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by Brian Butler

Financial de-globalization (a real trend?)

2009/02/06 in credit crisis, macro trends

There has been lots of talk lately of “deglobalization“…especially since Gordon Brown (Prime Minister of the UK) mentioned these words at Davos, a little over a week ago.  But what does it mean?  Are we really de-globalizing?  In this article, I will argue that while the treats of protectionism are real…it’s still a bit too soon to call “deglobalization” a trend (no matter how good this may sound in headlines).

A second concept that I will present … is that (a) trade protectionism is indeed a threat, but one that politicians ultimately have control over.   On the other hand (b) financial de-globalization is an area which is less understood, and much harder to control.  Financial deglobalization works in reverse….politicians want money to be spent at home….as opposed to “product” globalization where it’s in the interest of home politicians who want their products sold overseas.

Clearly the treat of protectionism is real, but I will argue that we are still a long ways from actually seeing “deglobalization” as an actual trend.

Deglobalization of trade (products)?

Nationalistic tendencies are on the rise.  We have seen labor strikes in France, UK and others…demanding local jobs.  We have seen the US congress propose “buy American” rules…and, we have seen protectionist actions from Switzerland and maybe even China.    In Malaysia there is a proposal to “layoff  foreigners nationals first” in order to protect local jobs.

“Protectionism” is clearly on the march…but is this really “deglobalization”?  I dont think so.  The threat of protectionism is not the same thing as “deglobalization”.  Rather, they should be seen as two distinct steps.  First comes protectionism…then, maybe (if we are unlucky) comes deglobalization.  Im not saying that it wont happen, Im just saying we arent there yet.

Politicians still have a choice.  This was clearly on display when Obama pleasantly surprised me and pulled the improbable “free trade” move by actively denouncing the “buy American” rules proposed in the stimulus package. He showed that clear-headed leaders have a choice about our path, and can choose to keep borders open to trade.

“Obama for the first time yesterday said he opposed language in the bill that would require steel and other goods used in infrastructure projects to be made in the U.S., saying such protectionism may trigger a trade war America.”  source:  Bloomberg

Political decision

What is interesting about this move (beyond just being a huge relief to all free traders)…is that it clearly shows that protectionism / vs free-trade is a political decision, and one that democratically elected officials have control over…. the process of deciding to try and protect local jobs is a political decision, and as long as cooler heads prevail, free trade in goods and services will continue.   (sure, there will be HUGE pressure from trade unions to “keep” local jobs, but the ultimate decision to close or open borders to trade is a decision that our leaders can make).

Exports are desirable for the US.  So, it makes sense to keep globalization of products alive-and-well.  Free trade of goods and services are clearly in everyones best interest (mosts economists agree that free and open trade is preferable to trade barriers).

But, the same can not be said of financial globalization.  Economists are much more divided about the positive impact of globalized finance on economic development.  Its not that they think its bad (although its clearly risky), the trouble is that there is much less consensus among respected economists about the benefits of globalized finance.

Who decides to (or not to) deglobalize finance?

Politicians can choose to have flexible exchange rates, and they can choose to allow capital to flow freely.  Politicians, however, can NOT oblige banks to lend money overseas.  In fact, its probably in the politicians interests to NOT lend money overseas (but rather at home to local companies).

Bank nationalizations will only increase the pressure to lend at home (rather than overseas).  As banks get nationalized (as they surely will, or already have been)…there will be increased pressure to lend at home (at the expense of lending abroad).

“The fact that the financial sector now depends on a government backstop may have prompted the banks to pull back more from foreign markets than their home markets, though they are clearly doing both.  Deglobalization – particularly financial deglobalization – isn’t going to be pretty.”   Brad Setser blog

And, even if the banks dont get officially nationalized (which I believe is highly unlikely)…the process of financial deglobalization will be hard to slow down…

There is “growing pressure on banks and financial institutions to retreat from international business and concentrate on domestic markets. Trevor Manuel, South Africa’s finance minister, captured the fears of many when he warned that his country and other emerging markets were in danger of being crowded out of international capital markets and of “decoupling, derailment and abandonment”.

Financial protectionism is driven by the logic of the market and political pressure. Banks that have lost confidence and capital in the credit crunch are retreating to the home markets they know best. And because so many banks have been bailed out by national taxpayers, they are also coming under political pressure to lend at home rather than abroad.   source:  Financial times blog

But, will finance get “deglobalized”?

