By on August 24, 2012

While there is renewed chatter about a renewed GM bankruptcy, ratings agency Fitch thinks otherwise. The agency that assesses the chances of defaults by companies and countries raised GM’s default rating from BB to BB+, which is once notch below investment grade.

In a statement distributed via Reuters, Fitch says the better outlook reflects GM’s continued positive free cash flow generating capability, very low leverage, strong liquidity position, reduced pension obligations and an improved product portfolio.

Fitch complains that GM’s profitability is nowhere close to the levels of its strongest competitors. The efficiency of GM’s manufacturing operations and the pace of new product development needs to be increased. Fitch is worried about GM’s European losses, and thinks it will be “several years at least” before Europe stops being a drag on the bottom line. Fitch wags fingers at  GM’s management turnover, and notes that the underfunded status of its pension plans remains high.

Fitch thinks that GM would burn a substantial amount of cash in a downturn, but will survive it intact.

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41 Comments on “Fitch: GM Not To Go Bust Anytime Soon...”


  • avatar
    mikey

    Great!…..I’ll sleep better at night.

  • avatar
    highdesertcat

    GM will NEVER go bust! The US government won’t let it. It won’t matter who’s in power in Congress or who resides in the White House. GM will never go bust.

    If it takes another bailout to keep GM and its overseas affiliates going, GM will get whatever it needs to keep going. There’s simply too much money already pumped into GM alone to quit bailing them out.

    In that, GM has become another Fannie, Freddie or USPS. None of those will ever go bust either.

    • 0 avatar
      kamiller42

      Let’s not forget other government franchises: Amtrak and Ally Financial (aka, GMAC). I am certain there are more. With so many citizens and profitless companies sucking on the government’s teet, do we really wonder why we are running $1.5+ TRILLION deficits?

      • 0 avatar
        highdesertcat

        And more appropriately, why do so few people in the real world care?

        IMO, the answer lies in the fact that those who can, do! By that I mean, if they can afford to quit working and paying taxes to support this fallacy of never-ending bailouts, they do.

        More and more people who can, are beginning to live their lives out of the government’s reach. I recently helped pour concrete for a safe my neighbor wanted installed in his house.

        He keeps very little in the bank, but he keeps a ton of folding money in the safe (as in boxes full). I helped carry the boxes into the safe and stack them. Those were not a collection of baseball cards, I can tell you. And it could have been gold bars and ingots as well.

        If there is no paper trail there is no record. Money is fungible. That’s why I get paid in cash.

        I’m truly surprised at how few people care about this economic train we’re on and our final destination.

        And I fully expect that Obama will be readily elected for four more years, because the Americans who are getting all the freebies and handouts do not want to see this gravy train derailed.

        Remember, the deficits are only a burden on those employed who pay taxes. The rest of them don’t care.

      • 0 avatar
        WRohrl

        Not that I really want to feed trolls and keep a totally off topic rant going but…

        I must say I find it hilarious when people (especially those who were in the armed forces) come out and imply that one should avoid paying taxes on one’s earnings. How do you think the Air Force is supported? Do you still draw any kind of income from that or any kind of benefit? Are you planning on renouncing those as well? Do you and your family live completely off the grid and hunt rabbits or snakes or whatever to eat?

        Your neighbor might have a lot of money but doesn’t strike me as particularly bright. While the available safe returns on money are quite low, anything beats nothing. Even if you pay taxes on the income it still ends up being more than less. Keeping it stacked in the basement or safe or whatever means a net loss in value (spending power). Those increasing deficits tend to feed inflation, right? Even keeping it in any bank with a 0% rate is better, i.e. they will store it for you for free at no risk to you. There is no further tax on cash sitting in a bank that is from declared and taxed income (on any earned interest maybe, but not on the princpal). Or perhaps you are implying that your neighbor is in a cash business and does not declare any of his income. Nice. Does he own a liquor store, a yard service or does he deal drugs or smuggle illegals across the border?

        The people that moan the most about paying taxes are generally the ones that cry the loudest when the fire truck doesn’t show up or their Medicare bennies get cut.

        Your neighbor would be thrilled to hear that you are announcing to the world that he has a ton of cash in the house. Hopefully a robber doesn’t confuse your house with his…but if he does and someone gets hurt, remember how a policeman or paramedic is paid – from tax dollars.

