As IF Times

link UPDATE 1-GM to acquire AmeriCredit for $3.5 bln | Reuters.

Unless you happen to be paying attention, this news item would be just another of those boring finance stories.  If you whittle the story down to the basic elements, then an amusing scenario becomes more obvious. 

As some may recall, not too long ago, General Motors wound up in a bit of a financial pickle.  The short story is, they were not selling enough cars at  prices that people were willing  to pay for their products.  Not that they didn’t make good products, it was just that for a similar amount of  money, many other manufacturers offered arguably better products.  General Motors was saddled with a legacy of costs that eventually overwhelmed the company.  Principally, the main culprits were the very generous pay and benefits packages given to working and retired employees.   You would often hear the joke that GM was more of an extended care and benefits company than an automobile company.

So along with large debt payments to bondholders, GM was unable to pay it’s bills with the income from car sales.  Luckily, the federal government  decided that the fate of GM was tied to the fate of many workers and therefore America.  They would be bailed out of their financial woes.  The amount of money involved was so big that only governments had the might to write the big cheque.  Ultimately with all of the restructuring, the government OWNS GM.  So now, GM is now Government Motors, or the people’s car company.  This solved a short term debt problem, but the company still had to sell cars. 

Since the economy overall is still not as robust as the administration would have you believe with unemployment still ratcheting upwards, people didn’t have the capacity to finance car purchases.  Ironically, many of the unemployed became that way because GM and Chrysler were forced to close down hundreds of car dealers throwing those people out of work.  Todays’ news is that GM will spend $3.5 billion dollars to buy a company involved in the financing of cars.   Not just anybody, but particularly people with ‘subprime’ credit.  Hmm, this sounds oddly familiar.  In case anyone noticed, the money used to purchase AmeriCredit is actually government money, or public money.  So in essence, the public is subsidizing other people to buy cars that they otherwise couldn’t afford with their own money.  I think in real life, that’s called a circle jerk.  Nevertheless, the UAW union at GM, also a major stakeholder post restructuring, have managed to keep their members employed albeit at the expense of everyone else.  Bernie Madoff in his ponzi schemes at least bilked the rich.  In this latest government scheme, the people who can least afford to pay are getting roped in.

This is but the first of these types of ingenious rescue schemes to see the light of day.  In scenarios throughout the country, the same dilemna will surface again as public pensions for teachers,postal workers, firemen, police etc have to be funded.  An agency will have to be established in order to offer financing to people who cannot otherwise afford teachers, fire or police protection: some means of allowing people to pay money regularly in order to recieve these services…hmm how to do that…if only there was a way…

link Illinois Failures Go Nationwide Under Obama – IBD – Investors.com.

An eye opening article to some, but the issues are well known to those who follow these kinds of things.  When I am roped into a conversation which veers towards American politics, invariably I am surrounded by those who still believe that the Obama team has what it takes to turn the U.S. economy around.  It’s often a waste of time to have them point out ANY and I mean ANY policies implemented since election that have been effective in reviving the U.S. economy.

What’s interesting is that now, 2 years after election when policies clearly are pushing the U.S. deeper into all kinds of long term messes, the retorts have changed to profess that  time is what is needed to allow initiatives to work out.  While Canadians may be excused for naivete and adherence to ideological tenets, Americans should know better and this is not just partisan opinion.  The writer, Shlafly, clearly shows the results of what years of mismanagement and misguided policies can do to a region.

“…Illinois was the stomping ground for years for Obama, his top advisers Rahm Emanuel, Valerie Jarrett and David Axelrod, and his appointees such as Secretary of Education Arne Duncan. After they promoted themselves to Washington to run the country, other Obama associates who didn’t make the cut continued to run Illinois into the ground, as the Illinois unemployment rate jumped from less than 5% to nearly 11%…”

and,

“…Under years of Democratic leadership, Illinois has refused to honor its obligations, cut spending or trim its shockingly large deficit, which at $12 billion per year approaches nearly half its budget. As a result, Illinois’ credit rating has been downgraded and it pays a massive amount in interest on its loans…”

People have the unique opportunity to peer into the future like Ebeneezer Scrooge and can see the Ghost of What Will Be if this star studded team of ideologues is allowed to run the entire nation the way they’ve run Illinois for the past generation.  But to many ideologues, it’s as if none of this matters and this curious aspect of human psychology is fascinating as it is infuriating.  It’s as if reality is an abstract notion that only affects other people.  We’ve all heard of Stockholm syndrome ( http://en.wikipedia.org/wiki/Stockholm_syndrome )wherein the hostages grow to identify and sympathize with their captors during  captivity.  It looks like this phenomenon is occurring on a massive scale but which future historians will dub Illinois Syndrome.

Or perhaps, it’s as simple as people just want to believe. Many years ago, one of the classic films of all time, The Music Man, featured Robert Preston playing the role of the con man who went from town to town selling dreams of musical talent to kids.  The underlying theme was  the boundless optimism of small town America and their faith in their fellow man.  Of course this was set during a much simpler time in America, but the boundless sense of faith in public figures still exists today despite well founded cynicism. 

It’d be a shame to see people’s good nature taken advantage of.