More government money for Linamar

Is there any economy left that doesn't only exist due to government bailouts. Peacenik is all in favour of government intervention in and support of the economy. But Peacenik thinks there is good intervention and bad intervention.

Banks and Wall St. who have committed fraud should have the proceeds of their fraud confiscated. All those big bonuses. Take them back. And the criminals should go to jail. But what about the autoparts industry. What about Linamar. After the cash for clunkers ended, auto sales have crashed to the lowest level since 1981. What autos is Linamar going to be making parts for? Who is supposed to buy those autos?

Linamar got $44.5 million in 2006. And yesterday Linamar got $54.8 million as part of Harper's re-election strategy. Maybe it is time to start planning a new economy. A no-growth economy. Maybe it is time to invest in the future, not in the modern equivalent of buggy whips. Peacenik sees this all ending badly. Very badly. When Linamar inevitably downsizes to match the size of the real auto industry, or what is left of it, what is going to happen to all the mortgages that former Linamar employees will no longer be able to afford. Peacenik can hear the air leaking out of Guelph's real estate bubble as Peacenik types.

glayson@guelphmercury.com

GUELPH — Prime Minister Stephen Harper brought along quite the house warming gift Monday when he attended the grand opening of the Frank Hasenfratz Centre of Excellence in Manufacturing at Linamar Corporation.

Harper announced Linamar would receive from the government a $54.8 million repayable interest-free contribution to fund the development of the company’s green and fuel efficient powertrain projects.

The funding was made possible through the Automotive Initiative Fund, which will provide $250 million over five years to auto-related companies in support of strategic, large-scale research and development projects.

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Different Stories

punditman says...As promised, Punditman is trying to fill Peacenik's shoes while Peacenik is off in the wilderness at Peacenik's compound learning how to make dandelion tea or wine or whatever he feels will help him in the near-to-medium-to-long-term-to-weird future.

Since Peacenik usually covers the Ilargi front, Punditman offers up this rather bleak picture of the so-called economic recovery. Punditman is not sure what to think, but Punditman tends to think things are going to get weird in America and most places in the not-to-distant future. It is hard to dispute the following figures: 25% of US homeowners will be underwater by 2010, and 30% by 2011 (or, according to the Deutsche Bank, 50% by 2011). Punditman was just reading another article that says tent cities are appearing all over America, full of homeless unemployed. Please let me know if you are reading this on your laptop in your tent, because, while Punditman surely knows about the tent cities, Punditman would not get a reminder of this by turning on Punditman's television, would Punditman? Punditman tries not to turn on his television lately.

Meanwhile the Obama administration is spending $1 billion to build a mega-embassy in Pakistan (not to be out-done by Dubya who did the same in Iraq). At the same time, by Christmas, 1.5 million Americans will have run out of unemployment benefits while unemployment continues to rise. When in doubt, time for some more Pentagon socialism to the tune of a $636 billion defense bill. It is hard to understand how any recovery based on reality can happen amidst all this. Here's Ilargi.


Ilargi: Right. So government spending, as we've of course mentioned before, is going through roofs never dreamt of until recently. The request for a higher government debt ceiling is but one of the many signs of this. One that may be far more important is the roles played by Ginnie Mae and the FHA, roles that both have been stealthily increased by stunning percentages since the present administration took office.

The idea, undoubtedly, is to take all that's bad and suspect on Fannie Mae and Freddie Mac's elusive books, wrap it up in glitzy fancy gift paper, and throw it in a vault somewhere that still has space left on top of or beneath the toxic paper it already holds. And sure, it will look good at the surface. Just propose an opaque bad bank construction for Fannie and Freddie, so you can keep hiding the losses from view, and continue the policies that led to their inevitable demise through other (semi-private) enterprises.

There's something terribly wrong here. And since it threatens to transfer additional trillions of dollars in losses to the taxpayer, that taxpayer had better beware.

Somewhere behind these ideas is the faith that the economy, and hence home prices, will rise again. It's slightly reminiscent of Hank Paulson claiming 11 months ago that the taxpayer would actually make a healthy profit off the TARP rescues. That went well, didn’t it? We’re all much better off.

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Busted

Peacenik has been asking this question of Peacenik's self: Could Peacenik be wrong? Garth Turner is wondering the same thing. The crazy thing is that Canada may have escaped the worst of the housing bubble but in a desperate effort to re-inflate the bubble economy the powers that be are going to insure that Canada follows the U.S. and the U.K. and Spain, and everywhere else, right down the toilet. Canada already has a huge deficit. Canada already has had to bail out Canadian banks. Canadian pension plans are already woefully underfunded. Canada already has record unemployment. Is this present housing bubble going to pop? Garth thinks so. So does Peacenik.

by Garth Turner

My, my. Could I be wrong? Just a bearded broken-down piece of meat? (If you saw ‘The Wrestler’ imagine me now with flowing blonde locks, a bursting heart and tights.)

After all, my words of caution to those people rushing into real estate deals seem to be falling on deaf ears. According to the MSM, we are on the cusp of recovery and hot property is all the proof necessary. So, this week’s new housing report was heralded as wonderful news, even though starts are down by a third nationally, and have been squished by half in Ontario. Big Bank economists have been lining up at microphones, saying since car and house sales are the first things to crash when recession hits, it makes sense they’ll soar when recovery noses out of the earth.

But, car sales are still dismal. The preponderance of real estate sales are to inexperienced buyers. And today’s jobs report shows the economy’s still a dangerous thing. But, whadda I know?