        How is the deficit any more of a burden on me (one of those who pay taxes) than it is on you (who apparently does not pay taxes on your cash income). I don’t see how it affects either of our daily lives more? The tax rate at my income level has not changed recently.

        In any case, the alternative to bailing out some of the companies would result in more massive unemployment, direct and indirect. Those unemployed would be supported on the public dime. Doesn’t that cause a burden as well? Or is that not something that people are able to comprehend? I don’t necessarily agree with all of the bailouts but also realize that A) I have a voice (vote) in this whole thing and
        B) If I dislike it that much, I am free to buy a one-way ticket to anywhere I’d like…(That’s actually incorrect, most places in the world that one would like to go to will not accept you as a one-wayer, but many of the place that you would not like to end up at, will.)

      • 0 avatar
        highdesertcat

        WRohrl, I’m sorry to disappoint you but I have VERY little money since I live off my Air Force retirement, my VA disability, and my social security retirement, all of them earned and paid for during my 20-year service to our nation.

        My income is so low, I don’t even have to file! And it is all legal. And my wife’s income is so low that our joint income also does not require us to file.

        That doesn’t mean that HER family isn’t made of money and sitting on a ton of it, Okay? It is INCOME I’m talking about. A lot of people sit on a lot of money but have very little income, so they do not have to pay taxes if they do not have to file. Consult a good tax attorney for more details on how to use the law to its full extent.

        I get exactly what I am entitled to, nothing more, nothing less. Sorry to disappoint you old chum, but I never got bailed out and never received a freebie from anyone.

        Lotsa people out there just like me, including cops, state and federal workers, etc. Like them, I actually had to work for what I got and I have to live within my means.

        Many of my Democrat friends I play poker with on Wednesday nights are or were successful business owners who chose to quit working and share their extensive strategies on how to avoid having to support this welfare administration.

        And they voted for Obama! That has me rolling on the floor! They got exactly what they deserved voting for a Far Left Liberal Democrat!!! And now they don’t like it. And there are many successful Democrats who do not like Obama’s policies all across the nation. Those who can, quit contributing by quitting work.

        Several of my friends and neighbors who migrated to New Mexico from places like NYC and The Garden State did so because they also wanted to get away from oppressive taxation AND THEY ALSO VOTED FOR OBAMA!

        Just because someone voted for Obama does not mean they like his policies and social welfare since it now is they whose wealth Obama wants to take to spread around.

        One guy from NJ was a plumber for 35 years and he built his business from scratch after getting out of the Air Force in 1985. He ended up selling it, cashing out and moving to my area. His income is as low as mine but he’s got a ton of cash he hoarded. I know, I helped him built his safe.

        No one questions your belief in wanting to pay high taxes. I can respect that. Some people feel that way. High taxes for lots of benefits.

        The trouble is, it is always the people employed and paying taxes who pay for the others who have no incentive to find employment on their own and pay taxes of their own.

        What many people who could do so have done, is to disconnect from that vicious cycle of working to support others and bolster defunct businesses like GM.

        However, there is nothing that prevents YOU from donating ALL YOUR accrued wealth to the cause of socialism in America. But I suspect that even you would see the folly in that. Why lower yourself to the status of the have-nots because of your ideology? Get others to pay more, right?

        My point in commenting was that we, the people, are on the hook to bail out GM if it ever needs money again. GM will never fail. Not in the past. Not in the here and now. And not in the future.

        Just like the other entities cited that will live on forever on the public dime without a return on the taxpayer investment.

        That’s where you and I differ. I believe that GM should have been pimped like Chrysler was. Chrysler recovered. GM not so much.

      • 0 avatar
        NMGOM

        highdesertcat,

        I agree that the direct bailout may not have been the way to go. Yes, Obama did it, but GWB had been heading in that direction too. So, you’re right: somehow the USA can’t let GMA fail (^_^).

        If this whole thing had been a structured dissolution bankruptcy**, in order to return GM to its component divisions as separate companies (which they once were), that might have been healthier in the long term. Yes, it would have created more short-term pain and driven unions up a tree.

