Silver Lining

It's always important to find the best in any situation. For instance, with the economic downturn, one small bright side is that there will be a reduction in junk mail. Not surprisingly, some of the first to go will be credit card offers and home refinance ads. Never mind that most of the credit card offers should never go out, at least the ones with your info already printed in. Don't expect to see that curtailed, though, especially since we just elected a VP from the capital of credit. More broadly, one of the functions of an economic downturn in a free market is to prune sick or wounded companies, or industries, in order to make the market more efficient.

This is, by the way, why we should let the domestic automakers die. Instead, they are likely to get $50 billion in loans. Unlike the so-called "bailout" the likelihood of the government ever getting this money back is pretty low. All of the "Big 3" are fatally wounded by staggeringly incompetent management, and bankruptcy is all but a forgone conclusion. However, it seems likely that President Elect Obama will hand them some cash.

Economic downturns are much like forest fires, destroying the dead and paving the way for new growth. Some industries, in this case junk mail, may be either trimmed back, or die entirely. However, when the fire is not allowed to do it's job, such as in California recently, or if the Big 3 are bailed out, the system starts to break down.

There is a difference between the Market Stabilization Bill and this bailout. A liquidity crunch is not the same as being fundamentally headed for bankruptcy. Furthermore, the government contributed to the liquidity crunch by it's policies. On the other hand, the government has done nothing but help the Big 3.

The problems at the Big 3 are deep and there is plenty of blame to go around. On both ends, the executives and the unions, there was a complete lack of long-term thinking. The economic rot is so deep at these companies, it is likely that the cleansing fire of bankruptcy is needed.