Jurassic Park

The financial news of late has been a bailout loan to GM. It is rather small change compared to what was given to the banks, but significant in that the money will almost directly flow into the hands of consumers that finance their purchase of GM vehicles. Some of this financing will be offered at 0%, for anyone willing to buy a SUV or large sedan in an era where gas can double in price overnight.

This amounts to a loan that will help GM dump its inventory of obsolete vehicles at loss. If it could not, then it would have to write much of its inventory off at scrap or parts value, for a far greater loss. For GM, this is all about slowing the blood loss.

Books will be written (if they haven’t already) on GM's rise and fall over a century. It made so many incredible collective mistakes and malinvestments, one has to question the limits of the corporate structure itself. GM was often compared to country, and it once was in terms of financial scope and number of employees. And like a country, unproductive bureaucracies grew with unnecessary levels of management, and made it far removed from the concerns of the populace, the consumers.

GM has been compared to a dinosaur much more often these days. It was well adapted to cheap oil, cheap input resources, and cheap consumer credit. All these used to offset relatively expensive union labor and costly executive failures. Take away even one component of that environment, however, or have a major shift in consumer tastes, and apparently it could not survive. One could argue the credit crisis was the meteor it could not see coming, but that would be beside the point. You see, the government has now intervened and decided it will not go extinct, and they have in fact created an artificial place for it.

I’d call it Jurassic Park for big cap dinosaur corporations. All funded by you, the taxpayer.

GM is not the only creature in this attraction. General Electric tapped the Federal Reserve for money no one would loan it. Then there’s AIG, a dinosaur so beloved by the populace it now gets round the clock care to the tune of hundreds of billions. There are of course several more species that simply cannot survive outside the park and its lush foliage of money growing off trees, or juicy consumers flush with government-supplied credit.

The dinosaur analogy very applicable because we all know that they were wiped out. Their time came, and went. Room was made for more new species, like mammals. With these dinosaur corporations being propped up past their prime, there is scant chance that new companies can scurry through their carcasses and create new wealth, technology, and opportunities.

That of course, would not be natural.