        But when the next recession comes (estimated for Fall 2013), that new GM, Chevy, Buick, Corvette, and Cadillac might have the flexibility and invigoration to weather the storm without government aid. The current GM? I’m not as sure as Fitch. After all, both Japan and Germany have a half-dozen car companies EACH, and we, being 10X larger than either, have only 3. Does that make sense?

        ** I should note that Dodge has divested itself of RAM and SRT (now separate companies or profit centers). So, someone in the Chrysler-Fiat Group must feel that smaller is better. And from the innovation leading to advanced fuel mileage in the new 2012/2013 RAM 1500 trucks (25 mpg highway), they can”t be that far off.

        ——————-

      • 0 avatar
        highdesertcat

        NMGOM, I think you’ve been reading the same articles that I have. Good show!

        And as far as Fitch and ratings are concerned, they’re meaningless. That’s why no one cared when the full faith and credit of the US was downgraded. It was meaningless!

        That old saying that, “if the US economy has a cold, the rest of the world’s economies have pneumonia” has never been more true. Whatever America is, or is not, America is still the strongest economy in the world with the best lifestyle for the majority who still have the wealth.

        Oh, yeah, we are not doing as well as we could be. We have, some say, as many as 9.2% of our workforce unemployed. But if we hold that figure to be true as an example, then we still have 90.8% of our workforce employed and paying taxes, and building their lives and buying new cars.

        My point in this discussion is 1) GM will never be allowed to fail, and 2) GM would be a viable, self-sustaining American automaker on par with Toyota and Ford, IF (and that’s the kicker), IF more people would choose to buy a GM product and forsake all others that they currently hold dear.

        Well, that’s not going to happen during my lifetime, no matter how long I live. The hope of GM and its future is directly tied to those kids playing hopscotch on the sidewalk.

        GM has to find a way to get the youth of America to want to buy GM products. GM lost my generation to the imports for a variety of reasons and now the transplants, and our children (the next generation) steered clear of domestic products altogether. GM has a fan club but there aren’t enough members to keep GM treading water for very long.

        Ford is doing the right thing. GM would do well to copy whatever Ford and Toyota are doing right.

        But until the kids of today start taking an interest in GM products and actually shelling out good money for them, the US taxpayers will continue to stand behind GM. No doubt in my mind.

        I was against Bush doing the 90-day bailout of the US auto industry but I understand that he did it so that Obama would have time to make an educated decision about it. Who knew that Obama would basically double down on bailing out the failed auto giant?

        That’s history. It was wrong then, but the decision was made against the better judgment of many industry analysts. So we’re caught in a Catch 22 with GM. We’re damned if we do, and we’re damned if we don’t. The precedence has been set and cannot be undone.

        I did want to bring up just how few Americans care about it all. Yeah, those currently unemployed are hurting. And, yeah, the middle class is shrinking because of Obama’s economic policies. Where is the incentive for American firms to produce in America when it is more advantageous to off-shore production?

        But Obama will be re-elected for four more years! And that will be because so few people actually care about anything that goes on in America as long as they are living the good life. And most of us are still living the good life.

        I don’t want to be the harbinger of bad tidings but we’re going to have a lot worse things to worry about than GM’s well-being starting this Fall and well into 2013.

        I don’t even want to go there on this forum, I would be accused of being a troll and ranting off-topic. But we’ll all know when those things get here. And it ain’t gonna be pretty.

      • 0 avatar
        WRohrl

        HDC – I’m just asking a few questions, no need to get all defensive. I’m still trying to figure out how you seem to not be aware that people paying taxes is what pays for your public service retirement, benefits, and SS (yes, an SS contribution is not technically a tax but in reality it might as well be). I get how a low income means you don’t have to file. However if everyone did as you admit to doing (paying illegal aliens cash under the table who then don’t pay any taxes) and not working (as you advocate, I understand you are retired), then your low income stream would dry up completely, right? No matter how valuable your service to this country was.
        I don’t need to consult a tax attorney to see how it works, I am well aware of tax strategies.
        Tax rates in this country at most every tier are EXTREMELY low compared to most other industrialized first-world nations. The problem with America is everyone seems to want something for nothing and feels a sense of entitlement. I have no desire to donate all my wealth to the republic and am sure I never said anything remotely like that (so please don’t say or imply that I did), however paying a fair share on par with others is not unreasonable. Living off the public dole while encouraging others to stop being productive and hiring illegal workers to pay them in cash does seem wrong to me. I don’t recall saying that I enjoy paying high taxes, mainly because I never said my taxes were high or that I even think the tax rates ARE high. You may have noticed (or not) that many of the services that are having issues are funded not by Federal taxes but by more local taxes (Fire, police, schools etc.)
        I’m also not seeing how a supposedly smart businessman such as your plumber friend thinks it’s a good idea to not earn free income on money, instead parking it in a safe in his closet or wherever. What exactly is the point of that? I really am curious, not being argumentative.

