“The Big Three”—Henry Paulson, Ben Bernanke and Sheila Blair,–were up on the Hill this morning, testifying before the House Committee on Financial Services.  The Administration officials gave an update to the lawmakers on the current state of the U.S. credit markets and the continuing financial rescue plans.  The most important thing said at the hearing was Secretary Paulson’s statement that the Bush administration decided this week to defer using much more of the $700 billion of the bailout money approved by Congress in October, leaving it to the next, Obama Administration.  So, the Bush Administration is going to sit tight until January 20th.  Well, some may say, the price of inaction may be high, but the price of action by this Administration may be higher.

The Bush Administration position of not spending any more government funds on bailouts puts a major break on the aspirations of the other Big Three from Detroit.  Even though Senate Democrats produced a plan to extend $25 billion in emergency loans to the hemorrhaging automobile industry, chances of it going anywhere are looking slimmer every day. 

In the event that the Detroit Automakers go bankrupt there will be a lot of pain to go around, and not just in Michigan.  AAM has been making this very point repeatedly: when one manufacturing job disappears it takes four to five jobs in the rest of the economy with it.  In the case of the auto-industry, a lot of different jobs’ figures have been thrown around.  Today’s New York Times Economix blog has an interesting discussion on the validity of the various estimates.  Economix concludes that: “a contraction” of the Detroit Automakers would result in direct and indirect American jobs losses of 2.5 million to 3 million in 2009.  

That can not be good news for an already shrinking U.S. economy.  Today’s addition to the barrage of recent bad economic news is the Labor Department’s report on the plunging U.S. Producer Prices—they declined the larger-than-forecast 2.8% in October, the most on record.

China, also being hit by the global economic crisis, has to contend with another problem: riots.  Between 2,000 and 10,000 people rioted on the streets of Northwester city of Longnan, because the government there announced that they will move the municipal offices out of the area.  This would lead to a loss of jobs and the decline in real-estate values, since the move was explained by the necessity to move the government workers out of the seismic zone.  The riots erupted on Monday and continued into the early hours of Tuesday.  The residents said that the unrest was provoked by economic distress, unchecked corruption and a lack of transparency by the local Communist Party.  The PRC government has been deeply concerned about maintaining stability across China, as the economic growth rates in the country decline.

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