The national frenzy that is Cash for Clunkers will end Monday at 8 p.m. Eastern, according to the government’s CARS website. “It’s been a thrill to be part of the best economic news story in America,” Secretary of Transportation Ray LaHood enthuses in a press release (PDF). “Now we are working toward an orderly wind down of this very popular program.” Though LaHood is able to put a happy face on the program (it’s what he gets paid to do), evidence suggests that there are still a number of headaches to work through.
For example, according to the CARS wind-down strategy (PDF), the DOT has only approved $140 million so far out of almost $2 billion in applications. The CARS staff has also tripled in the last “few days,” in order to handle the volume of applications, and there are now 1,100 public and private employees reviewing CARS applications. And it’s still possible that America will cash in over a billion worth of clunkers between now and Monday. In which case . . . actually, nobody knows what would happen. At this point, the DOT still has $1.8 bil of the first $2 bil worth of applications to go through. Whether the program ends up over or under budget is probably a secondary concern to simply processing everything at this point.
Well, my ’89 F150 escapes with its life then :). We had seriously considered clunkering it and unloading one of our newer cars in exchange for something new, but in the end it didn’t pencil out for us.
It will be interesting to see if the industry comes up with some promotions of their own to replace the CARS program.
They need to keep it going. I was surrounded by way too many Oldsmobuicks this morning on the way to work and nearly got hit by an Explorer.
I would have C4C’ed our old 10 MPG-on-a-good-day 1999 Dodge 1500 pickup had the Mahindra 30 MPG Diesel pickup been around to buy. Oh well. When is that arriving anyway?
–chuck
I was going to trade in my ….no wait, no car that I have owned in the last 20 years has gotten less than 20 MPG.
Seriously, can we declare the SUV craze over now?
They’re rotating the program to household appliances now.
After that, probably farm and recreational vehicles (RVs, boats, tractors and ATVs).
Then, back to autos.
If not, beware that soon to arrive crashing&burning sound.
Governments distort markets horribly. That should be the lasting lesson of this program, and will, in fact be it’s legacy.
For those of you looking to pick up a lightly used car in a year or two…in the famous words of W. Axl Rose, “just a little patience…”
(Yes, yes, I know, car salesmen of the world; the bulk of CFC buyers were frugal, responsible, tidy folk, who paid cash for their cars, and had FICO scores of 985. Sure…)
Neighbor C4C’d his F150, driven about 8-9 times per year for the last 13 years for a new Forrester to give to his son-in-law so SIL could give his just-16 year old daughter his 6 year old Outback.
Is that distorting the market?
(Yes, yes, I know, car salesmen of the world; the bulk of CFC buyers were frugal, responsible, tidy folk, who paid cash for their cars, and had FICO scores of 985. Sure…)
That’s funny ohsnapback, I’ll bet 4 deals didn’t add up to a 985 FICO
1100 employees to work through the morass of paperwork that is the CARS program. How much of the $3B will be carved out to pay for the infrastructure to make this program work. Let’s see… computers, office space, health insurance benefits, consulting fees. Ironic considering some of this programs most ardent supporters were trotting out C4C’s alleged green cred. A tax credit would have done the same thing for less money and no additional paperwork. And it would have been more environmentally friendly on a massive scale.
THANK GOD!!!!!!!!!!
And with that…3 BILLION was pissed away with foreign companies benefiting most.
taking tax dollars from one person and giving it to another to buy a car that depreciates. Only a politician could call this an economic success.
my F-150 lives for now. After considering C4C I decided I would sell it outright for a grand or so and buy a depreciated used vehicle. Plenty of them around and they didn’t benefit from C4C. As a matter of fact, the fuel efficient used cars were unaffected by the market skewing C4C since they were not killed off nor bought with the proceeds.
Next time just let people trade in what they want and buy what they want with a smaller or graduated value. The hard limits and rules caused a lot of problems.
And a lot of decent cars got put to death.
That Geo Tracker is too fuel efficient to qualify for C4C.
Oh yeah, and thank god C4C will soon be over, it threatened to be never ending.
I’m glad the government came up with a way to #1 clear out large amounts of dealer inventory that was just sitting around unable to be purchased due to the banks holding back loans, #2 the government figuring out a way to bring more business to the dealers, #3 the government figuring out how to coerce people into trading in their aging cars for more fuel efficient cars.