No, I think not.   Currency markets trade 100′s of Trillions of dollars per year.  The sheer size of international financial markets ($140 trillion in promises 2005) makes it highly unlikely that finance will actually be “deglobalized” (see data below).  While the size of the pie may shrink, I dont see that as the same thing as deglobalization (elimination of the pie all together).

Again, I think that this term of “deglobalization” is a bit overused in the press, and has a shock value, but not much else.  Its important to realize that deleveraging of capital markets is going to happen (which means there will be less credit around for everybody).  Its also important to realize that capital will flow to the safety of the US when emerging markets seem too risky, but it will flow in reverse when volatility subsides.  Local banks may lend less overseas, and nationalized banks may be pressured to lend at home.  But, this is NOT deglobalizaton of finance.

As long as barriers are not erected to keep local capital at home (as is the case in countries such as China with capital controls), then global financial capital will flow freely.  As long as exchange rates remain flexible (in most of the major trading economies of the globe), then financial globalization will continue.

The economists will still debate about whether that is a good thing or not.  But, for now anyways…I dont see “deglobalization” as a trend.   The threat of protectionism is…deglobalization is clearly not.

Wiki:  Read more & contribute in our GloboTrends Wiki:

Data

Size of the Financial sector:

1.  USA:

  • household & non profit:
    • total assets = $64.4 trillion assets owned  (5x USA GDP)
    • total debts =  $11.9 trillion
    • total balance:  $52.5 trillion
      • of this $52.5 trillion…the breakdown was as follows:
        • $25.6 trillion = tangible, mostly property
        • $38.7 trillion = financial assets
          • $6.1 trillion in deposits
          • $3.1 trillion in credit market instruments
          • $5.7 trillion in direct corporate equity
          • $8.9 trillion in indirect corporate equity, of which…
            • $1.1 trillion in life insurance
            • $3.0 trillion claims on pension funds
            • $1.9 trillion claims on gov’t retirement funds
            • $2.9 trillion mutual funds

So, total US financial assets in 2005 was as follows…

  • Household & non profit sector (data from above):
    • financial assets:  $38.7 trillion
  • Business sector -  Non-farm, non-financial corporate sector
    • financial assets:  $10.9 trillion
  • Business sector -  Non-farm, non-corporate sector
    • financial assets:  $2.3 trillion
  • TOTAL US private sector Financial Assets:
    • $52 trillion USD (approx. in 2005)….obviously it grew more till 2008 (especially housing bubble), before falling…

Financial assets globally…

Compare this with world (in 2005):  source : McKinsey report 2005, “Mapping the global capital market”

  • USA (private sector only):  $52 trillion  =  37%  (rounded)
  • Eurozone (all):  $30 trillion                  =  21%
  • Japan  (all):  $19.5 trillion                    =  14%
  • UK (all):  $8 trillion                             =   5.7%
  • Top 4 total $109.5 trillion / 140           =  almost 80% world total !!
  • World total (all, including private + govt + business):  $140 trillion….owned of financial assets

How this $140 trillion breaks down…

  • $44 trillion was equities      =  31.4%
  • $35 trillion was private debt securities   =  25%
  • $23 trillion was government debt securities   =  16.4%
  • $38 trillion was bank deposits                        =  27.2%…….down from 42% in 1980 (shift away from simple deposits to more indirect banking)
  • $140 total

How has it grown? As a % of GDP…

  • $140 trillion was = 3.16 x total world GDP in 2005….up from 2.18 times in 1995,  and from 1.09x in 1980
  • Regional trends from 1995 to 2005
    • UK: rose from 2.78x to 3.59x GDP
    • USA  from 3.03x to 4.05x GDP
    • Eurozone: from 1.80x to 3.03x GDP

* data from McKinsey report 2005, “Mapping the global capital market“  and http://www.federalreserve.gov/releases/

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by Brian Butler

Beggar thy neighbor (part 2); this time its Switzerland?!?

2009/01/26 in credit crisis, currency, macro trends

Back in December, I wrote an article about the risks of rising protectionism in which I forecast the potential rise in beggar-thy-neighbor policies as a result of the ongoing economic crisis.  I called that article “part one” in anticipation that further articles may need to be written (hoping that they would not).  But unfortunately, there has been a string of recent news articles that have shocked me into writing a part 2 for this series  (lets hope there wont be a part 3!).   The culprit this time comes from the most unlikely of all places…Switzerland (yes, the home of the “WTO“, the global protector of free trade).