        You did avoid answering my question:
        How is the deficit any more of a burden on me (one of those who pay taxes) than it is on you (who apparently does not pay taxes on your cash income). I don’t see how it affects either of our daily lives more? I have not noticed that the effective tax rate at my income level has changed during the current administration.

        I’m also guessing that many of your buddies that moved from NY and NJ to NM to avoid the “oppressive taxation” did so to avoid the perhaps oppressive STATE/COUNTY/CITY taxation of not their income but their assets and expenditures in THOSE locales. The Federal tax level is the same in every state and the ONLY one directly controlled by the administration.

        GM and Chrysler were in pretty much the same situation. Both received money from the government. Chrysler was given to Fiat, somehow it seems to be making a comeback with vehicles designed before Fiat had anything to do with them. Neither builds many particularly exciting or desirable or aspirational products, however Toyota for example builds even fewer. Toyota just happens to have a deserved rep for building a quality product at a fair price, the occasional hiccup notwithstanding, thus a large part of their reason for continued success.

        How much was the bailout of GM? $50 Billion? I honestly don’t recall, no joke. Overall the sum of money is so small as to be almost inconsequential in the grand scheme of things. If GM was not bailed out, do you really think that the overall economy would be in better shape due to that chunk of money being available for something else? Really? Is the money gone? Not yet, not until the US sells the stock or gives it away. Is the stock going back up? Who knows, I don’t think so personally, but in the event that it does and if the Treasury actually makes a profit on it, then what would you say? I note that you did not make mention of AIG, also bailed out. Notice how the Government somehow actually made a profit there? I do recall that you had the impression a while back that the government GAVE Chrysler money in the 80′s as well. Not so. And they did not GIVE all of the money to GM as well, instead they got an equity stake in return. The stock you bought in GM went down, the stock the gov’t has is also currently down. You sold yours. The government has not yet sold, thus it has not yet recorded a loss.

        The funny thing is I do work, I have a successful business, I enjoy it, I pay a fair share while using the rules of the game set up by the republic. Since I work at my own business and have earned income as well as unearned income I am also not concerned about those stream drying up and also very much enjoy not being dependent on anyone else’s stash of cash, either the government’s or a family member’s.

      • 0 avatar
        highdesertcat

        WRohrl, I can appreciate the fact that we may have differences of opinion about how different things influence our lives. Even differences in our interpretation of how politics affect each of us is understandable.

        I am not interested in winning you over to my POV, and if you feel that paying taxes to keep others living the high life is something desirable for you, I have no problem with that.

        By all means, if you feel you are undertaxed, donate more of your personal wealth to the US Treasury. I won’t object and the 50%+% of the American people who pay NO taxes at all won’t object either.

        But you should not be prejudicial towards people, like me, who actually worked for a living at one time, paid their taxes on time and now take out of the “system” instead of paying in. People that worked earned their cookies.

        You should object to failed companies who are selectively kept alive by government bailouts and who don’t stand a snowball’s chance in hell of ever making a comeback without major amputations.

        You should object to people who live on the government dole and find no reason to ever find work or pay taxes of their own. It isn’t like there isn’t any work to be had. It’s more like the work is not in the place where the unemployed are located and they don’t want to move.

        Many are too good to do the menial work to feed themselves. Hence foodstamps. America has been spared the devastation inflicted on Europe and Asia during WWII. Even illegal Mexicans are not above doing the work that Americans refuse to do.

