Cisco for General Motors

Economic Watersheds & Financial Footprints

If you follow the Dow Jones Average, you know that General Motors was recently dropped for Cisco Systems (and Citigroup for Travelers).

Locally, there is an echo of this "changing of the guard": the old Ford Motor dealership in St. Louis Park, near 36th St. and Highway 100, is out, and a new LA Fitness is on the way in (hard bodies for car bodies??).

Leaving aside what happened to Detroit and why, there is an obvious economic difference between a manufacturer like Ford, and a service business like a health club.

Think of it this way: each car sale creates demand for car parts, steel manufacturing, repair services, auto insurance, banking and finance, etc. Economists call this a multiplier effect.

By comparison, what you might call the "financial footprint" of a health club is much smaller.

On the plus side, at least it can't be outsourced . . .

The New General Motors

What's Good for Goldman Sachs

To love Geithner’s plan, you have to embrace his philosophy that what’s good for Wall Street is good for America.

--Margaret Carlson, "Geithner Deals Wall Street a Can’t-Lose Hand"; Bloomberg (3/26/09)

What's good for the country is good for General Motors, and what' s good for General Motors is good for the country.

--Charles Wilson, General Motors CEO (1952)

So today's General Motors is Goldman Sachs?

Unfortunately, the updated equation is wrong on two counts: 1) what's good for Goldman Sachs seems to be very bad for the rest of the country; and 2) what's good for the country . . . seems to be irrelevant to Goldman Sachs.