it's been downhill ever since the discontinued the Edsel

I know - let's short AAPL some more!

Ford is the strong one that didnt need Federal help. Then again my bet is that all of them will be about this ugly if not worse, that includes Toyota and Honda as well as Chrysler and GM.
Dirk van Dijk

Toyota reported -30%+

Copied from NC comments.

January 5, 2009 3:49 AM

Blissex said...
His point is different: the US is pretty close to the end of its rope, in terms of relying on the rest of the world for financing. He sees it as a no-brainer that a massive fiscal deficits, whether they are narrowly successful or not, will relatively soon (he estimates 2 to 5 years) lead to a collapse in prices of dollar denominated assets.»

"Keynesian" anti depression tactics are not universally applicable, they are based on the assumption that there is underused production capacity due to excessively low demand.

Whether the USA or the UK and other big consuming, big importing economies have any underused production capacity as opposed to underused consumption is not that clear.

In particular because the industrial policy of both USA and UK has been to export primary and secondary industries and keep only tertiary industry that depends on demand generated by the former, not by consumers, for its sales.

Some decades ago the elites of USA, UK and others decided to pursue an unofficial "industrial policy", which was to eliminate existing unionized manufacturing industries, exporting them to countries with lots of non union labor, and to push instead on non unionized service industries (finance, software, movies, ...) as well as keeping some military/space manufacturing sector.

This resulted in a strategy which I call "headquarterization" where countries like the USA and the UK come "capitals" of the world, with company headquarters, served by typical "capital city" service industries like finance, law, business consulting, marketing, public relations, lobbying.

"Headquarterization" has happened within countries as well, as productive stages of industry have moved to the periphery of each country (NYC and London used to do quite a bit of manufacturing) and the "headquarters" have moved to the center (there used to be quite a few regional stack exchanges for example).

The problem with "headquarterization" is: what do "capital" cities or countries export to "production" regions in exchange for the products they consume?

In a single country with a single currency and a single political system no problem: the "capital" owns the "production" periphery and receives income from it.

The goal of the industrial policy of the USA and UK governments was based on an international division of activities where 2nd/3rd world countries would have "production" business that would then pay top dollar to 1st world country service businesses to be listed on 1st world country stock exchanges, to be banked by 1st world country banks and stockbrokers, to have contracts drawn by 1st world lawyers, to have marketing plans created by 1st world MBAs, and so on.

In other words, the USA and the UK to become capital exporting and rentier countries, earning money in the form of profit and rent on the exported capital and the management of that capital. The world as a big plantation. Just as in the 18th century London rentiers often lived off sugar plantations in the Caribbean, managed by local agents.

This plan has some terrible flaw, arising from the fact that it cannot work that well without political and monetary union.

You can do Keynesian stimulus all right in the USA and the UK, as there is manifestly a large unused production capacity for services in banking, stockbroking, marketing, legal advice, and all other "headquarters" industries.

The problem is that people don't eat or use derivatives, shares, marketing plans, legal briefs, etc.

That is, if a country's economy is based on financial services, one must stimulate demand for financial services, and if the source of demand for financial services is abroad, then it is the economies abroad that must be stimulated.

If you pump a lot of money into the USA economy, will this lead to unused production capacity being put to work? Sure, but in China and in India, because that's where the secondary sector is (and in Arabia and Russia and Australia and Chile as that's where the primary sector is).

Then maybe as a later consequence the demand for "headquarters" services from China and India to the USA and UK will recover and NYC and London will make a lot of money again.

But in the meantime the currencies of the USA and UK will collapse, as there will be a significant lag between resurgent demand for imported products and an increase in the demand from abroad for "headquarters" services.

Now if the USA and the UK and China and India used the same currency and the same central bank and treasuries it would be much easier. But in effect international trade is conducted in yen and swiss francs and euros, and the policies of China and India and USA and have quite different goals.

But it just happens that this is not the case. Even worse, in the long term neither the Indians nor the Chinese are idiots, and it is far from clear why they should import "headquarters" services from NYC and London instead of having their own in Mumbai and Shanghai.

So far the only good reason remaining is that both places are "business friendly", in effect they are to India and China what Switzerland is to them: an offshore postbox where to hide from the Chinese or Indian taxman and politician.

