Lie Of The Day: McDonalds Can't Get Credit (And The Financial Markets Work!)

Michelle Malkin.com ^ | 9/29/2008 | Michelle Malkin

[goldstategop]

McDonalds CAN get credit. And the financial markets work - there's a massive adjustment undergoing that will eventually stabilize the markets better than any state organized bailout ever could. Perhaps it time for Washington to stop hitting the panic button in search of a quick fix that would make things worse and delay the market's ability to get back on their own feet. Conservatives should continue to block ill-advised interference by the federal government. Time will take care of the global bank crisis.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

[KoRn]

I wonder why such large companies NEED credit to operate. Don’t they have enough cash on hand to simply buy what they need?

[Beowulf9]

Is it just me or do I hear the sound of many happy moos?

[goldstategop]

For current operations, corporations have money on hand. But to expand or just enter new markets or upgrade equipment, etc., these things have to be bought with a credit line.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

[rawhide]

I agree. The financially sound companies will still be able to get credit. Others not so financially sound may still be able to credit, but maybe less of a credit line than they want, and also at a higher interest rate, which, because of their risk is the way it should be.

[rawhide]

You would think the McDonalds owners/franchisees could afford the upgrades out of their own pocket? 100K per store is really not that much.

[goldstategop]

The markets will rapidly liquidate inefficient or unstable banks or companies. The survivors will be healthier and the economy will be stronger. There is no need to risk taxpayers' money on what our free enterprise system is better at than the government anyway. Just give it the chance to work.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

[WOSG]

“Bailout or no bailout, the stock markets were heading lower as financial markets continue to undergo massive asset revaluations. No matter what elaborate new rescue packages Congress, the Bush administration and the U.S. Federal Reserve bring to the party, the market is going to continue marking stock prices and other assets down until values reach realistic levels.”

I CALL BS ON THIS.

Markets respond to the realities of what is going on. The market reacted instantly to the vote - it lost 500 points in MINUTES.

That tells you that the market perceives a MUCH ROCKIER RETURN ON INVESTMENT WITHOUT THE BAILOUT. They view the economy as being weaker without the rescue package.

The reality is simple: The rescue bill is good for the financial markets.

To claim that markets would have fallen anyway is non-credible and it impeaches the other statements of the sources.

[roses of sharon]

Was/is this some kind of Paulson, Obama plan.....right before the election. (Paulson is a Dem and a huge environmentalist)

I am getting suspicious.

Paulson is said to be worth 500 million....how is one worth 500 mill and not see this coming?

[goldstategop]

No. But its a win win arrangement for the franchisees and the bank. McDonalds gets the equipment to become profitable and the bank sees a return on its investment.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

[rawhide]

I’m with you. Those investors who took the risks need to bear the risks.

[ThePythonicCow]

Don’t they have enough cash on hand to simply buy what they need?

No more than they have enough cows on hand past immediate operational needs. Companies large and small pick and choose what they specialize in, and treat the rest as commodities, to be bought and sold at market prices, perhaps hedging those prices if they are too volatile. Capital is a commodity for McDonalds, just as are beef, buns, and counter clerks.

[Doe Eyes]

McDonald's has cash reserves of $2.34 Billion and debt of $11.06 Billion.

[goldstategop]

We don't know if that is true. I don't think throwing money at the problem will work. The better thing to do is to take government handcuffs like onerous regulations and punitive taxes off the markets. Then watch them soar!

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

[Dilbert San Diego]

good question.

Don’t fast food places do a lot of cash sales every day, as opposed to credit card sales that don’t clear the bank right away?

Years ago I had known somebody in fast food, and they typically made 3 bank deposits a day since they didn’t want too much cash on hand, they wanted to get it to the bank. This was before fast food places took credit cards.

I had heard the McDonald’s credit story too. You figure that McDonald’s is a huge profitable company, and if their bankers are nervous, what about the rest of us?

Who the heck makes up these stories? Several news outlets report this as the truth. We are influenced by what we hear in the news, even if we never eat a Big Mac and don’t care about fast food, news like this will influence people’s opinions of what’s going on on Wall Street.

[Ilya Mourometz]

The Nikkei 225 is down about 3% right not. Not exactly catastrophic (though it’s up from about 5% down—also not catastrophic).

[William Tell]

KoRn said: "I wonder why such large companies NEED credit to operate."

If you borrow money to fund your business improvements, then the business must generate sufficient income to pay back the principle and interest on the loan. Anything over that amount is a profitable result of making the improvements.

If you make use of capital that you already have, you need to make exactly the same amount as above in order to be making a profit. Failing to make a profit but not seeing that you failed to make a profit (because you used your own cash) causes many businesses to make improper decisions.

Another way of looking at this is, "You shouldn't loan yourself money to do things that other people are unwilling to finance."

[rawhide]

The reality is simple: The rescue bill is good for the financial markets.

You are right, it is good for the financial markets. But it a lousy deal for the taxpayers. If I make some bad investments, the government is not going to bail me out. Especially if I made some careless investments.
And with a government bailout, this just encourages more careless investing in the future. Why not invest and be careless, if you know the government will bail you out if the investments goes sour? That is crazy.

[Earthdweller]

Way to go Michelle!

[goldstategop]

Exactly! Socializing risk is a terrible thing to do. Freedom is about the ability to fail as well as succeed. We take that away, we live in a fascist society. I felt delighted this afternoon when the House shot down an attempt to impose fascism upon the American people!

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus