Crash Test Wham-O: GM (General Malaise) Hits the Wall

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Crash Test Wham-O: GM (General Malaise) Hits the Wall

Today marks Chapter 11 for General Motors, and its replacement in the DJIA by Cisco. What we can learn from this 'driving while blind' crack-up?

First, let's put on our surgical masks and examine the collapse. For sure, GM was on the sick list for a long time. The late John Z. DeLorean told us so thirty years ago, in his book titled On a Clear Day You Can See General Motors. Early in this decade, The Economist stated quite clearly that global auto production was plagued with 25 percent overcapacity even during good times, and that a bloody shakeout would follow.

But just as the extreme overshoots of stocks in 2000 and 2007 set the stage for the savage bear markets which followed, the extreme overshoot in car sales in mid-decade led to the severe sales drought we have today. The 'zero/zero/zero' rate blowout announced in mid-2003 by the fatuous halfwit Alan Greenspan produced an orgy of overconsumption, much of it borrowed from sales that would have taken place during 2008-2010. GM throttled up during Bubble II to maintain market share. When sales evaporated during the ensuing bust, it was a life-threatening event for a high-fixed-cost dinosaur like GM. It had no place to hide when sales plunged.

And the lessons for today? Both similarities and differences exist. A similarity is that we've gone 'beyond zero/zero/zero' into 'unconventional measures.' However, unlike Bubble II, this rate distortion is not being used to turbocharge auto, housing and retail sales. Instead, it's being used for something far worse -- dumping the next ten years' worth of capital investment into a collapsing Ponzi scheme.

Everyone who's ever escaped from a Ponzi scheme with a profit -- such as those who bailed out of Bernie Madoff's fund two or three years ago -- knows that you have to leave before the first default. Once the cracks in CONfidence appear, it's too late.

By contrast, the Fed/Treasury madmen have pumped capital into Ponzi companies AFTER their collapse -- and they're still doing it. There is almost no chance of this malinvestment yielding a profit. In fact, the socialized financial sector, consisting mostly of nonproductive and even value-subtracting enterprises, over time will actually consume the principal.

This is a big deal. Wasting years worth of the investment capital needed by the entire economy means chronic unemployment and underemployment, aging plant and equipment, and loss of technological competitiveness as R&D is starved. Under these circumstances, the U.S. faces bleak choices: borrowing itself deeper into a hole, implementing an inflation tax with currency printing, or selling assets to foreigners to obtain capital. In practice, all three of these desperate measures will be used.

Life-changing consequences follow from this. Like the Soviet Union in 1990, the U.S. today is a militarily dangerous, but economically decadent and capital-starved empire. It is headed for 'former superpower' status in short order.

How did this happen? (1) Federal Reserve Act; (2) permanent war [paper money is, first and foremost, a mechanism of war finance]; (3) superstitious delusions spread by 'economics,' which masquerades as a science, but in practice has served as little more than a  tweed-jacketed army of Ponzi apologists.

If elected to public office, I will hose out the Harvard economics department, fill it three feet deep with dirt, manure and hay, and turn it into a HOG WALLOW.

BACON! BACON! BACON FOR THE PEOPLE! 

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Goodbye, GM.

"Just as President Roosevelt did after the attack on Pearl Harbor, the President must tell the nation that we are at war and we must immediately convert our auto factories to factories that build mass transit vehicles and alternative energy devices."

I advocated exactly this a few months ago on another thread abot what to do in the future....  I personally see no other way out.  We are at the crossroads, and I unequivocally agree with Michael Moore on this one.

Mike.

Goodbye, GM
by Michael Moore

June 1, 2009

I write this on the morning of the end of the once-mighty General Motors. By high noon, the President of the United States will have made it official: General Motors, as we know it, has been totaled.

As I sit here in GM's birthplace, Flint, Michigan, I am surrounded by friends and family who are filled with anxiety about what will happen to them and to the town. Forty percent of the homes and businesses in the city have been abandoned. Imagine what it would be like if you lived in a city where almost every other house is empty. What would be your state of mind?

It is with sad irony that the company which invented "planned obsolescence" -- the decision to build cars that would fall apart after a few years so that the customer would then have to buy a new one -- has now made itself obsolete. It refused to build automobiles that the public wanted, cars that got great gas mileage, were as safe as they could be, and were exceedingly comfortable to drive. Oh -- and that wouldn't start falling apart after two years. GM stubbornly fought environmental and safety regulations. Its executives arrogantly ignored the "inferior" Japanese and German cars, cars which would become the gold standard for automobile buyers. And it was hell-bent on punishing its unionized workforce, lopping off thousands of workers for no good reason other than to "improve" the short-term bottom line of the corporation. Beginning in the 1980s, when GM was posting record profits, it moved countless jobs to Mexico and elsewhere, thus destroying the lives of tens of thousands of hard-working Americans. The glaring stupidity of this policy was that, when they eliminated the income of so many middle class families, who did they think was going to be able to afford to buy their cars? History will record this blunder in the same way it now writes about the French building the Maginot Line or how the Romans cluelessly poisoned their own water system with lethal lead in its pipes.

So here we are at the deathbed of General Motors. The company's body not yet cold, and I find myself filled with -- dare I say it -- joy. It is not the joy of revenge against a corporation that ruined my hometown and brought misery, divorce, alcoholism, homelessness, physical and mental debilitation, and drug addiction to the people I grew up with. Nor do I, obviously, claim any joy in knowing that 21,000 more GM workers will be told that they, too, are without a job.

But you and I and the rest of America now own a car company! I know, I know -- who on earth wants to run a car company? Who among us wants $50 billion of our tax dollars thrown down the rat hole of still trying to save GM? Let's be clear about this: The only way to save GM is to kill GM. Saving our precious industrial infrastructure, though, is another matter and must be a top priority. If we allow the shutting down and tearing down of our auto plants, we will sorely wish we still had them when we realize that those factories could have built the alternative energy systems we now desperately need. And when we realize that the best way to transport ourselves is on light rail and bullet trains and cleaner buses, how will we do this if we've allowed our industrial capacity and its skilled workforce to disappear?

