Yesterday the Auto manufacturers, including GM, Toyota and Ford announced massive drops in their year over year sales (16%, 32% and 35% respectively). Why is that? Partly because sensible folks who are worried about their jobs don't want to spend large amounts of money in a tough economic environment. Another reason for the decline is that many who wanted to buy a car could not get credit to do so, because our credit markets have ceased to function. Now let me ask you a question: how long do you think that car dealerships without sales remain in business? Are car dealerships main street enough for you?
Let me give you another example. This one comes directly from my own high tech company. We are currently raising another round of venture capital financing to fund our operation. Where do you think venture capital funds get their funding? Much of it comes from financial institutions, who invest in these funds in the hopes of seeing high long term returns on their money. We are also financing some of our operations through bank loans, like many other companies. A company needs to buy raw materials to build its products and it needs to pay for these before it gets paid by its own customers. With no one lending money, how long do you think that companies like ours can survive? We have about 25 employees working in the company. What do you think will happen to them? Main street enough for you?
Not convinced? Here's yet another example. Yesterday, Warren Buffet invested $5 billion dollars in shares of General Electric. Buffet got an great deal for his money. Why is it that titans of industry, such as GE, get pressed into panicked deals of this sort? I mean, this is a company that makes locomotives, wind turbines, light bulbs and yes, it does have some financing activities. Does it get more main street than General Electric?
So, before you bitch and moan about how we are rescuing fat cats, stop and think for a second. Is your company safe? Is your job safe? How about your 401K, is that safe? Stop listening to the ignoramuses that are stirring public sentiment against this economic rescue package, like the ever shrill and populistic Lou Dobbs of CNN, and start listening to the people who truly understand what is going on in this economy, including Warren Buffet who called our current crisis an economic Pearl Harbor.
Yes, this economic rescue package is not perfect, and I am not against making some changes to improve it, but not passing the bill is simply not an option. We have been duly warned and we will pay dearly if we don't listen.