General Motors' Highest Value Is As A Power Base Expander . Or Dependency Expander....

Power base expander ? Dependency Expander ? * What are those?

Do please follow along with me...

(Work in progress here.)

We all know that a given market does only one thing- discover the highest use, or "value", for a given good or service to the people in that market at that moment. Even if the owner thinks the item belongs in the toilet, or even at the dump, the market knows better. The world experts may think an item is worth a certain sum, they can be very wrong. In both directions.

Old paintings burn like crazy. But even if you WANT to sell that Watteau for one pound as a fire starter, if you are in the market where Watteau people can set the price, the market won't let you.

And what does that mean about the buyers in those markets?

People who buy are buying because think that they can make the highest and best use of the item. If anyone else thought so more, that person would buy the thing.

Think about that little wedge of property between your house and your neighbour's. Too small to build on, a leftover of land division. You can use it, your neighbour can use it, but no one else can.

But neither of you buys it- because there's no higher use in your minds. It's always going to be vacant land.

Which brings me to the General Motors "bailout".

There's no more transparent, accessible to people in the business, instant feedback market than the NYSE. Since it's public, and there are always bid and ask prices, it's impossible to conceal value. (Absent fraud of course.)

And in a transparent market like that, there are plenty of people looking for undervalued things- people who believe the market is wrong. If they are , of course, they make a new market by their buying decision, like Morgan did with Bear Stearns.

A transparent market isn't "never wrong", but it's seldom wrong for very long. As I told my genius broker when I wanted to buy $10,000 worth of Bear Stearns options at $4...

So, what is General Motors? Is it a scrapeoff, or fixer upper?

The market has told us. No one in the car business is even interested in GM as a car making company. If it had value for that, plenty of people in that business would have bought it, EVENTUALLY, as its share price dropped. Hell, I'd have paid $100,000 for it.

But who has bought it? A car maker? A takeover/breakup shark?

No, the United States Government is the buyer.

And just in case that fact isn't enough, it was bought at a price that was, I think, greater than the open market capitalisation!

That is to say, You or I, or a consortium of our friends, could have bought General Motors for less than the "bailout" sum.

AND THE GOVERNMENT DOESN'T EVEN OWN IT!!!!!

That's right, we paid more than the price tag, it without buying it!

Cherchez l'argent. No matter how apparently stupid, it is never waste- because something is gotten in exchange.

It's not a scrapeoff- there's no intent to close it down. In fact, the opposite is the plan.

So, what did "we" get for our money? What actual use are we going to make of GM? Because it's jolly well ours now.

OOh, I know! We're going to do with it what it does!

It's like that ragged house down the road which just sold. The new owner is going to resell it, fix it up, or tear it down. Because that's all he CAN do. He can't drive it to the store or sail it across the river or open up a steel mill. The house won't do any of those things.

So what else is GM other than a car maker and lender of money?

Its value IS to be "bailed out". I say this in all seriousness.

It's a huge interface with millions of voters- and their livelihoods, savings, pensions, debts, mobility, their health...

The only thing that makes GM valuable at this price is that it is a ready made conduit, all set up. What for?

Delivering loyalty payments from "the government" to reliable voters. Buying new loyalty from stockholders. Buying gratitude from the workers kept on who aren't paying their way. Patronage, from contracts and positions.

That, and an unrealistic pension/medical benefits scheme which, when it fails, can be "rescued". Think of how thankful all those sick old people will be!

And, of course, it's a laboratory for any scheme our masters want to "test" in the "real world".

And a sales tool for plundering and enslaving us all- so we'll hear, "Of COURSE the government can make universal health insurance work- look at GM!" "Of course we can borrow our way to prosperity- look at GM!"

It's an extortioner's dream- because the tache d'huile of GM spreads allll over...

"Not controlling (name of thing or process) will negatively impact all those jobs and pensions at GM, therefore..."

It's a thrill for the lefties, too. When they were growing up, GM, the world's largest industrial corporation, was an exemplar of evil. Exploiter. Obscene profits. Grinder of the faces of the poor. Union buster. Destroyer of the Earth, our home. Even Vietnam, since one of its great architects came from GM.

You'd think they would WANT GM to die. But now, they will sit on the board.

For the greater good, of course. Such a sacrifice.

What, you thought GM's purpose was to create and sell high quality, inexpensive vehicles and thereby increase share value?

Who are you, the ghost of Billy Durant or Eddie Rickenbacker?

That's SO 1910.

If you study its history, actually GM was mainly a financial company created to profit from the shakeout of profitable/unprofitable car makers. It (as opposed to its carmaking divisions) has at least since 1920, been a financiers' and accountants' company. Raskob and Sloan basically invented stock price valuation as a management tool.

The chickens are in a way coming home to roost on this one.

* "power base expander"

–noun

1. A business enterprise, organization, property, or other entity which was designed to do one thing but is used for its ability to increase a power base, usually political.

"General Motors was worthless as a car company. But it made a great power base expander for the Obama administration."

[Origin: 2009. Coined by Sciencegirl, first lexicographic publication by Staghounds.)

I prefer "dependency expander", which is what's happening here. But there are other power base expanders which might not be used to increase dependency at all, so that phrase is more useful.

It's not "founding fathers" or "cold war", nor is it as funny as bifixtural, but it is actually useful to describe a phenomenon I've not heard named before.

It might catch on.

Inspired by reflection on Tam's post today.