Thus, as GM is "reorganized" by the federal government and the bankruptcy court, here is the plan I am asking President Obama to implement for the good of the workers, the GM communities, and the nation as a whole. Twenty years ago when I made "Roger & Me," I tried to warn people about what was ahead for General Motors. Had the power structure and the punditocracy listened, maybe much of this could have been avoided. Based on my track record, I request an honest and sincere consideration of the following suggestions:

1. Just as President Roosevelt did after the attack on Pearl Harbor, the President must tell the nation that we are at war and we must immediately convert our auto factories to factories that build mass transit vehicles and alternative energy devices. Within months in Flint in 1942, GM halted all car production and immediately used the assembly lines to build planes, tanks and machine guns. The conversion took no time at all. Everyone pitched in. The fascists were defeated.

We are now in a different kind of war -- a war that we have conducted against the ecosystem and has been conducted by our very own corporate leaders. This current war has two fronts. One is headquartered in Detroit. The products built in the factories of GM, Ford and Chrysler are some of the greatest weapons of mass destruction responsible for global warming and the melting of our polar icecaps. The things we call "cars" may have been fun to drive, but they are like a million daggers into the heart of Mother Nature. To continue to build them would only lead to the ruin of our species and much of the planet.

The other front in this war is being waged by the oil companies against you and me. They are committed to fleecing us whenever they can, and they have been reckless stewards of the finite amount of oil that is located under the surface of the earth. They know they are sucking it bone dry. And like the lumber tycoons of the early 20th century who didn't give a damn about future generations as they tore down every forest they could get their hands on, these oil barons are not telling the public what they know to be true -- that there are only a few more decades of useable oil on this planet. And as the end days of oil approach us, get ready for some very desperate people willing to kill and be killed just to get their hands on a gallon can of gasoline.

President Obama, now that he has taken control of GM, needs to convert the factories to new and needed uses immediately.

2. Don't put another $30 billion into the coffers of GM to build cars. Instead, use that money to keep the current workforce -- and most of those who have been laid off -- employed so that they can build the new modes of 21st century transportation. Let them start the conversion work now.

3. Announce that we will have bullet trains criss-crossing this country in the next five years. Japan is celebrating the 45th anniversary of its first bullet train this year. Now they have dozens of them. Average speed: 165 mph. Average time a train is late: under 30 seconds. They have had these high speed trains for nearly five decades -- and we don't even have one! The fact that the technology already exists for us to go from New York to L.A. in 17 hours by train, and that we haven't used it, is criminal. Let's hire the unemployed to build the new high speed lines all over the country. Chicago to Detroit in less than two hours. Miami to DC in under 7 hours. Denver to Dallas in five and a half. This can be done and done now.

4. Initiate a program to put light rail mass transit lines in all our large and medium-sized cities. Build those trains in the GM factories. And hire local people everywhere to install and run this system.

5. For people in rural areas not served by the train lines, have the GM plants produce energy efficient clean buses.

6. For the time being, have some factories build hybrid or all-electric cars (and batteries). It will take a few years for people to get used to the new ways to transport ourselves, so if we're going to have automobiles, let's have kinder, gentler ones. We can be building these next month (do not believe anyone who tells you it will take years to retool the factories -- that simply isn't true).

7. Transform some of the empty GM factories to facilities that build windmills, solar panels and other means of alternate forms of energy. We need tens of millions of solar panels right now. And there is an eager and skilled workforce who can build them.

8. Provide tax incentives for those who travel by hybrid car or bus or train. Also, credits for those who convert their home to alternative energy.

9. To help pay for this, impose a two-dollar tax on every gallon of gasoline. This will get people to switch to more energy saving cars or to use the new rail lines and rail cars the former autoworkers have built for them.

Well, that's a start. Please, please, please don't save GM so that a smaller version of it will simply do nothing more than build Chevys or Cadillacs. This is not a long-term solution. Don't throw bad money into a company whose tailpipe is malfunctioning, causing a strange odor to fill the car.

100 years ago this year, the founders of General Motors convinced the world to give up their horses and saddles and buggy whips to try a new form of transportation. Now it is time for us to say goodbye to the internal combustion engine. It seemed to serve us well for so long. We enjoyed the car hops at the A&W. We made out in the front -- and the back -- seat. We watched movies on large outdoor screens, went to the races at NASCAR tracks across the country, and saw the Pacific Ocean for the first time through the window down Hwy. 1. And now it's over. It's a new day and a new century. The President -- and the UAW -- must seize this moment and create a big batch of lemonade from this very sour and sad lemon.

Yesterday, the last surviving person from the Titanic disaster passed away. She escaped certain death that night and went on to live another 97 years.

So can we survive our own Titanic in all the Flint Michigans of this country. 60% of GM is ours. I think we can do a better job.

Yours,

Michael Moore

[email protected]
MichaelMoore.com

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

 Michael Moore presents some good ideas in that piece, especially point 9: To help pay for this, impose a two-dollar tax on every gallon of gasoline. This will get people to switch to more energy saving cars or to use the new rail lines and rail cars the former autoworkers have built for them. Obama should put him in charge of restructuring GM.

 

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Excellent post, Mike!

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Mike & Others:

The proposals made by Moore are not only dangerous but also impractical.  What this calls for basically is more centralized, top-down, government control of our economy, specifically the car industry.  I can see how very easy it would be for these proposals to be taken seriously and even adopted by the US government.  In periods of economic gloom, combined with a charismatic leader and lopsided political power in the legislative branch, history has shown that government power and intrusion into the private sector can easilly grow beyond anything thought possible.  That's how FDR managed to stay in power despite having a worsening economy at every election cycle, packed the Supreme Court in a move remeniscent of typical dictators, and moved the government into areas of the economy that still haunt us today (like the social security ponzi scheme).