        Things were tougher during the days of the pioneers but it was their spirit that built America to what it is today. It wasn’t the freeloaders with their hands out that made America what it is today.

        And speaking of illegal alien Mexicans. If I CONTRACT someone to do a job for me, I am under NO obligation for anything but to pay them the wages for the work performed. They’re not my employees and if they decide not to pay taxes on their earned income in America, that’s their business.

        It may interest you to know that many AMERICAN contractors also do not declare their income they receive in cash. That’s why so many people keep so much cash in their possession instead of in the bank where the IRS can keep track of it.

        I’m not being defensive. But when you start your dissertation with:

        “Not that I really want to feed trolls and keep a totally off topic rant going but…”

        That drops your credibility rating down to zero in my book, along with all the other know-it-alls who comment just for some perverse reason to have a mentalorgasm.

      • 0 avatar
        bd2

        @kamiller42

        You don’t think the auto industry as a while sucks at the govt.’s teat w/ publically financed roads, bridges and tunnels?

        Including the interstate highway system that was started under Eisenhower.

        And the airline industry also gets its fair share of govt. subsidies w/ the airtraffic controller system and publicly financed airports.

        And let’s forget the subsidy that goes into ensuring a flow of fuel for all those cars and planes – from the US military presence in the Middle East to tax credits for oil exploration.

        Also a bit humorous that people keep mentioning Ally/GMAC when Ford Credit received more in bailout $$.

    • 0 avatar
      oldfatandrich

      highdesertcat, you have this absolutely right. You can also add The First National City Bank of New York (Citibank),Bank of America and JP Morgan Chase to the list. And as to the “new” General Motors—existing as it does by the grace of its robe holder the Treasury—how many of their products do people aspire to own: a Corvette ? a Camaro ? a CTS-V ? The remainder are churned out to keep the UAW membership in cigarettes and beer.

      • 0 avatar
        mikey

        I don’t smoke….but the Beer?…I’m good with that….thanks.

      • 0 avatar
        highdesertcat

        oldfatandrich, as you may already know I was, and am, against bailouts, hand outs and nationalization of any kind to anyone at anytime anywhere.

        Businesses should succeed or fail on their own merits. There were many times in the distant past when I was building my house that I was sweating paying my illegal aliens at the end of the week and no one bailed me out.

        I hocked a lot of things of value, near and dear to me, just to pay them until my retirement money came in next payday or the people who owed me money forked over the cash.

        That said, we, the people, are stuck with GM and all the other teat suckers like Fannie and Freddie and the USPS. That’s not only a fact but a harsh reality as well.

    • 0 avatar
      L'avventura

      Fitch is rating GM’s bonds. Which is a different issue from if they would be bailed out again. Remember, during the last bail-out bond holders were the one’s being screwed over.

      The fact that Fitch gives it a BB+ means that they don’t think that GM will get another bailout. For comparison, Fitch gives Ford a BBB- IIRC.

      Obviously, a slow-down in the Chinese market is very worrying. But GM is actually in very good financial shape since most of their legacy costs and debt have been wiped with the bailout.

  • avatar
    NormSV650

    The Truth! GM will never be liquidated in our time so highcat and Buickman along with ttac will always have material.

  • avatar
    billfrombuckhead

    This whole Forbes article reeks of naked short selling.

  • avatar
    mike978

    Hopefully now that an independent company that specialises in this area has come to the conclusion that GM is unlikely to go bankrupt again we can stop hearing from some of the B&B who contributed to the “chatter”. Lets just deal in facts and not fantasy.

    Fitch’s assessment seems spot-on with both the pros and cons (less than optimal management, efficiency etc).

    • 0 avatar
      bd2

      That Forbes piece was nothing more than a political hit-piece and was laughable in its attempt at automotive industry and financial analysis, but I’m sure the audience that it was geared for lapped it up as “gospel.”

  • avatar
    John

    Enron’s bonds were rated investment grade by an independent firm (Arthur Anderson), up til the day Enron went bankrupt.

