Best of the Week
Most Popular
1.Will UK Interest Rate Rises Crash House Prices? - Nadeem_Walayat
2.Full on Crash Alert for Major World Stock Markets... - Clive_Maund
3.Gold And Silver Market Bottoming? Big Rally Imminent? Reality Check Says NO - Michael_Noonan
4.The Coming Silver Price Rally Will Outperform All Previous Ones - Hubert_Moolman
5.The Trigger For The Upcoming Stock Crash - Harry_Dent
6.Imploding Department Store Results - James_Quinn
7.Dr. Copper is Speaking, are you Listening? ... - Rambus_Chartology
8.Pandemonium in the Stock Market, Dow falls 1,000 points in a week - EWI
9.Asia's Whirling Dervish of Devaluations Has Encircled China's Exports - Keith_Hilden
10.China Weakens the Yuan; Rattles Global Stock and Financial Markets - Gary_Dorsch
Last 5 days
EU Migration Crisis and Population Density, Why Cameron is Right, England Really is Full - 3rd Sept 15
Stock Market Return to Crisis: Things Keep Getting Worse - 3rd Sept 15
Dow Theory Stock Market Sell Signal Examined - 3rd Sept 15
How OPEC’s Attempt to Save Face Affects the Crude Oil Market - 3rd Sept 15
Crude Oil Price Forecast 2015 and 2016 - Video - 3rd Sept 15
The Real Threat from China’s Stock Market Crash - 2nd Sept 15
How Our “Mixed Economy” Created These Mixed-Up Markets - 2nd Sept 15
'Gravity' Is Returning to Stocks and Bond Markets - 2nd Sept 15
OPEC Divorce And Self-Destruction Thanks To Saudi Crude Oil Strategy? - 1st Sept 15
The Beginning Of A New Financial / Stock Market Cycle - 1st Sept 15
Three Things Every Master Trader Knows About Trading Options - 1st Sept 15
Chinese Yuan Revolution? - 1st Sept 15
Take Advantage of Record-High Auto Sales… Before This Bubble Bursts - 1st Sept 15
Pondering Hitler's Legacy - 1st Sept 15
Mainstream Media Goes Berserk - 1st Sept 15
Your Decisive Stock Market Plan to Follow Whilst Most Investors Shiver With Fear - 1st Sept 15
Are There Stock and Financial Markets Investing Opportunities For The Remainder Of 2015 - 1st Sept 15
Crude Oil Price Forecast 2015 and 2016 - 1st Sept 15
REPO Window Hidden $Trillion QE Monthly Volume - 31st Aug 15
Silver and Warnings From Exponential Markets - 31st Aug 15
Stock Market Calls Fed’s Bluff - 31st Aug 15
Why Some ETFs Led the Stock Markets Down Last Week - 31st Aug 15
Stock Market Collapse - Take The Opportunity To Bail Before It’s Too Late! - 31st Aug 15
The Most Important Market Chart on The Planet - 31st Aug 15
Stock Market 50% Retracement - 31st Aug 15
Stock Market Crash Red Alert for 2nd Downwave... - 31st Aug 15
Independant Scotland 1 Year on, UK Civil War If the SNP Fanatics Had Succeeded - 30th Aug 15
Gold’s 7 Point Broadening Top - 30th Aug 15
The Day the Stock Market Shook the Earth: Takeaways From the Dow’s 1,000-Point Drop - 30th Aug 15
Gold Price Rally Marked by Short Covering - 30th Aug 15
Aging Stocks Bull Market - 29th Aug 15
Economic Destabilization, Financial Meltdown and the Rigging of the Shanghai Stock Market? - 29th Aug 15
The Stocks You Should Be Buying After the Market Drop - 29th Aug 15
How I Learned to Stop Worrying and Love Market Fluctuations - 28th Aug 15
China's Yuan Devaluation: Why It Was "Expected" - 28th Aug 15
Stocks Go Nuts But the Question Remains – Will the Rally Stick? - 28th Aug 15
Fed’s Stock Market Levitation is Failing - 28th Aug 15
The Eight Energy Systems Driving The Stock Market Rout - 28th Aug 15
Silver Sold, then Squeezed - 28th Aug 15
U.S. Economic Fundamentals 'Look Good' - Bullard of St. Louis Fed - 28th Aug 15
Stock Market Margin Calls Mount - 28th Aug 15
Einstein, Physics, Gold and The Formula To End Economic Decay - 28th Aug 15
The 10 Best Stocks for Options Trading Plays in This Market - 28th Aug 15
Economics of a Stock Market Crash - 28th Aug 15
Currency Wars Detonate; Gold Refuses to Budge - 28th Aug 15
UK Immigration Crisis Hits New Record, Trending Towards Becoming a Catastrophe - 28th Aug 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Global Stocks Slide

Government Subsidizes and Bankrupt Companies

Companies / Government Intervention Feb 27, 2013 - 11:15 AM GMT

By: BATR

Companies

There are many forms of government subsidies. Ambitious politicians ingeniously design schemes to expand their power and repay their donor patrons. Opportunist corporate enterprises beg for favor to fund projects or guaranteed loans. The role of government venture capitalism has produced a much-sordid record for the taxpayer. The sheer concept of picking winners and losers is a pure political play that defies pragmatic prudence. In spite of this, actuality, the rush to squander public money is one of the few growth industries. The pitiful results of the predictable bankruptcy are the common fate of this flawed business model.


