Apocalypse Now

I am surprised by the seeming irrationality of the general public when it comes to the automobile industry bailout.

It is common knowledge that the US automobile companies account for a massive amount of concentrated power in the domestic economy. Millions of jobs are directly tied to their fortunes. Yet, the jealousy engendered by the previous successes of these companies is so irrational that most people outside the pale are willing to throw the baby out with the bathwater, or to paraphrase Samson, "Let me die with the auto companies!" Let them go bankrupt and the world and US economy will get its revenge on GM, Ford and Chrysler for manufacturing gas guzzling SUV's which made them a lot of money and made very many people happy.

An issue that has not even been mentioned in all the debate about the bailout is what happens to the auto companies' creditors when the they go bankrupt. There are many sizable companies whose sole customers are the auto manufacturers. (How this happens is a discussion for another blog) As soon as a petition for bankruptcy is filed, all payables are frozen and sometimes for years. That means that all first tier suppliers, which accounts for the bulk of the big 3's current liabilities will not be paid. Even if they had other customers, they would not be able to remain viable for very long without a source of cash. They would not be able to pay their suppliers (let's call them 2nd tier) and they in turn would not be able to pay their suppliers and so on. Bond holders will also not get paid giving another shock to the financial markets.

How much of this will we be able to sustain before we all succumb in one way or another?

I am not looking forward to such an Armageddon.