I wrote in 2009
Megan McArdle articulates some of what I have been hearing about GM.
http://meganmcardle.theatlantic.com/archives/2009/03/gm_is_toast.php
Namely, that now that we know GM is toast we should stop bailing them out and head for Chapter 11 bankruptcy. After all why throw good money after bad?
There may be good reasons for supporting bankruptcy for GM but this is not one of them. First and foremost, we ARE going to throw good money after bad. There is no way around this. The first bailout was throwing good money after bad.
. . . the question is not should GM go bankrupt but should GM go bankrupt – now.
Today from the WSJ
GM, the largest U.S. vehicle seller, said its sales rose to 168,670 cars and light trucks in November from 150,676 a year ago.
Among the four continuing GM brands, Buick and GMC sales climbed 36% and 30%, respectively. Sales at the larger Chevrolet jumped 18% and rose 21% at Cadillac.
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Wednesday ~ December 1st, 2010 at 2:35 pm
sardonic_sob
You weren’t wrong. You just weren’t as right as you thought you were, as quickly as you thought you’d be. GM is still a Potemkin entity, with new cardboard facades held onto the carcass of the old beast with bailing wire and chewing gum. And the taxpayers will never get out of it what they put into it, especially if you count the massive tax breaks it was allowed to retain through the bankruptcy process in violation of decades of generally accepted practice.
Tuesday ~ December 7th, 2010 at 9:02 am
Axel
Very interesting post, that looks back at how opinions can be both sensible and wrong. Even if it should not be a reason to fall into scepticism and political inaction.
Can I suggest to put in perspective this GM story (on which you consensualy and sensibly looked right but proved mildly wrong) with the creative destruction post.
GM bailout is in my view a good example of a priori too costly ‘destruction’ that has been postponed many times. How costly is it to influence this way the shumpeter’s praised economic dynamics ? Will GM ever be able to avoid capital misallocation ?
What were the positive (in a general recession context) of this bail out ? How can one assess the trade off between smoothing the recession path (bail out) vs future likely continuing GM capital misallocation/’creation’ tax on the overall economy ?