Link: http://www.cbc.ca/money/story/2008/11/19/usautos.html?ref=rss
Summary
Currently, automakers are facing a dangerous decline, which would lead them to bankruptcy. The Republican U.S senators, with White house support, provided a last minute plan to give $25 billion US dollars to bail out U.S automakers. If the plan succeeds, then automakers will have enough money to pass before the end of the week. Unfortunately, it is predicted that the bailout would have to wait till the new Barack Obama administration takes over in January. Also, another issue had been brought up about the fact that the government had chosen to bailout banks, but not the automakers. "Barney Frank asked how the government could justify a bailout for banks and insurers,but not the automakers."
Chapter 3 The Role of Government in a Market Economy
This article ties into the chapter of the role of government in a market economy perfectly. As stated in the summary, automakers such as GM, Ford MotorCo., and Chrysler are now in desparate need for a bailout from the government. Keep in mind, these automakers are privately owned, which means that government does not own it. In this type of issue, even though the automakers' company is privately owned, government can intervene when issues get out of hand. Right now, the government is debating whether they should bailout these automakers. If the government does bailout these companies, there would be positive third party affects. Current employees would be able to keep their job and earn a living. It would somewhat avoid anymore declining in economy, but if it fails, many people will be laid off and economy would decline even more.
Reflection
I think that government will bailout these automakers. There are many news ads on this article and everyone is aware of the situation. Public opinions may make an impact on the government's decision. The reason is because if they don't, more people will be laid off, which affects the economy negatively. People would avoid purchasing any goods, due to the lack of income. Also, I agree with Barney Franks's statement. If the government is willing to bailout bank companies, why not GM, Ford Motors, or Chrysler? These are all big companies that make big money. Thus, it would be the best interest for everyone if the government initiates the $25 billion bailout.
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4 comments:
I also believe that the government will eventually grant the bailout to the automakers. The government is under extreme scrutiny because of the economy's current condition. It would be another step in the right direction in trying to fix the economic condition. In order for the economy to be on stable ground again, customers must purchase goods and if there are no automakers making cars then how can u expect customers to buy their goods? The government must intervene when it is necessary. These aren't small companies either, they are very large companies that are well known around the world. If they were to go bankrupt, then it wouldn't be soon for other companies to become bankrupt.
The U.S. government will grant the bailout to the automakers. It's a highly predicable fact. The automotive industry is key for a lot of sectors in the American economy. Giant processing plants requiring energy and parts will need to be in motion so that a large proportion of citizens will still be employed. The big three automotive companies, while corrupt, are a key player in the improvement of the global recession. If these companies declare bankruptcy, I can't see another possibility for the U.S. economy to regain strength. In looking back, there is a way for their economy to regain strength and given their current situation, is a viable option. The Depression in 1929 was eased by the preparation of war. Grim, but nonetheless potentially parallel to our situation.
Alex N.
Although I feel the government is going to grant the bail to all three companies, it doesn't seem smart to bailout GM. This is because of the fact that GM has the largest debt at $38.7 billion, which, in itself covers the $25 billion asked by all 3 carmakers. If the government decides give the grant, they better be sure GM can make up for the debt, because if not, they might as well be draining the billions of dollars down the sink; thus, putting themselves in a bigger financial hole than they were about 4 months ago.
Raymond Chen
Block E
Econ 12
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