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Governments Preparing To Bail Out DRAM Makers
An anonymous reader writes "DRAM makers are facing one of the worst downturns in their history and governments around the world are lining up to help companies through the mess. Taiwan, Germany and South Korea all appear poised to offer some assistance to their DRAM chip makers. The chip makers' problems are indicative of global woes. Easy lending terms and a bright view of the future prompted them to build too many new DRAM factories. Much of the new output was aimed at Microsoft's Windows Vista, which has higher memory requirements than XP."
The problem comes with the concept of "too big to fail" due to concentration. In the general case, you are quite right, If you have a hundred bakers, and there is not enough demand for bread to keep them all in business, the least efficient ones go bankrupt and the more efficient ones thrive, thus increasing the general efficiency of the baking business.
The problem is when you have monolithic industries, or quasi monolithic industries, where the whole industry for one region sinks together. If you have one mega-bakery and that is badly run, you cannot let it go bust because there will be no bread and people will starve.
The DRAM industry has become increasingly capital intensive: a new Fab costs billions, but produces vast numbers of chips. This means that there are very few fabs in one country, probably only one. Healthy shrinkage, by a few percent, is not possible: you lose 50% of your industry or none. And, politically, that is unacceptable for any single country. Worldwide, it would be correct to close down one or two DRAM fabs at the moment. A World Government, with perhaps 12 fabs, could look at the big picture. But Taiwan, Germany, and South Korea, with two or three each, cannot accept losing such a large slice of their industry.
The same was true in the finance industry: because of their size, AIG, Fanny Mae and Freddy Mac were "too big to fail". Lehmann was adjudge not to be too big - but the repercussions of its failure are turning out much larger than expected.
The same is true in cars. "Detroit", the Big Three American car manufacturers, is collectively "too big to fail". And they are so interlocked in the public mind that they would appear to sink or swim together. Mind you, their problems are basically the result of baling out Chrysler twice instead of letting it fail at a time when it could have failed on its own and brought the appropriate slimming down to Detroit.
Consciousness is an illusion caused by an excess of self consciousness.
I do wonder how a modified capitalist system would work, where there was a "written in stone" law that as soon as you owned more than 25% of a market, you were automatically required to split your company in half. It seems like this would promote all sorts of competition, and prevent "too big to fail" from ever happening.
Velociraptor = Distiraptor / Timeraptor
Russia doesn't have the economic infrastructure or, these days, the world standing to be a real economic superpower. (They weren't much of an economic superpower during the Cold War, either, when compared to the United States.) And frankly, I don't think Europe has the steel in the spine to stand up to their threats (Russia, China-to-a-lesser-extent, Muslim immigration and the recent problems therewith, and even the United States) in any significant capacity.
China--there, you have something. But it's not going to be "divided across China, Europe, and Russia." If anyone "fights," it's going to be a fight between the United States and China, and the rest of the world, like it or not, are the chess pieces. But even then it's not going to be the drag-out fight, because it is mutually beneficial for China and the United States to stay very close trading partners. (For more on this, I suggest Tom Friedman's The World Is Flat--I don't agree with all his conclusions, but it's worthwhile for sure.)
Everybody owes the United States money and the United States owes everybody money. That means a U.S. recession will be a global problem for a very, very long time. Do you realize that China had something like 10% of GDP in Freddie Mac and Frannie Mae? Everybody's money is here.
I think you need to learn more about modern politics and economics before you make sweeping statements.
"You can either have software quality or you can have pointer arithmetic, but you cannot have both at the same time."
Actually the parent is wrong. The USD is gaining strength because the rest of the world is also in a recession. US Treasuries are the current preferred safe haven, its bad here but worse every where else. When other currencies are sold and US treasuries bought, the yield dives and the relative value increases. We are in rapid deflation, look at the prices of everything, they are down down down. The Fed printing money will have an inflationary affect but it ain't happening yet, the key is that they raise the interest rates and fast once this economic cycle is over to help curb inflation.
I'm not not licking toads.
it's funny how Americans get all up in arms about true socialism that actually serves public interest, like socialized medicine/higher-education/sciences/internet access/etc., but you never hear a peep out of them about tax dollars being funneled into companies like Halliburton/KBR, GE, Carlyle Group, Northrop Grumman, Boeing, Lockheed Martin, etc. that serves only the MIC. likewise, no one made a fuss about Harley Davidson receiving, essentially, a government bailout from the Reagan Administration in the form of overt protectionism during the 1980's while Reagan was simultaneously espousing the virtues of free market capitalism. and now we're outright giving government subsidies to the Big Three automakers to bail them out, and again there is practically no opposition to this either.
frankly, the recent corporate bailouts are more akin to Reaganomics than socialism. after all, nothing is being socialized. the Big Three automakers aren't being nationalized. American citizens aren't getting free cars or anything else out of this. it's just taking from the poor to give to the rich. that's been going on ever since monetary economies were created. today we're just corporate sharecroppers rather than feudal serfs.