The public will buy what it deems of highest value.  If that takes the form of small, economic, energy-efficient cars, then they will buy them.  Forcing them on the population is not going to make them choose GM over Toyota or some other vehicle.  It will just decimate our domestic auto industry further.

Furthermore, I am more concerned over the principles that would allow the government this kind of power.  I believe it was Benjamin Franklin who said, "Do not give the government any power you would not give your worst enemy."  No matter how well-meaning, eventually this power will be abused or used in ways not originally intended.  Look at the Patriot Act as an example.

I also believe "Coercion is the root of all evil."  I don't know who said that, but I believe that sums up everything that has anything to do with the credo of Liberty.  Forcing people to make or buy certain cars is co-ercion and could easilly be extended to force all manner of things upon people.  I do not want Michael Moore in charge of what I drive anymore than I want him in charge of what food I eat.

Be careful what you wish for.

 

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

... what would you propose as an alternative Patrick?

... serious question ... not being provocative ...

Best,

Paul

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Another great post Machinehead.

Here's the great Dr. Hussman weighing in with a similar assessment:

There's an economists' riddle that goes “Why are the debates in academia so bitter?” – the answer – “Because the stakes are so low.” Now, very often, that's true. I remember a presentation that Paul Krugman gave at Stanford where he was talking about a model of economic development. Paul drew a diagram on the board, and as he described it, he drew a few little arrows indicating migration of businesses from one area to another. A respected economic theorist at Stanford, Mordecai Kurz (who never drew an arrow without a differential equation), immediately jumped up and shouted “You haven't described the dynamics!!” to which Paul responded that he was indicating a general movement of economic activity toward one place to improve efficiency. Dr. Kurz pounded the table and screamed “Then erase the arrows!! ERASE THE ARROWS!!” and then stormed out of the room and slammed the door behind him. I think that was probably the exact moment that I decided to go into finance.

Presently, however, the debate about the long-term economic fallout from this defense of bank bondholders is anything but academic. I recognize that I have been on a virtual rant about it in recent months, but the reason is that it is literally the most important fiscal and bureaucratic event that we are likely to observe in our lifetimes, and is very possibly the precursor to enormous future economic difficulties.

You simply cannot have an economy lend out trillions of dollars in bad debt, and then make the lenders whole with public funds (while still facing a massive second wave of probable mortgage defaults) without destructive repercussions. There is very little chance, in my view, that the current downturn is over.

We have enjoyed a nice reprieve – if over a trillion dollars in redistribution could not accomplish even a reprieve, it would be a surprise. It's clear that investors are hopeful that we can simply return to rich valuations, debt-financed economic expansion, and abnormal profit margins based on excessive leverage. From my perspective, this hope is as thin as those that we observed at the peak of the internet bubble, the housing bubble, and the profit margin peak of 2007.

These are momentous times.  We are blindly sacrificing the future to preserve a current illusion and the profits and positions of the already wealthy.  Heckuva way to run a country.

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Patrick Brown said:  The proposals made by Moore are not only dangerous but also impractical.  What this calls for basically is more centralized, top-down, government control of our economy, specifically the car industry.  I can see how very easy it would be for these proposals to be taken seriously and even adopted by the US government.  In periods of economic gloom, combined with a charismatic leader and lopsided political power in the legislative branch, history has shown that government power and intrusion into the private sector can easilly grow beyond anything thought possible.

We still seem to look to the government for solutions to problems that they create.  The problem is NOT that we need more government, the problem is that we have too much government and too much intervention.  The lines between government and the private sector are being erased as we move to a Nazi form of "corporatism." 

machinehead said: Life-changing consequences follow from this. Like the Soviet Union in 1990, the U.S. today is a militarily dangerous, but economically decadent and capital-starved empire. It is headed for 'former superpower' status in short order.

How did this happen? (1) Federal Reserve Act; (2) permanent war [paper money is, first and foremost, a mechanism of war finance]; (3) superstitious delusions spread by 'economics,' which masquerades as a science, but in practice has served as little more than a  tweed-jacketed army of Ponzi apologists.

I agree that #1 was the Federal reserve act, which was quickly followed by the mechanism to collect on their debt via income tax.  If you get rid of #1, then #3 will also be eliminated. 

I don't understand what you meant by #2 - permanent war [paper money is, first and foremost, a mechanism of war finance] What does permanent war have to do with "paper money"?  Permanent war will certainly ruin an economy but you seem to imply that paper money is bad. 

I suggest that paper money is a solution, not a problem - the problem arises when paper money becomes nothing more than interest bearing debt, which is what we now have.  Paper money may also be issued free of debt and/or interest if we take back our sovereign right to issue and control our own currency.

The restoration of Lincoln's greenbacks would go a long way to solving our current crisis but that opportunity will stay hidden as long as we remain a client state of international bankers and corporatism.

Larry

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall
Patrick Brown wrote:

Mike & Others:

The proposals made by Moore are not only dangerous but also impractical.  What this calls for basically is more centralized, top-down, government control of our economy, specifically the car industry.  I can see how very easy it would be for these proposals to be taken seriously and even adopted by the US government.  In periods of economic gloom, combined with a charismatic leader and lopsided political power in the legislative branch, history has shown that government power and intrusion into the private sector can easilly grow beyond anything thought possible.  That's how FDR managed to stay in power despite having a worsening economy at every election cycle, packed the Supreme Court in a move remeniscent of typical dictators, and moved the government into areas of the economy that still haunt us today (like the social security ponzi scheme).

The public will buy what it deems of highest value.  If that takes the form of small, economic, energy-efficient cars, then they will buy them.  Forcing them on the population is not going to make them choose GM over Toyota or some other vehicle.  It will just decimate our domestic auto industry further.