Why worry about Switzerland?  Well, because of a recent quote from Swiss National Bank Vice President Philipp Hildebrand….where he  pledged to sell “unlimited amounts of the currency (Swiss Franc) to curb its  appreciation.”  In other words, the Swiss National Bank would do everything in its power to devalue their currency (compared to market supply /demand).  This means selling their own currency to buy another currency (likely target = the Euro).

On the surface it appears harmless for Switzerland to assume this protectionist stance…what can it hurt if a tiny country decides to defend its currency?  ( With a GDP of around $490 billion, Switzerland is about the size of Belgium or Sweden, two middle-ranking economies in the 27- nation EU.)…And, doesn’t Switzerland need the help? (because their banking-dependent economy has been harmed by the global crisis, with the resulting unemployment and potential deflation which are threatening the Swiss economy)…

The reasons actually make some sense…

  1. Switzerland is facing the risk of deflation….which is terrible….and so, in order to avoid this terrible economic situation of deflation, Switzerland might need to have a weaker currency so that prices of imports will be higher, hopefully leading to some inflation (some rise in prices, which would counter this deflationary pressure)…
  2. Also, Switzerland needs jobs, and since the economy is heavily dependent on exports (to Europe mostly), the currency should be weaker to help drive up exports and keep the Swiss economy moving.  (Swiss exports, make up more than half of Swiss gross domestic product, and account for a  large percentage of Swiss jobs).

Ok, that sounds reasonable…but Switzerland is not just a “tiny European country”…they are a modern, advanced economy at the heart of the global financial system (and hence, smack in the middle of this global crisis).

The trouble with protectionism in Switzerland is that the same excuses (to turn protectionist) could equally apply to both Japan and to the US…who are both fighting slow economic growth, rising unemployment, falling exports and the threat of deflation (which Japan fought for over a decade).

Why focus on the relationship among Switzerland, Japan and the US?

Because all three of these currencies have appreciated during the global crisis.   These are the three major “safe havens” for global capital as it flees risk in other areas.  All three were major carry-trade partners (in the past) in which their local currency was borrowed at low interest rates, and invested abroad at higher interest rates.  But, as the world lost its appetite for risk, and as volatility increased, global investors were forced to unwind (reverse) those investments, and to bring massive amounts of capital home (to all three countries).  This explains why US, Japan and Swiss have seen their currencies appreciate during this crisis.

The trouble is that none of these countries manufacturing base benefits from having currency appreciate.  All three see their exports less competitive internationally as a result of strengthening currencies.  All three are facing job losses and deflation and near-zero percent interest rates.  All three are facing political pressures to create jobs and fight their local recessions.

And up until now, all three have respected the principles of free trade, and have allowed their currencies to float on international markets.  But, this changed when Switzerland broke-ranks with the others, and announced their intention to try and stop this appreciation to help their local economy.

This is extremely dangerous because it sets precedent for the other major trading partners.

What would happen if Japan were to announce their intention to also try to devalue their currency?  It clearly is in Japans interests to do so as it would help their important export sector…but, would that set off competitive devaluations across SE Asia?  Would China follow?  If both the Swiss and the Japanese (the only two other appreciating currencies along with the US dollar) were to actively devalue their currencies, would the US be far behind?  Can all currencies devalue?  Clearly not…but if all try to …its the basis of a competitive trade war.

Note:  the Japanese Yen has appreciated much more strongly during this global crisis than the Swiss Franc, but they have been surprisingly quiet and restrained in their non-defense of the currency.  In the chart below…you can see that the Swiss franc was steadily strengthening vs the Yen for about 4 years…but then the crisis hit, and the Yen has strengthened much more in comparison to the Swiss franc (inverted scale…so a downward sloping line = Yen strengthening, Swiss franc weakening).

chfjpy

In summary…it is important to remember that not ALL countries can follow this strategy of devaluing their currency, because one currency must appreciate if another depreciates…the trouble is that if all countries try to follow this strategy, we would have a trade war!

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A closer look at the Swiss Franc – a 5-year perspective…

What is Switzerland really worried about?

Has their currency really appreciated that much?   As we saw in the previous chart, the Swiss Franc has actually depreciated a lot compared to the Japanese Yen (or, not appreciated as much vs other currencies as has the Japanese yen).