The bottom line is that when the people start saving and can’t spend money, the government is going to do it.
That’s the only logic behind the F22 program and the only logic behind most of the military industrial complex. To keep Americans working…somehow.
I’m a registered republican – but, not like these birther, death panel, fringe, asshole/idiots that come to these Town Halls armed. I understand what the government is doing, and alot of it I support.
I know Obama is gonna pass Healthcare by November – but, this time around, he’s dropping the bipartisan bullshit and he’s gonna ram it through. Just like when Social Security was passed.
fter that, probably farm and recreational vehicles (RVs, boats, tractors and ATVs).
Hey that sounds good…I will trade in my stinky, polluting, 2-stroke Tigershark waverunner for an efficient, 4-stroke, fuel injected Malibu Corvette Edition inboard ski boat with the 505HP ZO6 V8.
http://www.malibuboats.com/boats/corvette
What I don’t get is why this was supposed to help anything but keep the factories running.
Meanwhile there is a whole class of people stuck driving vehicles (around here anyhow) that are worse than the vehicles getting crushed b/c they can’t even come close to buying a new car ith a gov’t rebate.
I HATE seeing perfectly albeit thirsty vehicles getting crushed and then getting passed by something that was on it’s last leg about 6 years ago…
It was a auto industry bailout (yes…Ford took a helping of this as well)…and a green initiative.
Both failed miserably…but Toyota, Honda, and the Koreans won’t be upset.
@jkross22: A tax credit would have done the same thing for less money and no additional paperwork. And it would have been more environmentally friendly on a massive scale.
+1
Have GM’s production increases even taken effect yet? I can see it now: the Cash For Clunkers viscious cycle: inventory piles up so the government launches C4C, sales pick up so GM increases production, C4C ends before the production increases take effect, inventory piles up from the production increases, repeat. Wonderful.
We are done bailing out the dealers? That did not take long.
My gut-wrenching emotive feeling suggests to me that after a period of lagging sales and inventory build-up the manufacturers will offer deals that save the buyer more money than the amount saved via that clunker cash scheme concocted by the compound dwellers of the current federal level regime.
I got a call from a dealer whose 06 750i I took for a spin yesterday, saying they dropped the price 10k.
Granted, I have no idea how long the car has been sitting there, but 29k for a 3 year old 750i ain’t bad. Even with higher miles (66k), seems like a reasonable deal. I wonder how many of these types of deals are out there. I also wonder if the c4c program left V8 powered cars with a lot fewer buyers.
Ready for the nose dive in sales for September? All the buyers that were late to the party will continue to drive their clunkers because most will have financially been eliminted from the market. All that increased production will bite the manufactures right in the ass.
First off, Cash for Clunkers will NEVER die.
Mark my words.
Second, my 98 Blazer will be relieved to hear that it has escaped the C4C automotive guillotine — for now.
You see, my C4C journey began several months ago. When the details were announced, I thought to myself “good Lord, why have you chosen me to be the unique recipient of this most bountiful gift?”
Here I am, chewing on the the thought of dumping that crappy old SUV (which serves its purpose fine — driving my ass around town to the tune of 5,000 miles a year). Could I get $2,500 in a private sale? Only 75,000 miles, but awful tires and a yearly maintenance tab around $1200. What to do. Enter C4C.
My Blazer gets 16mpg. To get the full $4,500, I need a sedan with at least 26 mpg. For financial reasons, I don’t want more than $16,000/5yr loan. So I’m looking at sedans around $20,500 after tax with at least 26mpg.
Needless to say, the final list was small and rather boring. In the end, I ended up flipping my wife’s 2006 A3 for a 2009 A4 (the two kids fit fine in the back, nice trunk, and quattro rocks here in the snow belt) for that same $16,000.
The moral of the story: I went out and bought a car I really didn’t need, but could justify given the upgrade in safety and comfort.
But to make this purchase I still went into debt. And that’s the problem: the way I see it, C4C is simply a way for the government to subsidize consumption fueled not by savings but through debt accumulation.
And last time I checked, too much debt seemed to be at the root of many of our economic problems.
