama's election to the highest office of the land and I'm especially pleased with the selection of Joe "I commute on Acela" Biden as his second.

 HOWEVER I do believe that our new president has gained for himself the cushiest deck chair on a ship that is all but done. The Bush years have left us awash in toxic debt, running on empty in so many ways, and the vital rudder of the rule of the law has been jammed in a hard right turn no matter what hazards present themselves immediately in front of us.

 The second biggest hazard is the impending bailout of Detroit, with the first being the ridiculous unsupervised debtor in possession financing for Wall Street that our Congress got stampeded into providing.  We've been treating the insolvency problem our various institutions have as a liquidity problem and this is purposeful misdirection, picking the pockets of our children for the sake of today's unproductive wealthy class.

 Like those five investment banks that simply evaporated over the last seven months Detroit's big three are now inevitably following in their footsteps. The sooner we see this for what it is the sooner we find a safe place to beach the smoldering, sinking wreck of our economy.

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     General Motors is dying:

General Motors Corp., seeking U.S. aid to avoid collapse, said it may not have enough cash to keep operating this year and will be "significantly short" by the end of June unless the auto market improves or it adds capital.

     Ford is dying:

Cash burn is the No. 1 issue,'' Rebecca Lindland, an IHS Global Insight Inc. analyst, said in a Bloomberg Television interview. "We associate cash burn with General Motors. It has not always been a problem with Ford. That is potentially a new problem."

Chrysler is dying:

Chrysler LLC is rapidly burning through cash and being driven to prepare for a possible break-up if it can't clinch a merger with General Motors Corp or get government funding needed to ride out the economic crisis, people with knowledge of the situation said.

   There are many reasons these patients need a do not resuscitate order which we'll explore below the fold.

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Sat Nov 08, 2008 at 05:57 AM PST

Letting Detroit Fail

by Rail Electrification

  Global oil production peaked in May of 2005. Despite the "Drill baby, drill!" mantra we're never going to equal that production number even if we go at it with a will; the oil that is left is in small, or deep, or sour pools. Small means more work to find them, deep means more work to get to them, and sour means more time, capital, and energy has to be spent cleaning out sulfur and metals before they can be used. They won't be there in the volume we need and their EROI, or energy return on input, is too low to maintain our current high energy lifestyle.

  Our banking system is crashing. The bailout accomplishes nothing except injecting nearly a trillion dollars we can't afford back into the casino on lower Manhattan; any pretense of investment has long been discarded – the word 'bet' appears far too often in the financial press in conjunction with activities there. There is talk of this problem getting into the "real" economy, which is both offensive and true at the same time; businesses that actually do something are closing due to the effects of the massive fraud of Wall Street.

   Either of these effects would have killed Chrysler, Ford, and General Motors. Taken together it is obvious that it's time for a dramatic downsizing in many ways.

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