Yesterday’s NYTimes had a good article on the city of Pittsburgh and its surprising resurgence.
A generation ago, the steel industry that built Pittsburgh and still dominated its economy entered its death throes. In the early 1980s, the city was being talked about the way Detroit is now. Its very survival was in question.
…
Entrepreneurship bloomed in computer software and biotechnology. Two of the biggest sectors are education and health care, among the most resistant to downturns. Prominent companies are doing well. Westinghouse Electric, a builder of nuclear reactors, expects to hire 350 new employees a year for the foreseeable future. And commercial construction, plunging in most places, is still thriving partly because of big projects like a casino and an arena for the Penguins hockey team.
With the recent debates on whether or not to bailout Detroit’s automakers, who’s industry-much like the old steel industry-is in need of major reform, Pittsburgh should serve as an example. Places like Detroit and other cities once buoyed by old line manufacturing industries must adapt and reform to survive what is inevitable. No one is guaranteed a job for life, but if folks are motivated and encouraged to to adapt to an ever-changing world economy, making themselves employable for life–things would work out a lot better.
Apple's 1984 "Big Brother" ad
An article over at Ad Age brings up an angle on the whole auto industry bailout probably not considered much before. The fact that a yet-to-be-appointed “car czar” will have control over a multibillion dollar advertising budget for the big three. Under the guise of “oversight,” this would effectively “Create World’s Most Powerful Marketing Exec[utive].”
The draft rescue plan for Detroit sent to the White House by Congress yesterday calls for the appointment of a “car czar” who will oversee the Big Three automakers’ expenses over $25 million — which, by extension, would include media buys. Based on Advertising Age’s estimates of spending by General Motors Corp., Chrysler and Ford Motor Co., that would give the as-yet-unnamed car czar control over some $7.3 billion in marketing spending in the U.S. alone.
The most disturbing thoughts about this (particularly to those concerned with liberty) are provoked here:
The car czar would wield a budget more than double those of AT&T, Verizon, Unilever and Johnson & Johnson, which round out the nation’s top five marketing spenders, and give the car czar more clout with media and agencies than such famed names in marketing as Walmart Chief Marketing Officer Stephen Quinn and Anheuser-Busch VP-Marketing Dave Peacock.
…If the bailout goes through, agencies that work for the Big Three will essentially be toiling on a government account, with all the associated red tape and strictures that involves.
So there you have it. We should all be concerned about this for many reasons. As mentioned, the large ad budget that comes with a czar-controlled U.S. auto industry will allow a government bureaucrat to wield unbalanced and unchecked influence over not only who gets ad contracts, but what media outlets get ad money. The czar can simply refuse to give business to an advertising agency who works for a foreign competitor of the big three (or a “non-compliant” corporation), or refuse to pay money to show ads on outlets that they deem “unfriendly” to the administration or its mission. This will be an unequivocal disaster. We have already seen the lengths to which administrations (and pre-administrations) have gone to influence and/or silence media they do not like. What kind of power plays do you think are possible when the administration’s appointee controls a major source of media outlets’ ad revenue? Whatever it ends up being, it won’t be pretty.
It’s been called a ticking time bomb by Investor’s Business Daily. CNNMoney asks if this will be the next disaster. Yet the Feds are delaying one key in bringing stability to our financial markets.
As a $62 trillion dollar over the counter market, CDSs need an exchange or central clearinghouse to provide transparency and collateral requirements. CME (formed from the Chicago Board of Trade and the Chicago Mercantile Exchange) and the Clearing Corp (formed from 17 financial players including UBS and Goldman Sachs) have stepped up to the plate. Clearing Corp could have had a clearinghouse up and running within a week or so; however, the Fed has pushed Clearinghouse to obtain a banking license which will probably delay its opening until next year. But with each bank that is removed from this house of cards the threat of meltdown is increased. The banks are falling one after another internationally, and with the CDSs so intertwined, its only a matter of time until when you take away one more card and they all fall.
According to Bloomberg, “Barclays analysts estimated in February that if a financial institution that had $2 trillion in credit-default swap trades outstanding were to fail, it might trigger between $36 billion and $47 billion in losses for those that traded with the firm. That doesn’t include the market-value losses investors face as the cost to protect companies against a default widens.”
Perhaps it would be a good idea for the Feds to speed their approval process?
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