What was the GM debacle?
“What was the GM debacle?”
During the Obama administration, GM wanted to declare bankruptcy. They were in bad financial condition and bankruptcy would have released them from onerous union contracts, allowed them to restructure debt and continue business as a smaller entity. Obama would not let them do that. Instead, Obama, ignoring the law and two centuries of common practice, made the “secured” bond holders take a “haircut” where they lost the better part of their money. The government and the unions ended up owning GM. The unions had zero legitimate financial interest in the ownership of GM. This was pure politics.
As a result, investors, both corporate and private, pulled their money out of the market. An estimated thirty trillion dollars left the economy overnight. To restart the stalled economy Obama doubled the money supply. It didn’t work, so he doubled it again. Then, they did something called “quantitative easing” which simply means printing money. Every month for several years the Fed added another 87 billion dollars to the money supply. The economy didn’t move. What did happen was the stock market went up. The companies did not increase in value, that was inflation due to the excess money. (We know these policies don’t work. They have been tried over and over and they have never worked. This is why Japan had the “lost decade” which has turned into the lost three decades. The other cause of failure is businesses want certainty. If the government could fire their CEO and take over the company and even give part of it to the employees, then there is no certainty. Trump reestablished the rule of law. That’s what brought the economy back online.)
Then, when Obama left office all of the money that had been taken out of the economy came flooding back. The normal investment that would have been made during Obama’s eight years was being made, plus the natural growth, plus Trump changed the tax laws so that billions of dollars kept overseas came back and it was invested. Now all that seems like a lot, and it is, but the drag on the economy is all the extra money Obama magicked into existence. That’s why the cost of everything is so high now.
This is the short answer to your question. In the future, textbooks will be written about this disaster.