From the Naked Capitalism…..

AIG’s loans so far come to $1.4 million per employee, and many of whom are stationed overseas. But their requests for more cash and better terms got speedy approval, while the auto industry, on whom far more jobs depend, may be dealt a deadly blow due to the failure to due a basic investigation of likely consequences.

I get the point. But throwing money down a rat hole is throwing money down a rat hole regardless if it is the Big Three or AIG. My solution for this injustice would be to stop giving money to AIG.

From Calculated Risk…..

Just checked some money market funds, and for a few of them the expenses are now greater than the yield – so you’d do better with a mattress.

From Pajamas Media…

But almost all of the discussion, when it comes to UAW culpability, has been on wages. The even larger issue, though, is the elephant in the room that seemingly no one discusses, even when given a political opportunity. For instance, I saw a “debate” on Fox News recently in which the Democrat defending the union said that it was partly management’s fault because of the poor quality of the cars, and the Republican failed to respond. And it’s not like people are unaware of it, at least people familiar with the industry. The issue isn’t wages — though those are a problem — so much as work rules. UAW work rules, which have evolved over the many decades since the passage of the Wagner Act, are the biggest reason that General Motors is uncompetitive with its non-union American counterparts.

What are work rules? They are agreements negotiated in the contract between management and the union covering how the employees are to be classified, how many breaks they get, how much time off they get, who can do which jobs, how discipline is to be enforced, etc. The goal of the rules is not to enhance productivity or production quality. It is to provide opportunities for featherbedding, increase numbers of (overpaid) jobs for union workers, and minimize how much they have to actually work. This is important because it’s at least in theory possible that the industry could be making money even at current wages, if they could be provided with the flexibility to increase worker productivity.

The article is full of little anecdotes to back up the author’s point. I have seen enough with my own eyes that I have no doubt that his point is correct.

But I still blame management for the problems. The power of unions is easy to overstate. A lot of times they are used as an excuse by managements for not doing their jobs.

Moreover, management could have refused to agree to those restrictions on their authority. But a lot of times, upper management thinks that such rules are relatively harmless compared to paying more money. I think they tend to think that all monkeys are the same. So they don’t feel like they are losing much when they give up the right to reward the better monkey.

From Euro Intelligence….

Frankfurter Allgemeine has cracking scoop this morning, having obtained an internal memo from the economics ministry, which expects a slump in growth of more than minus 3 per cent for next year, by far the worst economic decline in German post-war history. The ministry plans to make this forecast official in its annual economic report, due out January.

Worse still, the decline in the present quarter is estimate at 1.25-1.75%. Note these are actual, not annualized figures.

Does anyone remember when the Fed use to focus on “Core Inflation?” The argument back then was that you should exclude volatile things like Energy and Food to get a true picture of the underlying inflationary pressures. Now get this from the Fed Report….

The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.

Since the Committee’s last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further.

Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.

Why don’t they strip out Energy and Food prices to get a true picture of the underlying inflationary pressures? As Megan McArdle notes…

The fall in the CPI was driven almost entirely by energy prices, without which the price index was flat.

When the CPI was high, people argued that interest rates should not be raised because underlying cause for the high CPI numbers was a rise in volatile energy prices. Now those same people argue that we need to cut rates because volatile energy prices are falling. I just don’t get it.

Even relative optimists like Felix Salmon are starting to get a little worried. At the closing of his post dealing with today’s cuts he says…

Did we really need a zero interest rate policy, or Zirp, on top of this? It would be great if we could get some reassurance from FOMC members that they understood the downside of today’s move and know what they’re doing. Because it really worries me.

Editors Note: The “This” in the above quote is referring to the Fed’s promise to print money and intervene directly in the markets.

From Spiegel….

Evidently the Romans and Germans fought a bloody battle in the third century AD, said archaeologist Petra Lönne. Some 1,000 Roman legionnaires may have been involved in the fight.

Intriguingly, the find includes more than 300 iron projectiles that were fired by powerful Roman torsion weapons known as scorpions (scorpio), which could catapult heavy darts with a high velocity and deadly accuracy. It had a range of 300 and was portrayed in the opening battle scene of the Hollywood movie “Gladiator.”