Furthermore, I am more concerned over the principles that would allow the government this kind of power.  I believe it was Benjamin Franklin who said, "Do not give the government any power you would not give your worst enemy."  No matter how well-meaning, eventually this power will be abused or used in ways not originally intended.  Look at the Patriot Act as an example.

I also believe "Coercion is the root of all evil."  I don't know who said that, but I believe that sums up everything that has anything to do with the credo of Liberty.  Forcing people to make or buy certain cars is co-ercion and could easilly be extended to force all manner of things upon people.  I do not want Michael Moore in charge of what I drive anymore than I want him in charge of what food I eat.

Be careful what you wish for.

 

 

Patrick,

 

I completely agree. We need less intrusion by government, not more.

If  a business is not economically sound then it should go bankrupt.

As far as taxes go; we have too many now with gov. wasting most of the money. I don't want to give them more to waste.

Ken

 

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

michael moore makes some good points. unfortunately he is still operating in a socialist mentality. obama is not going ot fix anything. what qualifications does he have to run a car company? what qualifications does th eu.s. congress have to run a car company?

is it even the job of them to do so?

waht happened to the constitiution? where in there does it say the government should take over a private corporation?

folks we left the reservation a long time ago.

moore wants to tax each gallon of gas another $2. who does that hurt? the poor and middle class thats who. and we end up giving money to people who have demonstrated a complete lack of fiscal responsibility.

this is the end game.....................mate

thomas jefferson just committed suicide.

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall
Patrick Brown wrote:

The public will buy what it deems of highest value.  If that takes the form of small, economic, energy-efficient cars, then they will buy them.  Forcing them on the population is not going to make them choose GM over Toyota or some other vehicle.  It will just decimate our domestic auto industry further.

Furthermore, I am more concerned over the principles that would allow the government this kind of power.  I believe it was Benjamin Franklin who said, "Do not give the government any power you would not give your worst enemy."  No matter how well-meaning, eventually this power will be abused or used in ways not originally intended.  Look at the Patriot Act as an example.

I also believe "Coercion is the root of all evil."  I don't know who said that, but I believe that sums up everything that has anything to do with the credo of Liberty.  Forcing people to make or buy certain cars is co-ercion and could easilly be extended to force all manner of things upon people.  I do not want Michael Moore in charge of what I drive anymore than I want him in charge of what food I

 

I agree with what you wrote Patrick.  The gov't should not be in a position to dictate what the consumers drive.  The attack on capitalism by Moore and others is unjustified.  If GM makes inferior products, they will sell less than the competition.  Continue this for a long time and they will go backrupt.  Which is where we are now.  Let them go backrupt without gov't bailouts!  If the gov't has it way we could be driving an East German Trabant (http://en.wikipedia.org/wiki/Trabant) because not many consumers are going to buy a $40,000 Chevy Volt!  Maybe with gov't incentitives (handouts) the price would come down to $35,000.  Let's get the gov't out of manufacturing and out of our banking system too. 

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall
Alex Szczech wrote:

 Michael Moore presents some good ideas in that piece, especially point 9: To help pay for this, impose a two-dollar tax on every gallon of gasoline. This will get people to switch to more energy saving cars or to use the new rail lines and rail cars the former autoworkers have built for them. Obama should put him in charge of restructuring GM.

 

You REALLY think this is a good idea? What about people who live in small towns which is most of us in the U.S. How could many even afford to drive to work? Want to kill off an economy that already has one foot in the grave? This would do it. Michael Moore for President! Might as well get this country over with and be done with it.

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

I normally cringe when government gets involved in our private lives or in private corporations as is the case with GM. However, when it comes to energy and transporation, Michael Moore just may be right(I'm cringing right now). I was recently in Italy, and their high speed trains are incredible! The public transportation, especially in the cities is fantastic. Granted, you may have to wait a little while for a train, as I had to, in the more rural areas, but at least you have the option. Italians, and most Europeans, pay high gas prices in the form of petrol taxes to subsidize the public transportation and the train prices are very, very reasonable. As for the petrol taxes hurting the poor and middle class, well, I think the regular folks have figured it out...there are bicycles, scooters, vespas and tiny micro cars everywhere. And it's not just the low and middle income types driving the scooters, even the business men in the suits and women in skirts can be found on the bicycles and scooters. It's quite a sight actually.

As we all know from the Crash Course, energy and other resources will be at a premium in the years to come. I'd rather use those remaining resources to build a low energy use European-style transportation infrastructure that includes more trains, rather than more cars and more highways and bridges to nowhere. I will be willing to pay more, gulp, cringe, higher petrol taxes to do that, as long as those taxes are "used properly". I know, I'm dreaming, back to reality.

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We Know What We Don't Want But We Don't Know What We Do Want ...

... but 'what' would be a good idea? I mean, eventually there has to come a time, probably out of the next from tenth highest level of fear, where an idea is put forward that'll probably be the right one. Yet, with all that has come before, distrust will remain and we'll most probably have a thread full of people casting it out as another poor choice? Surely some of the idea's brought forward by Moore are excellent ...

In my mind, the eventuality of either a government (however reduced in size) or a businessman (funding gained from God knows where) will come forward to fill the void where 'need' has come into play ... and I don't mean all previous results of paying people to dig holes up and another group fills up the same holes either ... diminished resource needs a collective to prioritize the future ...

... what is a 'Good Plan' ? I don't have one, but surely the brains of this site could build a better one than the 'None Plan' that is doing its best to fall down around our ears ...

Best,

Paul

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Patrick and others,

There are two issues here that when joined create an unsolveable monster.