    • 0 avatar
      mike978

      Agreed, but Enron management engaged in major fraud. Is that what you think GM management is doing? That is different from just being inept or managing badly. At some point people just have to accept legally binding financial accounts and independent assessment unless there is evidence to the contrary. Otherwise we get into theories and assertions that can never be dis-proven even if the available evidence disproves it. I can understand why some people want GM to fail or think they should never have been bailed out. But it is another thing to willfully ignore the data that they are indeed profitable (at this time) and are unlikely to go bankrupt.

  • avatar
    turbosaab

    Fitch said the same thing last time. Have their ratings ever predicted anything that wasn’t already obvious?

    • 0 avatar
      Pch101

      “Fitch said the same thing last time.”

      It would appear that you didn’t bother to read what they said the last time.

      The truth of the matter is that Fitch and the other bond rating agencies first downgraded the old GM to junk status in 2005, and then kept downgrading them from there. That was four years before the bankruptcy, and almost two years before the start of the recession.

  • avatar
    Mike Kelley

    Given recent history, I would rate GM’s bonds at least as safe as California municipal bonds.

  • avatar
    Polar Bear

    The US election season is on? God help us all. Now the comment field will be full of politics for months.

    Back to topic. How long before GM has used up the boost from free government money and reduced debt from going bankrupt? How long before GM is back to normal? 5 years? 3 years? That is when we will see if the new GM is any better than the old GM.

  • avatar
    -Cole-

    Believers will put up with anything.

  • avatar
    billfrombuckhead

    All this “government shouldn’t be inn free markests” is out of touch with reality. It sounds good, truthy even but is so much ideological unicorn crap. None of our frenemie trade partners believe in free markets. Japan’s recent announcement the Japanese government would help Toyota move production abroad after bailing out and restructuring their flat screen TV industry shows what a fantasy libertarian ideals are in the real world.
    http://www.thetruthaboutcars.com/2012/08/lexus-could-move-production-stateside-japanese-government-ready-to-help/

    • 0 avatar
      bd2

      All this “government shouldn’t be in free markets” is also out of touch w/ the REALTIES of the free markets.

      W/o the govt. setting up proper regulations and oversight – there is NO transparency which is required for efficient and smoothly operating markets.

      And instead we end up w/ market manipulation (see Eron’s maipulation of the energy markets) or worse (see the subprime/derivatives economic meltdown).

      The German govt. has had a hand in helping its automotive industry (as do the Chinese and Brazilian govts.) and various German governmental entities own shares of VW and BMW (and 16% of Daimler is owned by sovereign funds from the UAW and Kuwait).

  • avatar
    oboylepr

    GM is already dead. The only thing outstanding is the funeral date. Good riddance to bad rubbish.

    • 0 avatar
      mike978

      This is the sort of comment I complained about earlier. I can understand and respect your view that GM should be dead, shouldn`t have been bailed out and is a bad company. However to say they are dead is just flat wrong. Can you please be fact based?

  • avatar
    DweezilSFV

    Fitch ? Right, really reliable. Worldcom, Enron, Freemont Investments, Fannie Mae and Freddie Mac, CDOs, [toxic] mortgage backed securities with AAA ratings. Sure, I trust their judgement. And Moodys and Standard and Poors. These ratings experts were complicit in the housing and financial bubble and bust. I really want to run out now and lard up my “portfolio” with GM stock now Fitch has weighed in.
    Having GM junk in my driveway is enough. Not interested in their junk bonds in my financial garage.

    • 0 avatar
      highdesertcat

      DweezilSFV, I’m with you on this.

      Fitch and ratings from the others are meaningless. No one cared when the full faith and credit of the US was downgraded. It was meaningless! The US is still the best economy to invest in even if its credit rating was downgraded.

      Who’ya gonna call and invest in as an investor? Japan? China? Europe? No way!

      Good old America is where everyone puts their money in spite of its lowered credit rating.

  • avatar
    billfrombuckhead

    I hope the short sellers get routed at some point. This whole Forbes article is corrupt. They have no basis fact but are trying to drive the stock down using political sentiment.

    I’m a small businessman and I would be close to nothing without government. Remeber those Jews before WW2 who had no country and no country would take them in? That’s why they formed Israel. Ask the Palestinians and Roma if they wished they had a powerful government.

  • avatar
    chicagoland

    Why do GM bashers convieniently forget about bailouts of AIG, Bank of America, and MorganStanley?