“The bolts were found densely clustered,” said archaeologist Henning Hassmann.

Historians say the discovery of the battlefield is so significant because it appears to refute the assumption that the Romans withdrew from Germania after their defeat by an alliance of Germanic tribs at the battle of the Teutoburg forest in 9 AD.

This longer article from Spiegel has more details. As best as they can tell, some German’s took a stand on the hill. There, they got pounded by the scorpions and Roman auxiliaries. After pounding the Germans for a while, it seems that the Romans attacked the hill from two different sides of the hill. They seem to think that the Romans won.

From Brad Setser….

In October, China was about the only central bank adding to its reserves (I suspect, it hasn’t formally released its reserves data). Most central banks were selling. That shows up in the US TIC data. South Korea, Brazil, Mexico, Russia and Ukraine were all net sellers of long-term US Treasury bonds …

The big central bank flow was a reallocation away from Agencies toward Treasuries. And specifically toward short-term Treasury bills.

China increased its holdings of short-term Treasury bills by a stunning $56 billion while also buying $10 billion of long-term Treasuries. That flow alone would have been enough to cover the trade deficit in the absence of any offsetting outflows.

You have got to admire China’s determination to make this all work. But how much longer can the prop us up.

(I know, I know, people can stay stupid for longer then I think. But I have to believe they are pushing their limit)

From Jeff Matthews….

You might think a supposed $50 billion fund with audited statements from an unknown accounting firm with no web site might, oh, raise some eyebrows.

And it did.

As the Wall Street Journal has reported, one individual more or less laid out the issue for the regulators in language that does not get much clearer, nor much further from the actual truth:

“Harry Markopolos, who years ago worked for a rival firm, researched Mr. Madoff’s stock-options strategy and was convinced the results likely weren’t real.

“Madoff Securities is the world’s largest Ponzi Scheme,” Mr. Markopolos, wrote in a letter to the U.S. Securities and Exchange Commission in 1999″.

Here is a guy who correctly identified a Ponzi Scheme almost ten years ago. Yet he had to wait that entire time for people to acknowledge that he was right.

Always remember that no matter how stupid you thinks something is, and no matter how certain you think collapse is, it can always continue on for far longer then you think. And that is assuming that you are right.

From Naked Capitalism…..

So let’s play out my variant of how a bankruptcy goes. The three ring circus described in The Deal moves forward. The story anticipates the bankruptcy process lasts till late 2010. I tell you what happens in the meantime: there are just about zero car sales. No normal prospective car buyer is going to have any confidence with a process this protracted and uncertain and will take his business elsewhere. GM runs through its DIP money faster because neither it nor any of its dependents are getting any dough, The assumptions going in, made with unduly optimistic assumptions about sales (no allowance for customer revulsion) are way way off base.

But now that GM is in Chapter 11, there is no turning back. Its cash hemorrhaging has grown far beyond what was ever envisaged even in supposed worst case forecasts. The only options now are nationalization (to what end? The brand has been destroyed) or liquidation. And liquidation takes down the parts suppliers, which in turn makes most of the foreign transplants unworkable.

So for the hatred of UAW and the stubbornness of some GM creditors we destroy the entire US auto sector.

This is silly. The health of the auto industry is ultimately dependent on the financial health of the consumer, not the Big Three. As long as there are people buying cars in America there will be an auto industry in America. As long as people need to drive cars they will need to fix cars. This means that parts suppliers will still be selling parts.

This issues of not wanting to buy from a bankrupt company is a red herring. Of course nobody wants to buy a vehicle from the Big Three if they are going bankrupt at current prices. But the whole point of bankruptcy is that it cuts your operating costs. This means that the Big Three should be able to dramatically lower their prices after a bankruptcy. Companies like Hyundai broke into the American market despite their previously bad reputation by dramatically improving their cars and selling their cars for dirt cheap. If the Koreans can do it, the Big Three can do it.

And if they can’t, why bail them out?