First is the issue of GM and our modes of transportation and I agree with M. Moore as regards our need to develop a new model such as a bullet train etc. Let private enterprize develop what is needed via the retooling of our factories. I like the idea of adding a charge to the cost of fuel when the proceeds are directed toward a transportation solution that works for the future. The cost is going to skyrocked in any case so doing something causitively now and directing the proceeds toward a viable end PRODUCT is preferrable to being the effect later with nothing to show for it.   We should be operating on oils'  true value as mentioned in the CC.

The second issue is whether government should be involved. Fundamentally, the people should demand transportation alternatives and IF gov't did represent the people in the utopian world of Thomas Jefferson et al then that might work. I do agree with you that nationalizing GM will be yet another disaster in a long line of them.  And trying to develop an alternative to the car through a vehicle (no pun intended) such as GM will not get us anywhere when it is "owned" by the same crew that "owns the FED" and our Gov't via the politicians.

Lastly, IMHO,  the fat lazy American is likely simply going to continue to whine about the high cost of fuel and that somebody ought to do something so they can continue to drive to the local MacDeath Burger joint to pound down another round of MSM and go to the movies. Actually this last point may be a fact rather than a humble opinion. I'm going to check with Damnthematrix on this!!!!!

Coop

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Re: We Know What We Don't Want But We Don't Know What We Do ...
Vanityfox451 wrote:

...... what is a 'Good Plan' ? I don't have one, but surely the brains of this site could build a better one than the 'None Plan' that is doing its best to fall down around our ears ...

WARNING THIS WILL NOT BE PLEASANT....

YOU HAVE BEEN WARNED.

Paul,

In my opinion, the plan that works is the one of sustainability.  Using only renewable energy sources, less complex life styles, and balanced population growth.  We take only what we can give back in the time frame it can give back to us from mother earth.  We still need to have technology, so we can adapt to changes in environment and the day red sun scenario ((the we need to get off this rock)). 

The hard and not so nice part of all this is that, at this sustainable level of life we have too many people to be support.  Population reduction needs to happen, whether it be controlled family sizes or whatever.  I know may people hate to look at this and if somebody can explain a better method great.  I just do not see it.

 

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Well, I would ask that everyone take a hard look at American culture. We are a country of the automobile.

In the smaller town that I just moved from (around 12,000 people) there is not even a single taxi cab to serve public transportation. I moved to Greene County with a population of about 250,000 and here there is a public bus system, but it doesn't go where most people live, so that doesn't do much good.

The auto is the only option if you want to go anywhere and you do because the food stores don't deliver.

Moore's suggestions are simply not well thought out. If gasoline were taxed another 2 dollars a gallon, minimum wage employees couldn't afford to go to work any longer. Trucks that get food and merchandise into stores would have to charge exorbitant prices and prices would skyrocket. People like me who travel for a living (I cover all of Southern Missouri) would have to go out of business.

They also are not well thought out because he doesn't seem to understand the business world. Who would turn GM plants into building windmills, solar panels and the like? The market is already saturated with these products or manufacturers would be producing more of them right now. That's called a free market.

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

 Hello MachineHead:

I read about 3-5 hours a day. I parse a lot of data. Few articles I read are focused like a laser, few authors know enough to hit on more than one or two salient points, hardly any get the entire thing, hardly any explain things with such clarity.

Your articles are beyond great! I re-read them and learn more each time.

Thank you for the time you take, I post them on the DG so they hit the front page where they can help more people to help themselves, and as always I look forward to the next.

Take care!

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

jerrydon10,

... I'm going to work backward up this thread so you're first...

... short term goals have kept the US government passing the buck for generations. Short term fixes will have Hell to pay in the long run. Without a new infrastructure being put into place from now and today, there won't be any jobs to go to by car in the future of any great merrit. If the implementation of a $2 tax on a gallon of gas is going to kill the lower and middle classes dead if it happens, then we're a long long way down the road to oblivion indeed ...

 Mat Simmons stated in February 2007 that prices were cheap compared to what it will be in the future. Here :-

... and James Howard Kunstler is well respected and recognised here at CM.com, particularly with a quote he made in 2003 that was used in the film 'The End Of Suburbia' where he said, "We're literally stuck up a cul-de-sac in a cement SUV without a fill-up". Coverage of which is the sheer madness of the suburban sprawl that has been a mainstay of the American dream who's time has come ... driving a 50 mile round trip to work every day is not sustainable in the long term ...

... In other words, the car as a mode of transport needs to be faised out and scrapped, pronto, and localized living and local jobs need recreating; this is no mean task ahead ...

mpelchat,

You're so right. No matter what ever we do now, limits to growth have hit their marker and an extreme decline is in order. What we've had and where we're headed, to me, has been best described by Ray Anderson, here :-

... we are those that see the ground rushing up sooner than others ... Our 'Legacy' is one thing, but adopting a philosophy that you and I may not be survivors would go a long way to recognising that some great sacrifice needs making now, for our future generations ...

ckessel,

...your last paragraph is most definately a stated fact, no matter whether you refer to Damnthematrix or not ...... !!!

... but seriously, if there is no dramatic push for the general public to be unified along factual lines so as to see what is ahead, the picture of the future looks oh so bleak for the US ... Boy, am I thankful so many people on this site are pushing the 'Crash Course' videos out to everyone they know!!!

Best,

Paul

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Paul said: ... but 'what' would be a good idea? I mean, eventually there has to come a time, probably out of the next from tenth highest level of fear, where an idea is put forward that'll probably be the right one.

Regarding GM, I think we need to understand the problem before coming to a rational solution.  While there may be a myriad of problems that led to the demise of GM, one stands out front and central - "free trade."(H/T to Elaine Melankis for the chart)

Remember Ross Perot and the great sucking sound as NAFTA and free trade suck the life out of American industry - well, he was absolutely right.  We may distract ourselves vilifying trade unions, social programs and our inability to compete with third world labor rates, but the real reason why our industry has been decimated is because of free trade; which should be immediately replaced by "fair trade" that serves our national interests first.