How about comparing the Swiss Franc vs the Euro (which is the major trading partner of Switzerland)?  Well, in this case, you do see that the Swiss Franc has appreciated during this crisis.  Where it used to take 1.65 Francs to buy a Euro, but now might cost 1.50 (meaning that the Swiss Franc is stronger as it costs less to buy a Euro). But this movement is less dramatic if you take longer-term horizon and look back over the past 5 years….

eurchf

If you see the chart above…leading up till the beginning of 2008, the Euro was strengthening vs. the Swiss Franc…making Swiss exports more competitive in their critical export market.  But, as the crisis began, the Swiss Franc began strengthening vs the Euro, making Swiss exports slightly less competitive (the basis for protectionist policies as was recently announced by the Swiss central bank).

But, this move in currency appreciation has hardly been dramatic when viewed from a historical perspective.  Over the past 5 years, the Swiss Franc has typically traded between 1.5 and 1.6 to the Euro, with a brief period during the 2007 year in which Switzerland benefited from a slightly weaker currency.   Then, in the end of 2008, the Franc strengthened a little beyond that 1.50 barrier, but is that enough to warrant triggering a protective stance in one of the world major developed economies?  Is that movement significant enough to risk triggering a world wide competitive devaluation competition?

How about vs the dollar?

usdchf

Here again, the chart doesnt show much more than a return back to historical levels.  This really doesnt look like the kind of distortion that would normally lead to a quote like this:

  • quote from Swiss National Bank Vice President Philipp Hildebrand….where he  pledged to sell “unlimited amounts of the currency (Swiss Franc) to curb its  appreciation.”

Boy oh boy, I really hoped cooler heads would prevail in one of the worlds most developed economies!   (especially considering that the WTO, the very institution that is supposed to stop trade wars, is LOCATED in Switzerland!)

Join our Forum and add your comments:  here

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Could there be good-side to all of this?

Effects on Eastern Europe:

Interestingly, the Swiss depreciation might actually help countries such as Hungary, which are facing a very serious economic challenge in 2009.   Many Eastern European nations borrowed heavily in Swiss Francs in the past in order to fund development back home.  But, as the Swiss Franc appreciated, their debts suddenly grew, and default risks rose.  So, perhaps the “beggar thy neighbor” of Swiss….may end up actually saving their (eastern Europe) neighbors…if allows them to be able to pay back swiss frank loans…

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by Brian Butler

Top macro-economic trends for 2009

2008/12/14 in macro trends

On our GloboTrends wiki homepage, we host an ongoing discussion of global “macro” economic trends that we think are the most important to keep an eye on.  Some trends we are watching in the GloboTrends wiki are currently ongoing right now (such as our coverage of the USA credit crisis, deleveraging,  margin calls, etc), and we will talk about how they happened, and predict their likely outcome.

Some of these potential macro economic trends may seem statistically unlikely to occur in the short term (if at all), but if they were to happen, they could cause massive global disruption to the financial and economic systems, so they are worth discussing, and taking a closer look at.  These unlikely events were dubbed Black Swan’s in a   book by Nassim Nicholas Taleb , or “fat tail” probability in statistics.  These are the financial equivalents of 9/11, or the chance that a housing bubble could cause global economic meltdown.  In a world where the un-thinkable seems to happen with a greater frequency, it makes sense to start looking at the “worst case” scenario, and figure out how to (a) protect yourself, and (b) position your portfolio to profit from ongoing trends.

The links are to the GloboTrends wiki, where the document is dynamic, so any of our community is welcome to contribute, and to help shape our views of these important developments.  Please log in to our wiki, and feel free to comment…

Top Trends for 2009:

In no particular order, here are the global macro trends that we think will be most significant in the coming year (2009):