We can’t drink ourselves sober, now, can we?
My advice? Keep your cash, and your clunkers.
jkross22 :
1100 employees to work through the morass of paperwork that is the CARS program. How much of the $3B will be carved out to pay for the infrastructure to make this program work. Let’s see… computers, office space, health insurance benefits, consulting fees.
Does that really matter ? The whole thing is meant to be a stimulus, not a subsidy. If the government is spending $10k to get someone out of an F-150 and into a Prius then it is better that the money gets split over 1000’s of people rather than just benefit the bank accounts of the buyer and seller.
Money spent on computers goes to Dell, Gateway, Intel, AMD etc., money spent on office space gives more property tax income to local governments to spend on schools, money spent on health insurance pays for doctors and nurses (because according to the Republicans the health insurance companies pass all money on to the hospitals and don’t make a dime in profits).
In the end I would say this is a situation where bureaucratic waste is the intention because many people benefit, not just a few people who decided they wanted a new car. The only money that is lost is corporate profits, the rest gets swirled back into the economy.
I agree with jkross22. I did 16 c4c deals and only one of them financed their purchase. As for the pull ahead sales meme, I don’t believe that many of these buyers would have been in the “new” car market anyways. They were driving older and mostly well cared for vehicles and would have proceeded, repairing and patching.
I have had the pleasure/displeasure of working on Capital Hill. I can honestly say that I do not think that the C4C idea was anything but a desire on the Hill for people to buy cars again. In my experience someone comes up with an idea that looks like it might work, they float it to freinds on the Hill and then, wham bam, its a bill or a program. In this case I don’t think there was anything sinister about the plan. You have lagging demand for car sales, an auto industry on the brink, pressure to reduce carbon and a desire to kick start the economy. I often found that once an idea gains traction it is hard to stop it. What that means is that most ideas, good or bad, never get vetted for long term effect. In this case the clunker idea looks good on paper, it appears to be a win win for lots of people and presto its a done deal.
Will it have long term demerits for the auto industry who knows, maybe maybe not. For the time being it looks pretty darn good for alot of people and for the Hill that is all that matters for the moment. Nothing Machiavellian here, just good old supply side politics and people wanting to make our financial machine work again.
(Yes, yes, I know, car salesmen of the world; the bulk of CFC buyers were frugal, responsible, tidy folk, who paid cash for their cars, and had FICO scores of 985. Sure…)
That’s funny ohsnapback, I’ll bet 4 deals didn’t add up to a 985 FICO
Those of us on TTAC that actually sell cars for a living are commenting on the credit worthiness of the C4C customers WE have seen. And in OUR experience with the program, these customers have all been more than credit worthy. Why dismiss our posts as lies? We are living it, you are not.
apologies for being the anal retentive Lisa Simpson know-it-all,
***just good old supply side politics and people wanting to make our financial machine work again.***
a subsidy to stimulate demand (C4C) is classic Keynesian 101.
Good or bad this thing gave a kick in the a$$ to a section of the economy that was lagging. I contended some time ago that people have money but were sitting on it, lahru points this out in his post. This got his cash buyers off their duff and back into the market. And the credit worthy but reticent (thanks dwford for your insight into that). Through some refinancing and debt retirement we were in a position to afford a car loan, but were also sitting by with aging and unused vehicles. This got us up and out looking again and eventually buying.
Seriously, can we declare the SUV craze over now?
When I find a newish V8 Hummer in my area on Autotrader for less than $20,000 it might be close to over. However as long as they’re staying expensive the more desirable they still must be. Sad (because I want one on the cheap), but true.
On a happier note: Ding dong the-waste-of-my-tax-dollars witch is dead. The sandpaper condom has come off, Uncle Sam’s in bed smoking a cigarette, and my taxes are temporarilly safe from “the common good”. At least for a while.
IMHO we should probably listen to the people who are actually doing the deals in regards to the kind of consumers buying the vehicles, not those drawing their conclusions from ideological axioms despite never having done an actual C4C deal.
Crazy, I know.
Seriously, can we declare the SUV craze over now?
