Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Friday, March 18, 2005

As GM Goes, So Goes the Nation?

That was the phrase of importance during the 50s and 60s. Now, however,

STANDARD & POOR’S yesterday threatened to reduce the credit rating of General Motors to junk status, pushing the financial reputation of America’s largest carmaker to the edge of the precipice.
The rating agency, which had already relegated GM’s debt to the bottom of the investment ladder, yesterday increased its negative stance when GM cut its 2005 profit forecast by 80 per cent and said that it would suffer a loss in the first quarter.
[h/t to BF for the link]
In my oral comprehensive exam in economics at Carleton College, back in the 1960s, I was asked to explain the underlying economic truths of, "As GM goes, so goes the nation." I wonder if it's still true....
GM is burdened with large pension and health liabilities; the company is the biggest private health provider in the US and hundreds of thousands of US pensioners rely on monthly cheques from the motor group.

I would, myself, would feel uncomfortable with the risk involved if I were a retiree from GM, having the continuation of my pension and health care dependent on the fortunes of GM. In general, I am uncomfortable when I hear about pension and health care plans that depend on the fortunes of one company for their long-term viability.
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