And we continue the insanity of damaging trade policies as evidenced by this: "Nissan Motor Co. is likely to receive more than ¥100 billion in low-interest loans set up by the U.S. government to promote the development of and transition to electric vehicles and other fuel-efficient cars, sources said Friday." So, we will go deeper into debt so that Nissan may better compete with GM, which is now owned by the taxpayers.

We threw away one of the few Weapons of Mass Production: tariffs and barriers.  Few Americans know that before the Federal Reserve and the income tax laws, our entire government was funded by tariffs and barriers!  All of it!  And ran in the green, too!

It helped our own factory system to develop into the mega-monster of WWII fame!  It made ‘Made in America’ a boast and not a rarity!  It created General Motors.  It made our cities big.  It made our nation an empire.  Free trade killed our nation and turned it from a creditor nation to a debtor nation.  Our rivals don’t need tariffs and they most certainly have many, many barriers to trade still….they benefit from free trade because the US has no BARRIERS and tax the workers to pay for our entire empire, all of it.  Corporate taxes are extremely small and the very rich park their profits offshore!

Many, many text books...make tariffs look evil!  Oh, the horror.  Things cost more but we had more workers who got higher and higher wages as they organized to get their share of the profits.  And the great middle class began to swell from holding less than 20% of the wealth to over 50%.  Now, it has shrunk back down to less than 30% and dropping like a rock.

Eventually, people will wake up and figure out why GM was able to become a major corporation in the first place: TARIFFS AND BARRIERS.  And why it is now dead.

Larry

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Larry, there is nothing to fear from free trade unless your government attempts to defy the laws of economics by absorbing all returning dollars with debt instruments instead of allowing them to find products:

http://www.peakprosperity.com/comment/35037#comment-35037

Currency exchanges automatically counter-act trade deficits or surpluses if they are allowed to function.  We haven't allowed ours to function for 30 years at least.

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Patrick Brown,

you've written an excellent piece, and it goes a long way in explaining how America has become one giant service industry warehouse. As a *snippet* from jpitre who wrote on the same thread below your post at post #50 ... :-

" The real challenge before us is to face up to how are we going to shut down a substantial portion of the “overhead” and get back to creative, innovative, productive work as a society.

It will get straightened out, the question is will it be on our terms, or that of the nature’s reality that, as Chris says, doesn’t do bailouts. "

... it would be fascinating to watch the slide stall and a return to equalibrium, if only your well thought out visualization were put into motion ...

Best,

Paul

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Patrick, trade barriers go beyond regulating currency exchanges.  For example, Japan does not allow foreign investments in Japanese companies to exceed 40%.  And, in Mexico you may lease land or real estate but foreigners cannot take ownership, plus you are taxed on the lease.

I am not criticizing either of these policies as I agree, sovereign nations should serve their own interests first.  I think we would be much better off with similar barriers designed to protect our industries and middle class.

Larry

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

From an AP article --

A bankruptcy judge has ruled that General Motors can have immediate access to 15 billion dollars in government financing as it attempts to quickly restructure under court protection. As it reorganises, GM will rely on billions of additional financial assistance from the Treasury Department and Canada. That is on top of about 20 billion dollars in taxpayers' money GM has already received in the form of low-interest loans.

As part of GM's restructuring plan, the carmaker wants to sell the bulk of its assets to a new company in which the US government will take a 60% ownership stake. The Canadian government would take 12.5% of the new GM, with the United Auto Workers getting a 17.5% share and unsecured bondholders receiving 10%. Existing GM shareholders are expected to be wiped out.

http://www.google.com/hostednews/ukpress/article/ALeqM5iXTBxXTQKK7FNW22w...

Isn't it breathtaking, the new sense of corporate 'looter entitlement'? Demand $15 billion (without even a gun in your hand) and BINGO  -- granted on the spot!

If a GM exec made this presumptuous demand to my face, I'd leap from my chair, grab one of the longneck beer bottles that litters my desk, and with a piercing war whoop, smash his teeth in.

Look, I've got nothing against GM. I grew up in a loyal GM family. My first car was a GTO (Pontiac, not Ferrari). But the spectacle of the Treasury pumping money into a company headed for bankruptcy, which was described as 'inevitable' LAST YEAR by many informed observers, was revolting. 'OTHER PEOPLES' MONEY,' the TARP workers exulted, as they emptied mail sacks of cash onto the GM loading dock..

If the proposed plan goes through, GM will be majority owned by the same lovely folks who run the post office, the IRS and FEMA. You'll excuse me for calling it 'General Morons.'

Who knew that the disparaging phrase 'welfare Cadillac' referred not to disadvantaged clients, but to the bankrupt clowns who make the infernal machines?

Michael Moore was right on target with 'Roger and Me.'  He saw this coming 20 years ago. But in the arcane realm of prescriptive economics, Michael Moore and Timmy Geithner (our first Vulcan-American Treasury secretary) together couldn't generate enough intellectual voltage to power a flashlight.

HAVE YOU DRIVEN A FORD LATELY

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Patrick...one other thing...

I think it is safe to say that Japan has been notoriously protective of her industry.  While many criticize them for policies that are intended to maintain a trade surplus, it has helped build a stronger middle class. (H/T- Culture of Life)

Note how our distribution of wealth is much more heavily weighted towards the wealthiest 1%.  And, comparatively, their middle class (common citizens) get a much bigger piece of the pie than us (US).  They keep good engineering, manufacturing and skill jobs in the country as much as possible.

Larry

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

DrKrbyLuv,

During the course of quite a few visits to Japan, I got some insight into its auto market. Very few cars over 4 years old are seen on the streets. The reason? Sha-ken -- biannual auto inspection. At the 4th year inspection, you will be presented with a long list of major parts and systems which have to be replaced at a cost of thousands of dollars. So, most Japanese cars get traded in at 4 years old, and exported to southeast Asia. The same is true of transit equipment. One of the subway lines in Buenos Aires runs electrified cars bought from the Tokyo subway, still in solid condition.