Yes. It has been dying for a few years, but the plug was finally pulled from the ventilator when people began trading in their ’90s Explorers for Ford Focii in droves. When the history books are written on the SUV craze, Cash for Clunkers will be the last chapter. I’m also glad at least some will be removed from the used car market. I don’t know about you, but I don’t want a 16 year old fresh out of the driving test barreling down the highway in a ’97 Expedition while texting on his iPhone.
Good or bad this thing gave a kick in the a$$ to a section of the economy that was lagging.
I thought c4c was for the environment?
Well if it’s “for the economy”, let’s look at clothing retail. Retail is lagging. Let’s give credits for Abercrombie and Fitch.
Or how about Circuit City? Linens n Things? Mervyn’s?
If this was really about the economy, it would have been much simpler/efficient to do a tax credit… but hey, then we wouldn’t have any gov’t inefficiencies to complain about. That just wouldn’t be any fun.
Well if it’s “for the economy”, let’s look at clothing retail. Retail is lagging. Let’s give credits for Abercrombie and Fitch.
Yeah, let’s construct strawmen instead of admitting the program was a success. That’s the ticket!
I could play that game too if I felt like being asinine. “If tax cuts are so great, why not make the tax rate zero? Huh? what about THAT?”
BDB : Yeah, let’s construct strawmen instead of admitting the program was a success. That’s the ticket!
How can 1) subsidizing those who do not need a subsidy, or 2) subsidizing those who once owned a paid for car and could not, by themselves, afford a new car (yet now are in debt due to their C4C purchase/lease) be called a success in any way?
All this misguided program did is increase the national debt through questionable fiscal policy. Now, in order to pay for this (and all the other spending that’s going down) three things (or a combination of the three) must happen.
1) the “stimulus” will have to initiate massive private sector growth, thus leading to increased employment and, therefore, increased tax revenue (in order to finance the debt).
2) taxes will have to be raised in order to finance the debt.
3) investors with dollars will have to be willing to purchase government securities (presuming they have faith in the goodness of the securities).
If none of the above happens then the Fed will have to “buy” the Treasury notes: meaning increased inflation (at the amounts necessary to be financed).
I don’t see C4C making any difference in #1. In fact, I suspect that when all is said and done, car sales will decline to their pre C4C levels real soon. In fact, I’ll go so far as to predict that any C4C stimulus effect will not even cover the cost of the program, much less create any overage.
So, is this a “success”? Maybe. But only if you live in the short term. For those of us with an economic view that spans more than a few months, probably not.
Edit (duh)Tax credits would heve been saved, not spent – they would not have stimulated anything. Cashflow was the point, even though it’s circular (and somewhat wasteful), it’s still cheaper than war with no booty…
So, certain people pulled the trigger, and the ship USS Economy has made a slight turn towards calmer waters. And even though the administrative aspects of the program are the equivalent of cleaning birdshit from cuckoo clocks, people were busy, and money got moved – huge economies seem to love that; even “wasted” money is not if it gets the gears to start moving.
Not perfect, but what capitalisitc tool is – and that’s exactly what it was – capitalism at it finest.
How can 1) subsidizing those who do not need a subsidy
The auto market needed a subsidy.
2) subsidizing those who used to have a paid car and could not, by themselves, afford a new car
Talk to the actual salesmen on this site. These are people with cash on hand and good credit scores that are taking advantage of the deal. The people taking advantage of this deal could afford a new car, but are by nature overly cautious and needed an extra incentive to do so. Traditional used car buyers with good credit scores were brought into the new car market, creating demand where it didn’t exist before, not just pulling it forward.
1) the “stimulus” will have to initiate massive private sector growth, thus leading to increased employment and, therefore, increased tax revenue
Yes, that’s the idea. It’s called the multiplyer effect. The government stimulus is a spark plug for our economic engine, not the gasoline it runs off of (which will be the private sector). When the economy grows, our debt as a percentage of GDP will shrink to a level manageable in the long-term.
If none of the above happens then the Fed will have to “buy” the Treasury notes meaning increased inflation
We should be so lucky as to have a little inflation. In case you haven’t noticed, consumer prices in the last year have declined by levels not seen since the ’50s. Which means were in danger of deflation, something especially deadly in an economy like ours where most people are debtors, not creditors. IOW the engine won’t even start, why exactly are you concerned about it overheating? It’s a silly and unfounded fear to have.