    Also, forget about the Iraq/Afgan war costs? Includes continuing Veterans’ benefits and long term care for wounded warriors? The War is #1 major contributer to the debt.

    • 0 avatar
      bd2

      They also conveniently forget that Ford Credit received more in bailout funds than Ally/GMAC and that Ford also received $5.9B in basically zero interest loans from the Feds.

  • avatar
    billfrombuckhead

    What’s going on with many websites is “cafeteria capitalism”. People pick out the parts of laissez-faire capitalism that helps their favorite political parties, companies, products or themselves while rejecting consistency with those principles. The Japanese buying down the yen is one such inconsistency.

    “Although not a proponent of mercantilism, noted 18th century Scottish economist Adam Smith (1723-1790) was responsible for coining the term “mercantile system.” Mercantilism was in opposition to Smith’s concepts of free trade, free enterprise, and the free movement of people and goods. In other words, it went against the precepts of a laissez-faire economy. One of the key assertions of mercantilism is that national wealth will come through the import and accumulation of gold or other precious metals such as silver. Smith was highly critical of this theory of wealth and he clearly understood the class bias in the merchant system that supported it. In fact, Smith expressed great concern about colonialism and the monopoly trade routes instituted by the merchant class, which often worked against the economic interests of the citizenry.

    Mercantilism as an economic system is generally held in low regard today. Japan, however, with its structural barriers to foreign competition and its discouragement of foreign direct investment has been accused of practicing a late 20th century form of mercantilism.”

    Read more: Mercantilism http://www.referenceforbusiness.com/encyclopedia/Man-Mix/Mercantilism.html#ixzz24cb69rqz

  • avatar
    doctor olds

    @highdesertcat- so, after all your bitching about how much the GM bailout will cost, it turns out you don’t even pay taxes! You’re not even chipping in the few bucks it MIGHT cost the average taxpayer after all is said and done. ridiculous

    • 0 avatar
      highdesertcat

      Olds, it’s true that my personal income is so low that I do not even have to file after I retired from the military in 1985. Most retirees are that way. Six guys I play poker with are that way.

      If I want to “chip in” as you say, I’ll buy a new car from them. I bought a 2012 Jeep Grand Cherokee last year. My contribution to Chrysler’s bailout? You decide.

      And until her family sold their realty business last year, my wife and the business paid more than enough in taxes to cover us all because the income of the business was more than a million a year and their tax-deductible expenses, after they laid off all the employees except family, didn’t even make a dent in the taxes they had to pay.

      Her brother-in-law is a retired tax attorney who handled all the business tax issues. He really has his act together, citing psalm and verse of the US tax code for each business deduction. Still, they paid a lot!

      Since she and her family sold the business last year, her official income of record and mine combined, including both our social security checks, still is below the magic number that would require us to file. We’re trying to keep it that way.

      If my teaching gig next month puts me over the limit, I’ll donate all of it to the Salvation Army.

      Our children pay enough to cover all our retirement income each month since they and their spouses each have a household income over $250K/year. Way over.

      I didn’t write the tax code. I just follow it. The key is not to keep all your money in a bank account that can easily be monitored.

      I learned that from my Democrat friends who have painstakingly sheltered all their wealth and keep cash money and precious metals on hand. Democrats know a lot about the tax code. More so than my Republican buddies who are caught in the income tax trap and pay through the nose. Sometimes you can’t get away from it, like when you’re civil service or don’t have your own business.

      All this doesn’t mean my wife and I are dead broke. I’ve learned a lot from the old hands at the tax game how to shelter, shelter, shelter.

      You know, it’s not how much you make. It’s how much you get to keep. I always wonder about the old codgers who receive even less money than I do each month but still seem to walk around with lots of folding money in their wallets and are the most generous people I know, spreading their own wealth around.

      The tax and social security laws make it unprofitable for people my age to officially go to work again without losing more than they make. Not only would they lose their free time but also part of their social security retirement income. Just not worth it.

      And, yes, I’m still against bailouts, handouts, and nationalization for anyone, any time, anywhere. Businesses should succeed or fail on their own merits.

      At least Chrysler made a comeback, now that it is foreign-owned. We could have done the same for GM, but didn’t. Too bad. So sad.


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