Thursday, November 8, 2007

GM loses US39Billion for the quarter

I've still no idea what the feds are thinking when they cut the interest rates. General Motors (GM) stated that they are suffering massive losses because of the weak USD, and the high oil prices. So far, I've never heard of a company losing so much money in only 1 quarter!

Indirectly, all this is caused by the Feds cutting the rates to bail out banks that made over-excessive risks in their investments! Now the situation is going to get worst if they cut more rates. It's really going to be a great depression this time if they cut more rates. The subprime issue will never be resolved through interest rates only, and the cutting of interest rates will drive up oil prices and inflation. This is especially so when we have a problem with over-exploiting of resources. When resources are scarce, the rates should be hiked, not cut!! In fact, not cutting rates will limit the damage to only 1 area. By cutting rates, all sectors will be affected. GM is only the tip of the iceberg.

I thought banks usually have risk management processes in place. Looks like I'm dead wrong! This is only the 1st week of November, and very soon, what I've said in this post will materialize. This is not good!

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