EDIT: Let me add that if they don’t stop these kinds of programs when our GDP is growing at a 3.5% per quarter clip again, then you would have me worried about waste of tax dollars and inflation. If that happens, by all means, vote in the Republicans. Though ideologues will tell you otherwise, no one economic theory works for all circumstances.
The auto market needed a subsidy.
Yes, If we don’t give them money, some mfgs. go bankrupt. Kind of the same way with E85 subsidies, too. How’s that working?
Yeah, let’s construct strawmen instead of admitting the program was a success.
What metric are you imagining when you say this program was a success? It’s true that lots of cars got sold and destroyed in the process.
If you’re right, then success will reflect in the numbers. Let’s take a look:
3,000,000,000.00 program. $4500 for some cars and $3500 for others. Average it to be $4000. That means that the theoretical (but never stated) goal is 750,000 cars and trucks. Perhaps it’s closer to 700,000 cars as there may be more that earn the $4500 than the $3500. Who knows.
But then you have overhead – the cost of employing people to design, build, deploy, manage and maintain this program. How much does that cost? No one knows and/or no one is saying. The NHTSA now has 1100 people supporting this program. They started with 230. The vast majority of these people are contractors, because of the short term nature of this work.
Right, so we have a program with no stated goals, very little in the way of planning, poor estimates by everyone on the response of the program, and slow reaction time when it’s realized the program doesn’t have enough people to process the paperwork. And how many dealers have been paid so far? 4-5%?
Yes, it’s been a smashing success.
What metric are you imagining when you say this program was a success
Gee, I don’t know, the fact that the money they estimated wouldn’t run out until November ran out in about a week? The “failures” you complain about (the amount of people needed to run the program, the underestimation of how popular it would be*) are really indicators of how successful it was. You’re really grasping at straws there.
Remember when a lot of the commentators on here said nobody would take advantage of it and the program wouldn’t increase car sales? Or that the program would involve massive fraud? Or that dealers wouldn’t want to participate it? Yeah, they’re were wrong on every single one of those points.
Now, the theory is that car sales are going to crash in a few months and/or all the cars sold will be repossessed. Something tells me this won’t happen, either, especially since the actual salesmen who post here keep telling us the people buying them have excellent credit and are paying large amounts in cash.
The next talking point, when this doesn’t happen, will be that car sales were recovering naturally anyway and the government had nothing to do with it, so it was just a big waste of money.
Indeed, we will be told that it would have been metaphysically impossible for the government to jumpstart the economy, because Government Doesn’t Work™ and what about the Post Office and Zimbabwe, anyway? Mark my words, we’ll be hearing that around March of next year.
*Of course the reason funding was so low initially is because Senate Republicans demanded it be $1 billion and not $3 billion, because they assured us anything more than $1 billion would be a waste since the program was doomed to unpopular failure.
Gee, I don’t know, the fact that the money they estimated wouldn’t run out until November ran out in about a week?
So, you are defining success by the speed with which $3B was spent on C4C.. that the money ran out much more quickly than expected. That demand for “free” money from the government ran out more quickly than expected.
Reminds me of the post Thanksgiving Friday morning sales at Best Buy where people are lined out the door to buy flat screens for $500. As in that case, these are sales being pulled forward.
You can choose to believe it’s just a silly strawman argument if you’d like, but when you incentivize certain behaviors, there are downstream impacts. This program is the poster child for any type of program or project, public or private where consequences were simply not thought of in the planning stages. Fast, good or cheap: Usually it’s pick 2. In the case of C4C, they picked one: Fast.
So, you are defining success by the speed with which $3B was spent on C4C.. that the money ran out much more quickly than expected.
Why yes, yes I am, because that indicates that a s**t ton of cars were sold through this program. Call me thick, but since the point of the program was by and large to move metal, running out of cash put aside for that so quickly indicates that it worked very, very well.
As in that case, these are sales being pulled forward.
Again, talk to the salesmen and dealer employees that post here. The people taking advantage of this program are by and large used car buyers. Not only that, but used car buyers who can afford to buy new but don’t because they’re extra-frugal people. Given them some cash in exchange for their 1990s Ford Explorer got them to. They would not be buying new cars if it wasn’t for this program. Not now, not a year from now, probably not ever. Demand wasn’t pulled forward, demand was created.