  1. Credit crisis of 2007/08 will continue on into 2009…this one is clear…but, how long will it last? how will it fundamentally change international finance?  Add your comments to our wiki…
  2. Deleveraging of Financial markets will continue.  In my opinion, this is the most destructive of all the trends.
  3. Risk of deflation in the US as Fed Funds target rate approaches zero (other analysts see the opposite risk of potential hyper inflation).  Add your comments..
  4. Changes are happening in China.  We are especially concerned about the relations/ dependency between China & USA
  5. Protectionism rises: free trade movement slows down in 2008
  6. Fiscal stimulus expected in massive doses…but will it have any effect at counteracting the deleveraging process?
  7. Monetary / Fiscal policy seen as ineffective…so expect un-conventional action from the Fed, such as quantitative easing
  8. Rise in risk aversion – investors and companies are paying for safety (as negative Treasury yields have indicated)
  9. Increased regulations: Philosophical move away from “free markets” toward “bigger government”.  How far will the pendulum swing?
  10. nationalizations will increase as companies go bankrupt, and look for protection.  privatizations will increase as governments sell off assets to raise cash….which will be the more important force?
  11. IMF will become more important,  WTO might be sidelined
  12. USA is losing stature (military seen as less strong, economy less of a model)
  13. US dollar:  will it continue recent trend of strengthening during the crisis?  Or, will the weak dollar trend resume after the height of the crisis passes, and investors become concerned about excessive debt levels (which no doubt will be increased as we pay for fiscal stimulus packages proposed with the new administration)

In addition to these global trends listed above, we are also interested in discussing how these trends will effect other areas.  For example, we are discussing…how will the credit crisis affect the…

  1. Rise of purchasing power in emerging markets (will this continue post “great deleveraging”?)
  2. inflation (was a big problem going into 2007…now is deflation more of a concern?)
  3. Asian countries fight to keep their currencies undervalued vs the dollar (will this intensify? lead to trade wars?)
  4. Clean-tech and environmentally conscious investing (will this movement continue in the face of economic crisis & lower oil prices?)
  5. immigration (with US & Europe stumbling, how will that affect relations with immigrants?  will there be resentment?)
  6. philanthropy &  Investing in socially good projects (will giving suffer as a result of the crash?)
  7. tech trends to watch (will innovation jump in response to the recession?  or, will lack of funding lead to less?)

Are we missing something?

We are looking for help… this is a community page for open discussion about global trends.

My goal with the site is to create a community where investors and global business leaders can learn, collaborate, gain reputation by contributing content, and lead discussions.   The reputation of leading a discussion on a particular topic should help to find financing, find new jobs, or find new business partners,etc…  Contribute to GloboTrends wiki:


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by Brian Butler

Chinese currency changes direction & depreciates

2008/12/04 in Tumblr blog imports

Its interesting how quickly trends can change.  Back in August of this year, I posted an article here on GloboTrends about the massive one-way bet investors were making on the appreciation of the Chinese currency.   Back then I wrote:

“Word of caution to investors:  If a shakeout ever does occur, and if foreign capital no longer sees China as a one-way bet on currency appreciation, there will likely be many local Chinese companies that will fail as they will see cheap and easy credit evaporate.  If you’re investing in China, be aware of the influence that this massive influx of foreign capital is having on Chinese banks, and their lending practices, and watch out for indicators that will surely come if the financial tides change…”

Back then, the chance of Chinese Renminbi depreciation seemed remote.  But earlier this week that momentum suddenly shifted direction, and the Chinese currency depreciated by nearly 1% in one day, the largest one-day drop in three years.

This wasnt the first time that a “sure-thing” bet on a currency movement turned out to be dramatically wrong.  A similar sudden reversal in currency direction occurred earlier this year with Vietnam, where international calls for allowing the currency to appreciate were suddenly replaced by fears of large scale depreciation.

But what is happening in China?  Is this the beginning of a new trend toward a weaker currency?  Is the move natural or state-induced?   Will this mark the beginning of protectionism?  Please join us in the forum for more discussion…

A new fear enters the picture…

If in fact we are witnessing a change in Chinese currency direction, then that could have two effects.  One is internal to China where local manufacturers will be happy.

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by Brian Butler

Beggar thy neighbor – trade protectionism (part 1)

2008/12/04 in Tumblr blog imports

With slowing economies globally, there is the real threat that individual countries might choose to look out for their own economic growth by trying to boost exports.  If just one country does this, its ok.  But, if all countries all try to engineer lower exchange rates to boost exports, then we could be in for serious trouble.  This is a classic “prisoners dilemma” scenario.

Beggar-thy-neighbor trade policies (or competitive devaluations of currencies), is basically what turned the 1929 stock market crash into the 1930′s economic depression.  It wast until after trade protectionism became entrenched with “beggar thy neighbor” policies of the Smoot Hawley act in the US (in which the US raised import barriers on a wide variety of products) that sparked a global race to the bottom, eventually feeding the fire that led to Nazism and Fascism in Europe.

