Here comes Quantitative Easing . . .

and there go the American automakers.

The Fed has to give the quantitative easing a shot. It didn't work in Japan, and it probably won't work here, but kid yourself not, they've got to give it a shot. No arrow left quivered.

The endgame, though, remains unchanged. The financial services sector in the developed world has decapitalized itself in the last five years. Mark to market accounting may be delivering the bad news, the bad news itself is simply the consequence of having gutted the credit culture of lender-borrower relationships and replaced it with a transactional focus (and a compensation structure based on transactional activity). Incidentally, that is eerily similar to the Enron fiasco--replete with a cast of characters all vying the be recognised as the smartest guy in the room.

Once through a patch of quantitative easing, but fairly early in the next administration, I think we'll see an unbelievable expansion of the current pilot program in the commercial paper market. In other words, if the private sector continues its failure to deliver the financial services required by the general economy, public entities will step in the fill the void. How and in what form remains to be seen.

Meanwhile, the endgame for the American automakers is even closer in time. The next hundred days, according the a senior executive at GM. I wonder if he's a finance guy or a car guy (to use the Detroit vernacular)? That comment was a little forceful for a finance guy. With the orphaned retiree medical benefits of several million voters mired in a bankruptcy reorganization, in about 101 days that should provide the dynamite charge required to pass healthcare reform approximating universal coverage.

In terms of the general economy, I'm not sure what happens if General Motors and Chrysler fail. I assume the initial reaction would be denial and an opportunity to reorganize under current management (as opposed to going straight into liquidation a la Lehman Brothers). If not, it's one thing to buy toxic assets, and another entirely to start stockpiling the output of original equipment manufacturers who've lost their biggest customer to bankruptcy. Where do you store all the cylinder heads, leather upholstery, and fender panels?