Krugman Gives Detroit 3 Small Chance

Commenting on the ongoing debate to inject public money into the Detroit three, I have had objections that fall into two categories. First, it is neither clear that public money should be given to the three corporations in spite of the claim that they can all be brought back to profitability. The second and more important is that there are options related to bankruptcy that the firms should resort in order to be allowed to reorganize.

The Washington Post covers Paul Krugman's comments made in Stockholm during the week preceding the award of the Nobel prizes. As he states, the forces of economic geography and structure of US economy suggests that the three firms may cease to exist despite the bailout plan. The idea of a bailout may be politically popular, but it is clearly unsound.

Update: A post on Paul Krugman's blog made a correction to this report. The Nobel Laureate did not state that the three automakers are doomed to failure.he appears to have spoken of its as a probability and not necessarily as a definitive declaration. That is an important distinction.