Tim Geithner related to Alan Garcia??

I’m beginning to think Tim Geithner and Alan Garcia are drinking the same Kool-Aid. In the news today:

Geithner sees ‘durable’ signs of stability “Probably why I’m doing this (tour) is to make sure we keep working with governments around the world to continue to provide enough support to lift this global economy back to a sustained pattern of growth,” he told reporters.

And in other news:

Geithner’s rhetoric is like that of Alan Garcia, who keeps claiming Peru is on track for strong GDP growth and has an iron-clad, recession-proof economy. The numbers, souped up to begin with, show otherwise (courtesy IKN) :

Chile and Peru GDP

Chile and Peru GDP

The root of the problem in the US, put simply, is that people bought houses they couldn’t afford. Without steep wage inflation, the foreclosure crisis and falling home prices may continue for some time (see Japan). For all the monetary easing (printing money) Geithner et al are doing, the only thing that achieves is to temporarily prop up the feeble balance sheets of overleveraged banks.

Tim Geithner and Alan Garcia both use optimistic rhetoric to appease the general public but sadly their policies serve rich old guys in suits before the general public.

Journalism

From Time.com:

“The legislative achievements have been stupendous — the $789 billion stimulus bill, the budget plan that is still being hammered out (and may, ultimately, include the next landmark safety-net program, universal health insurance). There has also been a cascade of new policies to address the financial crisis…”

If you’re into the 100-day-Obama-lovefest, read the complete article: Joe Klein on the President’s Impressive Performance Thus Far.

To me this is terrible journalism, akin to the Latin Business Chronicle voting Alan Garcia as Leader of the Year. Where are the hard questions journalists are supposed to ask? Take this quote from an Obama speech for example:

“It is simply not sustainable,” he said, “to have an economy where, in one year, 40% of our corporate profits came from a financial sector that was based on inflated home prices, maxed-out credit cards, overleveraged banks and overvalued assets.”

This quote is completely contradictory to the economic policies the Obama administration has implemented, which amount to nothing more than printing up collosal amounts of money to keep the big banks and big wigs on Wall Street in business.

If Obama actually believed what he said in this particular quote, he would simply let some of the big banks (and GM) go bankrupt. If you think that sounds insensitive, it could be argued that throughout history successful societies have been distinguished by having some orderly liquidation/bankruptcy process, so that smart, innovative, successful businesses can replace those that for whatever reason became obsolete and insolvent. If anyone actually believes middle class America benefits from the big banks on Wall Street’s survival, I have a mountain top in Peru I’d like to sell them.

In fairness, other than the economic policies of the Summers-Geitner team I’m not critical of anything President Obama has done in his first 100 days, and to his defense Joe Klein does say it’s a “journalistic conceit” that the President could be assessed in 100 days. But to print these type of quotes without at least questioning whether the President’s policies are in line with what he said, is just plain terrible journalism.

GM Bankruptcy

More talk today about a possible GM bankruptcy. Well, a monkey with a calculator could have figured out GM was bankrupt years ago, if you accounted for their off-balance sheet liabilities. Instead of addressing the problem then, GM stuck its head in the sand, overproduced cars and offered in-house financing to sell cars that the market couldn’t support, and thus to make their own numbers look better. The credit crisis didn’t hurt GM, GM helped create it.

On a different note, instead of fixing their disastrous labor relations GM tried to get rid of its union workforce and go to the greener pastures of Mexico. How’s that whole globalization thing working out?

Let’s have a look at a US made car, as seen on the road here in Peru, shall we:

US made car in Cusco, Peru

US made car in Cusco, Peru

Now take a look at the vast majority of cars on the road in Peru: made in Japan, Korea, and China.

Kind of says it all. The US auto industry messed up globalization beyond belief.

I’m not a happy camper about this: my brother works for GM in Europe, he and a lot of other good people might lose their jobs. This weekend I’m going to the beach. I’m writing a turnaround plan for GM, see if I won’t.