Basically, Japan's government is heavily influenced by cartels of manufacturers and construction companies. This produces high-quality public services -- the trains run on time, without breakdowns -- but at the cost of enormous accumulated debt. And of having to buy a new car every 4 years, if you drive.

The U.S., by contrast, has become a de facto banksters and financiers' cartel. We don't even get any public services in the bargain, as Dr. Martenson often laments. Just a turbocharged debt clock, spinning so fast the billions go by in a blur. This is one of many manifestations of Dada economics in our rickety world. We believe it because it's absurd.

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Larry,

The fact that others have protected their industries is not the point.  I will re-post what I worte on the thread below so it is easier for people on this thread to read, analyze, critique and perhaps arrive at a greater truth.  With all due respect, I believe you have not read it fully, or I have not explained it well enough. 

What I am essentially saying is that it does not matter if one country has a higher cost of production or not.  That includes costs of production related to special laws (like OSHA, environmental laws, etc which places like China do not have) and naturally-caused costs of production such as what occurs in agriculture due to latitude and climate preferences of crops. 

The reason it does not matter is because a trade deficit causes the currency of the country with the deficit to devalue, therebye reducing the costs of their goods relative to the country with the surplus.  The devalued currency then acts as a stimulus, promoting more imports from the country with the surplus, leading eventually to a trade balance. 

This has obviously not been allowed to occur as should be obvious with China's Yuan still severely undervalued to the dollar.  The reason it has not appreciated is because we leave the barn yard doors wide open for them to re-invest those dollars in US bonds, rather than US products.  Our debt has crowded out demand for production and what we have today is 30+ years in the making.  Anyway, here is the post:

Quote:

Chris,

I have a question.  Take two countries, A & B, and let's make the following assumptions:

  • Both countries have a money supply that grows only at the same pace as increased goods and services.
  • Neither has access to sell debt to the other. 
  • Both have to use each other's currency to buy products from one another.  That is, country A has to use B's currency to import B's goods, and B has to use A's currency to import A's goods.  They can exchange currencies (but not debt) through each others' central banks.
  • After the first trade "cycle" Country A runs a trade deficit with country B. 

The college entrance-exam question is, "based on the above assumptions, what can be said about the relationship between A & B's currencies after the first trade cycle"?

If I am not mistaken, the answer is that A's currency would depreciate against B's.  The reason is because B has more of A's currency than it actually needs to buy A's products, and A doesn't have any of B's currency because it used all of it, plus some of it's own, to buy B's products.  

The next question is, given that A's currency is now worth less of B's currency than it was prior to the trade cycle, what can be predicted of the next trade cycle assuming all other variables remain equal?  I think the answer is that A will run less of a trade deficit than it did the first time, maybe none at all.  In fact, B may run a deficit this time.  The reason is because A's currency is worth less than it was before, so all of B's products cost more.  That will stimulate either less consumption in A, or more local production.  In the meantime, B , enjoying a surplus of A's currency from the prior year's trade surplus, will be more inclined to buy cheap A goods.

The beauty of all this is that there is a natural self-correcting mechanism for keeping trade balanced if rules governing debt and currency exchange as stated above are followed.  There is no need for trade barriers or anything else.  If our currency were to remain fixed to the natural growth of goods and services, and there were no debt-exchange horseplay, other country's products would quickly become too expensive for us, and we'd resort to local production automatically.  Of course, we'd never wake up one day and realize things were more expensive to import than to produce locally. Economies function gradually.  With each passing year, thousands - no, million of individual decisions guide individual actions governing purchases and investments.  Slowly, exports and  imports rise and fall, accross a multitude of product categories and services, but in the end, they are always approaching a balanced state, because that is what the rules governing the system force it to do.

The reason for this whole exercise, is because it seems to me that one giant reason why the US cannot compete is because its money does not act like other countries' money.  In the example above, A & B could be any two countries in the world except the United States.  All other countries use each others' currencies or dollars (and dollars could be substituted by the central-bank exchange mechanism above without changing the example) to trade with each other.  The US can use dollars whereever it wants - it never needs anyone else's currency.  Also, recipients of US dollars do not need to use them to buy US products.  There is always a more than willing US government willing to borrow those dollars back.  So, almost everything from the US ends up being quite expensive, because, as I stated in earlier posts, the #1 export from the US is debt and it crowds everything else out.  The system we currently employ, by its very nature, has depleted our own country of many productive activities, because it over-rides the balancing forces that the system any other country-pair in the world lives by.

Sorry for the long thread, but I would really appreciate your thoughts here, especially if I am making some obvious or not-so-obvious mistakes.

PS:  I honestly do not know if I am "right" or "wrong".  I believe the above is a better explanation of how we have managed to export all our production and wound up with the world's largest debt.  This didn't come from any economic theory I know of, but if it's a good theory, I'm sure someone thought of it already.  My point in posting it originally was to illicit thought and if there are holes to be poked, to poke them and arrive at the real truth.  I re-post it here since this discussion has gone into the trade-war argumet, which I believe will continue to crop up and deserves answers, and which if we go down the wrong path, could worsen our lives.  Protectionism is widely argued to have augmented the Great Depression I. 

 

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Vanityfox has on at least two occasions asked for alternative ideas..... and all I have seen here is people defending, more or less, the status quo: capitalism and free trade.  Neither of which have worked, obviously or we wouldn't be here, and yes, I know some of you will argue it's all due to government interference.

Arguments that America is a car culture just don't wash with me.  I predict NOBODY will be driving cars within maybe as little as five years...  We are planning to ditch our car as early as perhaps next year.  You don't have to have a car if you restructure your life so that you make it so....  Don't you want to reclaim control over your life instead of allowing a car to do this?  Think outside the square..  QUICK, that square is fast shrinking and about to disappear giving you very few options!