Example in Latin America

The real danger of the latest financial crisis is that it could lead countries to try and boost local production (and jobs) by engineering lower foreign exchange rates, and boosting exports.  Back in November, we saw the first real hint of raising protectionism when Mercosur (Latin American trade bloc) raised its common external tariff on a variety of items.

Example in China (maybe):

China represents the latest example of a nation trying to boost internal production (and jobs) by depreciating its currency against the US dollar.  The benefit to China is that a lower value of the currency benefits Chinese exports, making them cheaper on world markets.  This is good for China as it boosts demand for their products (if purchasing nations choose to substitute Chinese goods for others).

But the trouble with competitive devaluations of currencies is that in order for one country to benefit, another must loose.  This is the trouble with seeing the world as a Zero-Sum game (in which my gain is someone else’s  loss).

But during this crisis…if you assume that global demand is shrinking, then the only way for China to increase its exports would be to take away exports from someone else.

This must be true unless lower prices from China would be significant enough to spur additional demand from consumers than would otherwise exist.  This is possible, and welcome…but the more likely scenario is that consumer demand around the globe is going to contract in 2009, and that in order for China to boost its exports would be to take away share from someone else.

This is the essence of a “beggar thy neighbor” strategy.  Only time will tell if this is really happening, or if the sudden depreciation in the Chinese currency was organic and not state mandated.  Lets hope it was the former.  Keep tuned in to GloboTrends as we will track this trend (of rising protectionism)…

Video From Bloomberg

Focus on protectionism in China

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by Brian Butler

Why NOT to bail out the US auto manufacturers…

2008/12/03 in Tumblr blog imports

My arguments for not supporting the government bailout for the Auto Industry goes as follows:

  1. Bankruptcy protection would allow the car companies to restructure (much as airlines have previously done)
  2. American-made cars will continue to be sold even if the car companies file for Chapter 11 protection from creditors.
  3. US manufacturers should benefit from restructuring
  4. Why should workers that don’t have health insurance fund a tax-payer bailout to protect the health package of union workers in the car industry?
  5. US is suffering from over capacity and in ability to adjust to lower demand.
  6. But, most importantly, I argue that the slowdown in the Auto industry is the result of a global slump, and is not just focused here in the USA.  all global manufacturers are suffering.  So, US markers wont lose market share by entering chapter 11

US government protection of the US auto industry doesn’t make sense.  Not right now.  Not in the middle of this GLOBAL financial and economic crisis. Tax-payer dollars should be focused on fixing the global financial problem (the root cause of the trouble), and not on saving a manufacturing industry (no matter how strategically important).  The troubles in the financial system are systematic (effecting everybody).   The troubles in the auto industry are localized (and only effect workers of those companies).

Also, I fear that getting government involved in protecting US jobs will only push the global economy further toward a movement of “protectionism”, which we can not afford.  If the US government money goes to protect the US auto industry, they are surely going to stipulate that the money must be spent on “made in America” car parts, and not used to fund operations / sourcing overseas.  But this is a slippery slope to go down, and especially slippery since we are just beginning a serious economic downturn.   Our government needs to resist temptation to enact protectionist barriers in futile attempt to protect American workers.

The car industry slump is a GLOBAL problem with falling demand for products worldwide, a lack of credit for consumers, and an over supply of production capacity. This financial and economic crisis is effecting all manufacturers from all countries:

  • Japanese Car makers are suffering:  In recent news, I read that Toyota, Honda and Nissan are all with sales down approximately 30%.
  • Indian car makers are suffering:  Tata motors is in trouble, and is seeking direct funding from the public in a strange consumer-deposit scheme.
  • European car makers are suffering as Europeans also cut back on Auto purchases
  • Korean car makers are suffering as export markets stagnate due to a lack of global demand

Because the slowdown is global, and because all global auto companies are suffering due to the lack of consumer appetite for their products (and a lack of credit to purchase them), then it makes less sense to bailout the US auto makers.

That will just encourage other countries to also bailout their respective auto industries, and encourage other nations to spend (waste) money reciprocating US policies.  If all car companies are suffering from the same global problem…that means that the US “big3″ wont loose significant market share by going into bankruptcy protection.

If the situation were different globally, and if the relative position of the US makers were to fall as a result of a unique US economic trouble, then perhaps I would see the bailout in a different light.  But, with a global economic slump on the horizon, I believe that all global auto makers are facing difficult times, and perhaps a US restructuring in this environment is exactly what the US industry needs.

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