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Party like it’s 2007

The argument always seems to be that things won't be as bad in Canada as they will be in the U.S. Who is pushing that meme? Not Peacenik. California has collapsed and California has a smaller deficit than Canada, and a bigger economy. Credit Card payments in Canada are now more in arrears than they are in the U.S. The U.S. is Canada's number one trading partner. The automotive industry in Canada is about to become extinct. Peacenik is hanging on, hoping Peacenik can have a summer vacation before.... what? Peacenik is hoping Punditman isn't reading these posts while Punditman is on vacation. Punditman would be disturbed.

by Garth Turner

I swear. Some days.

Commodities tanked Monday, taking the stock market with them. Serious doubts are rising about the reality of a broad-based global recovery. Merrill’s new hot-shot girl economist (HSGE) rattled Bay Street with a warning Canada’s economy will likely swoon again after it plumps a little. Thirty-six people have died from swine flu in this country. Lots more to come with unknown economic consequences of a new pandemic. And Ottawa’s budget cop is warning us the feds are walking us into huge jobs losses and $156 billion of new deficits over the next five years.

So what topped local newscasts in Toronto, Edmonton and Vancouver?

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Resist or Become Serfs

by Chris Hedges

America is devolving into a third-world nation. And if we do not immediately halt our elite's rapacious looting of the public treasury we will be left with trillions in debts, which can never be repaid, and widespread human misery which we will be helpless to ameliorate. Our anemic democracy will be replaced with a robust national police state. The elite will withdraw into heavily guarded gated communities where they will have access to security, goods and services that cannot be afforded by the rest of us. Tens of millions of people, brutally controlled, will live in perpetual poverty. This is the inevitable result of unchecked corporate capitalism. The stimulus and bailout plans are not about saving us. They are about saving them. We can resist, which means street protests, disruptions of the system and demonstrations, or become serfs.

We have been in a steady economic decline for decades. The Canadian political philosopher John Ralston Saul detailed this decline in his 1992 book "Voltaire's Bastards: The Dictatorship of Reason in the West." David Cay Johnston exposed the mirage and rot of American capitalism in "Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You With the Bill)," and David C. Korten, in "When Corporations Rule the World" and "Agenda for a New Economy," laid out corporate malfeasance and abuse. But our universities and mass media, entranced by power and naively believing that global capitalism was an unstoppable force of nature, rarely asked the right questions or gave a prominent voice to those who did. Our elites hid their incompetence and loss of control behind an arrogant facade of specialized jargon and obscure economic theories.

The lies employed to camouflage the economic decline are legion. President Ronald Reagan included 1.5 million U.S. Army, Navy, Air Force and Marine service personnel with the civilian work force to magically reduce the nation's unemployment rate by 2 percent. President Bill Clinton decided that those who had given up looking for work, or those who wanted full-time jobs but could only find part-time employment, were no longer to be counted as unemployed. This trick disappeared some 5 million unemployed from the official unemployment rolls. If you work more than 21 hours a week-most low-wage workers at places like Wal-Mart average 28 hours a week-you are counted as employed, although your real wages put you below the poverty line. Our actual unemployment rate, when you include those who have stopped looking for work and those who can only find part-time jobs, is not 8.5 percent but 15 percent. A sixth of the country is now effectively unemployed. And we are shedding jobs at a faster rate than in the months after the 1929 crash.

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punditman says...The article posits that if the Obama administration doesn't change course--and fast--America is headed towards becoming Weimar Germany. And we all know what followed. So will we see skyrocketing inflation followed by some sort of crypto fascism? Things are not getting better, and that is why Peacenik is practicing his survival skills for two weekends in a row. And that is why Punditman is worried. Is this what America's near future will look like? Scary stuff--and not just for America.

Surviving the Great Collapse

by Robert Kuttner

This economic crisis doesn't have to be a second Great Depression - if government does nearly everything right, and soon. But if government doesn't do more, and fast, this could be worse than the 1930s. Why? Three big reasons:

Finance: A Doomsday Machine. The financial system is in far worse shape than it was when the stock market crashed in October 1929. In the 1920s, there was a stock market bubble, mainly because people could play the market "on margin," borrowing to invest in stocks. There were also scams like the original Mr. Ponzi's. Like in the present decade, the Federal Reserve helped to enable the game, with low interest rates and few rules.

But today, thanks to "securitization" of loans and the ability of insiders to create exotic and unfathomable financial instruments, the speculative system makes buying stocks on margin look like child's play. In the aftermath of the crash of 2008, the process of sorting it all out and getting banks functioning again is something that markets simply cannot do.

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After Punditman's interesting post about Ann Rand yesterday, Peacenik feels almost crass to be bringing up the collapse again. When this is all over historians may view Ann Rand as the 12 Monkeys of the present crisis. (12 Monkeys reference too obscure to explain. Rent the movie)

Today the Globe and Mail headlines "IMF dashes hope of short recession." Chrysler has threatened to pull out of Canada. Nortel may be breaking up. Its funny how quickly our lovely corporate citizens turn to threats as soon as the going gets tough. AIG: save us or we'll destroy the world. GM: save us or we'll be back in the stoneages. And on and on. Reading about Ann Rand and how Alan Greenspan was part of her "collective" made Peacenik want to ralph, again. And reading that Bernie Madoff is off to jail does not make things right. There are many more Benie Madoffs who should be in jail. And there are many more Ann Rand devotees pulling the strings in government and corporate America.