The latest outrage has Buyers Circle Around Ailing Fisker Automotive. Yet, some critics of this assessment would have you believe that Fisker Automotive is in a sharp contrast to competitor Tesla Motors.

"But the fact that potential buyers are from China is already raising alarms about Fisker, which raised $1.2 billion in venture capital and spent about $192 million in federal loans to build a factory. "Technology developed with American taxpayer subsidies should not be sold off to China," Republican senator Charles Grassley told Bloomberg. He compared it to the acquisition of A123 Systems by China-based auto parts company Wanxiang Group.

By contrast, Tesla Motors, which also received a DOE loan to build its factory, is crossing into higher volume production. Yesterday, Tesla announced that it expects to be profitable this quarter and is making its Model S at a rate of 400 a month, which will allow it to hit its annual target and meet demand for the electric sedan. (See, Tesla's Explosive Revenue Suggests a Bright Future.)

One crucial difference between Tesla and Fisker, which is well known for its bold designs, has been Tesla's manufacturing expertise. Fisker may well still go public and be a successful EV supplier. But for energy-related startups to go the route of Tesla rather than Fisker, they'll need innovative technology, access to capital, supportive policies, and great business execution."

The Obama environmental cult would argue that it is largely appropriate to spend public resources to fund private technological businesses. Some will be successful while others will fail. However, the partnership role with government in this new state/capitalist prototype is necessary to achieve the greater good of a fossil free ecosystem. Expensive cars, not designed for the commuter, are now joint venture public finance missions, in order to curtail gas fumes.

Henry Ford is rolling in his grave and Enzo Ferrari is searching for the electric switch.

The notorious "Green" sector has vivid examples of bribery, theft, incompetence and high-priced inefficient technology. The Foundry publishes a most informative list of President Obama’s Taxpayer-Backed Green Energy Failures. "So far, 34 companies that were offered federal support from taxpayers are faltering — either having gone bankrupt or laying off workers or heading for bankruptcy." Examine the specific site links for expanded details.

Now expand the creativity of the subsidy culture to the bankruptcy constituency. The report, Union That Bankrupted Hostess to Receive Generous Government Subsidies, will push you over the edge.

"Last year, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union refused to accept concessions that would have kept Hostess in business. The company had tried to cut costs as it faced high labor expenses, rising ingredient costs, and decreasing sales. The Teamsters union accepted the concessions, but the Bakery union would not, choosing to strike. Unable to continue operating, Hostess filed for bankruptcy.

Now those who helped bring down an American icon will receive generous, taxpayer-funded benefits from the Trade Adjustment Assistance (TAA) program. These generous benefits come in addition to existing unemployment insurance, job placement, and job training programs. TAA benefits include:

• Up to two years of job training in an approved training program,

• Up to 52 weeks of Trade Readjustment Allowances for workers in job training,

• Job search and relocation allowances,

• A refundable "health care tax credit" that covers 65 percent of a worker’s health insurance premiums in qualifying health plans, and

• A two-year wage insurance program that partly replaces workers’ earnings if they accept lower-paying jobs."

The civic grant philosophy is not just for corporatists. Union goons prefer that their rank in file lose their livelihood, so that they can enjoy the welfare stipends of the state-run insolvent society. The prospects of a Mandarin logo on a Fisker vehicle are hardly on the same scale of transferring innovative technology to Cantonese creditors. However, the common practice of squandering national treasure for dubious purposes seems to be the primary product of the political careerists. Leave it to the progressives over at The American Prospect, for an unintended analogy, in the essay The Twinkie Defense - the unions made us do it. "Hostess Brands is classic case of private equity engineers and executives looting a viable company, loading it up with debt, and then asking the employees to make up the difference."

Regretfully, but with no remorse; the political class plays the role of private equity engineers, as the government plunders our economy, through crony spending and swelling of the debt, while saddling the taxpayer with the bill.

James Hall – February 27, 2013

Source : http://www.batr.org/negotium/022713.html

Discuss or comment about this essay on the BATR Forum

http://www.batr.org

"Many seek to become a Syndicated Columnist, while the few strive to be a Vindicated Publisher"

© 2013 Copyright BATR - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors

BATR Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History