But in the short term the health of the sector of the USA and the UK depends strongly on exports of service industries, which are only in demand if the underlying production industries in China and India (and Arabia and Russia etc.) sell. For many years this has been arranged by large scale "vendor financing", where China (and Arabia ...) have been lending a lot of money to USA and UK consumers to buy their products and thus generate demand from Chinese and India companies for banking, broking, marketing, advertising services in the USA and the UK.

But this cannot continue indefinitely without currency readjustment...

Put another way, the USA and the UK have geared up to earn a living by selling ("headquarters") services to rentiers owning primary and secondary industries, and their internal base of rentiers is too small for everybody to earn a living servicing them, so they must sell also to foreign rentiers, and foreign rentiers will only buy those services if their primary and secondary industries are selling well, and they aren't, and stimulating demand for primary and secondary products in the USA and the UK is a very, very expensive way to indirectly trigger demand for tertiary services from abroad.

Live by the financial services, die by the financial services...

Willem Buiter Calls for Less US Stimulus, Expects Collapse in Price of Dollar Assets « naked capitalism 

Zeno says: If you keeping cutting in half, you'll never get to zero.

but you will end up with a car with two wheels.

hey Motorcycles....maybe they can make them!

Diane Casey-Landry, chief operating officer of the American Bankers Association, a trade group in Washington, said that bank profitability had to come ahead of any demand to ease lending.

“Taxpayers should get a return on their investment,” Casey-Landry said. “We have to go back to a time when we realize not everyone is entitled to get a loan. What is going to get us out of this recession is sound lending to people who are going to pay it back, not throwing money at people who can’t.”

A love letter from the banking industry to the taxpayer.

Where have you gone Alan Mullally,
NASCAR nation turns it's lonely eye to you

bobn writes:
Dirk van Dijk(Unrated) writes:
Ford is the strong one that didnt need Federal help.
Dirk van Dijk | 01.05.09 - 1:29 pm | #

A line of credit is just money paid out a little later. If you want to call that strength, fine.

Well, it depends on what weapon I use.

Do you call that reverse compounding when you get 50% closer in each step, or just shrinkage? just saying.

Basel Too writes:
Audi sales only down 9.3%
Surprising (at least to me) given that Volvo is down 47%
Basel Too | 01.05.09 - 1:46 pm | #

Their 5000 customers are very loyal.

Audi sales only down 9.3%
Surprising (at least to me) given that Volvo is down 47%

not that surprising that Audi is gaining relative to Volvo, BMW, even Porsche and probably even the luxury japanese series. I see more and ore of them around town (Dallas-Fort Worth area)

Keynesian" anti depression tactics are not universally applicable, they are based on the assumption that there is underused production capacity due to excessively low demand.
anonymous | 01.05.09 - 1:39 pm | #

the operative words are "excessively low demand". It seems that all those touting Keynes have missed that point. The fact demand has fallen doesn't mean that it is low much less excessively low. If people were spending more than they were earning demand was too high not to low.

Policy should be based on a "prudently reducing spending" not in trying to sustain demand. The goal of policy makers should be have decline in demand of about 10% spread over two years. New definition for soft landing.

I am betting huge that Chrsyler will come in -50.4 %

SUBARU FOR THE WIN.

Seriously, if there were electric car companies right now with small, all-electric cars, I'd love to compare their sales.

good god. who are the 1454 idiots that decided that they needed a new HUMMER...

If you look, you'll see Mini (or is that MINI?) was up YoY. (Remember those are November numbers.)

Well Obama is only proposing a $500/worker stimulus plan. Ford better not bank on the bottoms up approach.

I was hoping for a new truck.

The wife . . . new earings.

OK, so can anyone tell me: whose logic was 'right'--ancient Greeks or Newton/Leibnitz?

Neither, in a quantized world.

As for engines, the Tritec engine has been replaced in the Cooper model with a 120 bhp 1.6-litre Prince engine with BMW's Valvetronic infinitely variable valve timing, developed on and with Peugeot's core engine.

Mini (marque) - Wikipedia, the free encyclopedia

ffdic,

I'm surprised you didn't research used especially since Texas is big truck, SUV and Van state...

Based on the November numbers posted above, that's a decrease of 420,000 cars sold from the prior year.  If the average car costs $20k or so that's an $8 billion decrease in one month just for cars or about $100B annualized.    Good thing 09 is here so we can all start spending again. 

11% unemployment coming per Reinhart & Rogoff, with housing falling into 2010.  No surprise, but these predictions have moved from lunatic territory to mainstream.   

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