The only function of economic forecasting is
to make astrology look respectable

The high profile effort to agree legislation to lend $14bn to the US auto industry collapsed on Thursday night, leading the Bush administration to hold open the possibility that it would seek funds from its financial rescue plan instead.

Efforts to agree a deal in the US Senate ended in failure when Harry Reid, the leader of the Democratic majority, said negotiations with Senate Republicans were at an end and warned that millions of jobs were at stake as a result.

…

Both Democrats and Republicans said the sticking point was a demand to push Detroit to bring down labour costs to a par with foreign manufacturers in the US. Democrats said the move made unrealistic demands on the United Auto Workers union, while Republicans argued that no effort to restructure the industry would work without such a step.

Perhaps a loan conditional on appropriate commercial restructuring was an appropriate way to help families through this catastrophe, but it appears the coercive powers of state and union have created a destructive intransigence.

Presidential candidate Congressman Ron Paul spoke powerfully in the debate:

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From the Times Online:

Rick Wagoner, the chief executive of General Motors, today expressed remorse for asking for a $18 billion hand-out from Washington but warned that without immediate assistance the car maker would run out of money by Christmas.

And from my spam filter:

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The Guardian:

A £12bn takeover of Britain’s biggest lender, HBOS, failed to halt the deepening crisis in world financial markets last night, as a wave of fresh speculation on global stock markets saw two of Wall Street’s most prestigious investment banks targeted as the latest victims of the credit crunch.

So, irrespective of whether this was or was not the correct crisis measure, over the years four financial institutions have become one — with consequent effects on competition and therefore the effectiveness of market forces — and still the rot has not stopped.

I see the Prime Minister personally intervened in this business arrangement. I note that the present solution to firms being too big to fail — that is, too big to be subject to market forces — is to make them bigger and less subject to market forces.

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