The problem with capitalism (which I think is as good as finished anyway) is that the only outcome necessary is profit.  Outcomes that include the health and security of society do not come into the equation, unless of course a big fat profit can be made!  But then this usually occurs by overcharging and disempowering the poor, a classic case in hand being the pharmaceuticals.

I find America's paranoia of socialism truly mind boggling.  Nobody is advocating a stalinist state.....  Quasi socialism works just fine in much of Europe.  Given the choice, I would live in France waaaaaaay ahead of the USA, I'd even consider Hungary seeing as Paul lives there!   We could talk about the good old days when gasoline was dirt cheap and you could cruise around the countryside in old Trumpies at 100MPH....

Mike

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall
Damnthematrix wrote:

capitalism and free trade.  Neither of which have worked,

Mike

 

Mike,

 

We have not had free trade or pure capitalism in USA for a long time so how can you say it does not work?

There is too much government and/or banker interference to have either.

 

Ken

 

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall

Mike,

Socialism isn't an "answer" either.  You really want government in charge of energy security?  That will just make things worse.  These are the same people that brought you social security that isn't secure, financial regulation that doesn't regulate, welfare for the poor that doesn't help the poor, low-income housing that becomes home to drug dealers and other criminals. 

If the government is charged with energy security, people will stop worrying about their own impact on the planet.  "Why should I worry - I pay a tax for that and the government I am sure is taking care of everything".  That's the same reason why people haven't saved for their own retirements - "government says we have Social Security, I don't have to worry".  It's why charitabnle giving is down: "I pay taxes and part of that goes to the poor."  It's why people don't do due-diligence on financial investments: "We have an SEC and God knows how many other regulatrory agencies... there couldn't possibly be a unscrupulous people like Bernie Madoff out there."  And it goes on and on.

Mike, maybe the answer is people like you making individual choices for their own good and out of their own free will.  People will make drastic changes in their lives when the alternative is painful and urgent.  See the video Chris posted a few weeks ago about surviving Peak Oil in Cuba.  What a great artificial "laboratory" example of Peak Oil.  People for the most part survived.  Yes, their lives were tunred upside down and yes it was painful.  I'm sure some starved.  But at the end of the day, they made individual choices for their own good and nobody had to convince them oil was running out because it already had.  Even their government didn't have to tell people to take every possible available piece of land and start growing things on it, because it was the obvious thing to do.

Mike, you and Paul put entirely too much hope in government.  It's most puzzling coming from Mike since it is obvious you are among the most self-sufficient people around here.

Finally, as I am sure it is no surprise to you, I totally disagree with you on capitalism.  It is not about "profit".  It is about creating value.  When value is created for society, profit is the pay off.  Someone who recombines land, labor and resources to produce something that is worth more than the sum of its parts has created value.  Society rewards him by paying a higher price for the end product than what it cost the risk-taker to produce it.  A risk taker who squanders his land, labor, and resources by producing something that is worth less than what it costs him to produce is not rewarded by society and he quickly goes out of business.  I couldn't think of a better way to value and control the expenditure and investment of energy in all its forms (human, natural and legal - i.e., property).

 

 

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Re: Crash Test Wham-O: GM (General Malaise) Hits the Wall
kenc wrote:
Patrick Brown wrote:

Mike & Others:

The proposals made by Moore are not only dangerous but also impractical.  What this calls for basically is more centralized, top-down, government control of our economy, specifically the car industry.  I can see how very easy it would be for these proposals to be taken seriously and even adopted by the US government.  In periods of economic gloom, combined with a charismatic leader and lopsided political power in the legislative branch, history has shown that government power and intrusion into the private sector can easilly grow beyond anything thought possible.  That's how FDR managed to stay in power despite having a worsening economy at every election cycle, packed the Supreme Court in a move remeniscent of typical dictators, and moved the government into areas of the economy that still haunt us today (like the social security ponzi scheme).

The public will buy what it deems of highest value.  If that takes the form of small, economic, energy-efficient cars, then they will buy them.  Forcing them on the population is not going to make them choose GM over Toyota or some other vehicle.  It will just decimate our domestic auto industry further.

Furthermore, I am more concerned over the principles that would allow the government this kind of power.  I believe it was Benjamin Franklin who said, "Do not give the government any power you would not give your worst enemy."  No matter how well-meaning, eventually this power will be abused or used in ways not originally intended.  Look at the Patriot Act as an example.

I also believe "Coercion is the root of all evil."  I don't know who said that, but I believe that sums up everything that has anything to do with the credo of Liberty.  Forcing people to make or buy certain cars is co-ercion and could easilly be extended to force all manner of things upon people.  I do not want Michael Moore in charge of what I drive anymore than I want him in charge of what food I eat.

Be careful what you wish for.

 

 

Patrick,

 

I completely agree. We need less intrusion by government, not more.

If  a business is not economically sound then it should go bankrupt.

As far as taxes go; we have too many now with gov. wasting most of the money. I don't want to give them more to waste.

Ken

 

This isn't an example of intrusion of govt into the commercial sphere. If it was a true take over by govt that actually had the best wishes of the tax payer in mind, boards of directors would have been fired, salaries of senior executives savaged, and the bonus system buried. The govt, which could have been described as the parasitic twin of big business, slowly sucking it's life's blood, in times gone by,  is now a vestigial tax collecting sex partner, for finance. KInd of like an angler fish. It looks similar but is actually quite different.

"Anglerfish employ an unusual mating method. Because individuals are presumably locally rare and encounters doubly so, finding a mate is problematic. When scientists first started capturing ceratioid anglerfish, they noticed that all of the specimens were females. These individuals were a few inches in size and almost all of them had what appeared to be parasites attached to them. It turned out that these "parasites" were the remains of male ceratioids.

http://en.wikipedia.org/wiki/Anglerfish

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