atomic_fungus (atomic_fungus) wrote,
atomic_fungus
atomic_fungus

#1594: Walking on a broken leg for 29 years.

"Steve Webb, 49, broke his left leg in a motorbike crash when he was 20-years-old. But after suffering decades of pain he found it had never actually healed."

Yeah, if you walk on a broken leg for 29 years, it's not going to heal.

I was going to comment about socialized medicine, but I'm starting to think the guy himself is at fault here, too.

* * *

Obama bankruptcy of GM hurt a lot of middle class people.

See, here's the fact of 21st century American capitalism that the liberals and communists won't tell you: The workers own the means of production. Large corporations are owned by stockholders, and there are a lot more middle class stockholders than there are rich ones. Whenever you decide to punish "the rich" by increasing capital gains taxes or by forcing an extra-legal form of bankruptcy on a major corporation--one which rewards the unions first and pays back stockholders last--you are not actually hurting the rich at all but socking it right to the middle class.

The rich can afford to lose whatever money they've got in the stock market--in fact a smart person with a fuck-ton of money will have all sorts of investments, some risky, some not, precisely because risk is proportional to reward: the long shots have the highest potential for big payoffs, while the safe investments don't have much of a rate of return but they do pretty much guarantee that you'll end up with more money than when you started. (Absent a total economic meltdown, of course, but a meltdown that bad rarely happens.)

So let's say we've got two hypothetical investors, Tom Sixpack and Johnathan Congac. Both TS and JC have invested in ABC Widgets by buying corporate bonds: TS has about $50,000 and JC has $500,000 worth of ABC Widgets corporate bonds. TS' net worth is something like $200,000 and JC's is something like $20,000,000. These two have essentially made a loan to the company, which the company promises to pay back with a certain amount of interest after a certain time has elapsed.

Now, before their bonds mature, ABC Widgets tanks. The company has been following a stupid business model for 30 years and it ends up with the wrong products at the wrong time. ABC Widgets must file for bankruptcy.

Under bankruptcy law, TS and JC are the first in line to get compensation for their bonds; the bonds are a hard-and-fast contract that must be honored.

But then a meddlesome President steps in because ABC Widgets is "too big to fail", and President Meddler rewards the union thugs by making sure they have first crack at the ABC Widgets pie. The bondholders (and other creditors) get screwed.

Tom Sixpack gets perhaps $5,000 of his investment back. Johnathan Congac gets perhaps $50,000 back of his investment. Which of them got screwed worse?

I know everyone is inclined to think, "Well, JC lost more money, didn't he?"

Not as a percentage of his net worth.

JC lost $450,000 out of $20,000,000, or 2.25% of his net worth. TS lost $45,000 out of $200,000, or 22.5% of his net worth.

The point is, the "rich" aren't hurt by this, not unless they are woefully stupid: if JC had had 22% of his net worth invested in what is considered a risky investment--and if he leaves his money invested for all the years while ABC Widgets is in obvious decline--that would count as "stupid" in my book.

The fact is that TS was stupid--first for risking so much of his net worth, and second for not pulling out as soon as it became obvious that GM was headed for the hurt locker.

Regardless, however, as bondholders they should have been the first to be paid back, not the last. They should have gotten back much more than 10% of their investments. But President Meddler had the unions to mollify as they helped him become President in the first place. And PM has no interest in, or sympathy for, average people who want to earn money.

I think the analogy is obvious even if the figures are fictional. I don't really have to explain it, do I?

* * *

I have to ask again: why the hell is it such a sin to want to be rich? Why do Democrats insist that anyone who is trying to make a buck--legally!--using the financial laws which were largely put in place by Democrats?

* * *

Come to think of it, the title of this post is an adequate allegorical explanation why GM is even in bankruptcy in the first place.
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