Thursday, July 22, 2010

Ponzis Resume

Just as the Ponzi housing finance schemes in the U. S. hardly missed a beat with FHA bellying up to the bar and Fannie and Freddie being made semi-official wards of the state, Ponzi auto finance is resuming, as reported by the LA Times:

General Motors Co. is getting back into the credit business, a move that will give its dealers more options to lease and finance car sales.

GM said Thursday that it would purchase AmeriCredit Corp. in an all-cash transaction valued at approximately $3.5 billion, or about $24.50 a share.

The acquisition gives GM what's known as a "captive finance unit" or lending division that allows it more flexibility to offer lease and finance deals. It would fill the role once played by GMAC; the automaker sold all but a minority interest of that company in 2006. . .

GM is already working with AmeriCredit to provide auto loans to customers with "non-prime" or poor credit ratings.

GMAC owned DiTech, one of the giant subprime housing finance entities. It is being resuscitated.

Now we have what we thought was European-style mixed economy stuff to complicate matters:

The automaker said it will continue to work with Ally Financial, the former GMAC finance company, for loans to customers with good credit and to provide inventory financing for dealers.

It would be both politically and financially untenable to sever the relationship with Ally to channel all of its financing business to AmeriCredit, said Kirk Ludtke, an analyst at CRT Capital Group in Stamford, Conn.

The federal government has approximately $57 billion of commitments -- including $17.9 billion of direct investment, $32 billion of federally insured consumer deposits and $7 billion of unsecured debt guarantees -- to Ally, he said.

"We continue to believe that the Obama administration is unlikely to allow either GM or Ally to pursue a strategy that would undermine the other," Ludtke said.

Statism is on the march. Anyone who continues to think that the U. S. still has a largely free market economy has another think coming. No less an authority on unfree markets than Hugo Chavez said after the shenanigans of the Bush administration in late 2008:

"Bush is to the left of me now. Comrade Bush announced he will buy shares in private banks."

Whether Senor Chavez was entirely accurate with that quote is not the point. The Federal government is almost everywhere now. Perhaps retail distribution of food and clothing remains free market-oriented; but with over 40 million Americans on food stamps and extensive welfare programs providing consumer "demand", even those bastions are indirectly socialized now.

Who knows, but today's strong up-move in stocks may owe more to hopes of zero interest rates forever than to anything else.

Under the aegis of Keynesianism, what is more certain than ZIRP is that money printing and government deficits will be used for political purposes in the U. S. indefinitely.

Gold has been a protection against that in the past. Is $1200 an ounce adequate protection? Since this is way up over one year ago, short term it may well be. In the long run . . . well, David Rosenberg stated recently that gold accounts for 0.05%of the financial assets of Americans.

Is that likely to increase or decrease?

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