@jkross22 & BDB :
i think the truth is somewhere in the middle. yes, this C4C helped your economy to stabilize, not grow as BDB says.
but it was the right thing to do, because the economy was in free fall.
all this is just slowing the decline. and dont be fooled by the market DOW and whatnot, thats gonna grow some more then fall like a staircase. as it did in the 30s.
edit:
it will take alot alot of effort to shed the debt the US holds altogether. and domestic sales wont do, as that’s just like moving your money from the left pocket to the right.
let my explain, looking the US as one entity, one “particle”/carbuyer of that entity is paying another/carsalesman. you/the entity US still have the same amount of money. no new money or value is added (from an outside perspective).
unless the US gets its exports going, nothing can help you get rid of your debt.
edit2:
sorry for the second edit, but i have to add this:
for the whole US to loose its debt, its either thru more export (for this you need the production/industries you dont have or wont be having anytime soon), or
you all collectivly part with a procentage of your wealth to pay the debt off
and you all collectivly become poorer (this is happening, as all can notice by watching the news)
Again, talk to the salesmen and dealer employees that post here.
So, you believe two or three opinions on an auto website are representative of hundreds of thousands of transactions. Okay.
We’ll know in the next few months which one of us is correct. If sales plummet, I’m right. If they continue on this path, you’re right.
By the way, I’m cheering for you to be right because the alternative will be C4C, part II.
BDB : The auto market needed a subsidy.
Need? You might as well say that you need a pony, too. Need is a strange concept to base fiscal and monetary policy on, especially since the government is not the best arbiter of individual need. What you are saying is that the domestic auto industry had to be kept going. But consumers had already abandoned much of this market, and consumers are really the best arbiter of “need” and “value”, not government. Based on the rational (or otherwise) judgment of consumers, these companies deserved to die.
BDB : We should be so lucky as to have a little inflation. In case you haven’t noticed, consumer prices in the last year have declined by levels not seen since the ’50s.
Do not confuse different phenomena. Some consumer prices have declined (others have increased). But this is due to several factors, most that can be placed under the heading of supply v. demand. In a recession, demand is usually down, and prices of existing goods typically drop, all things being equal.
Inflation, on the other hand, is not strictly speaking a supply and demand phenomenon, but, rather, a function of monetary policy. If, as could be likely, foreign investors decline to purchase our debt, and if taxes cannot be raised high enough to service the debt, and if economic stagnation continues, monetization will likely happen. At the levels we could be talking about, inflation is most likely. At this juncture, I see no evidence of any political support for a strong dollar.
Good or bad this thing gave a kick in the a$$ to a section of the economy that was lagging.
That’s like saying the ocean rose because my rowboat displaces water.
Anent monetary policy and inflation, one factor that could influence a continued decline in prices regardless of monetary policy is consumer psychology about the future. Right now equity and real estate assets have precipitously declined. An injection of money into the banking system along with interest rates at near zero has yet to stimulate consumer buying across the board. I’m not sure how much liquidity (measured by M1) will have to be present for people to start buying, once again. I think most people who could buy, or could afford to go into debt, are very afraid of the future.
In this light, C4C was likely just a little blip. I don’t think it will have any long term effect. The government takeover of the auto industry kept these “toxic assets” from being thrown overboard by the market. Obviously, in the near term, economic displacement would increase, but as long as government GM and government Chrysler are sucking up money that would be better allocated by more efficient market oriented investments–investments that people actually want, the long term is even bleaker.
So, you believe two or three opinions on an auto website are representative of hundreds of thousands of transactions. Okay.
I would say yes, since we are on the front lines of this, not keyboard quarterbacking it.
We’ll know in the next few months which one of us is correct. If sales plummet, I’m right. If they continue on this path, you’re right.
Sales probably will fall back to pre-clunker levels. Most of these sales never would have happened – at least not anytime soon absent the clunker cash.
However, there have been many benefits:
1. Tree huggers got a bunch of old polluting cars off the road
2. Dealers and manufacturers got rid of a bunch of old units so they can start the 2010 model year clean.
3. Stimulus money got spread around to many people – salesmen, managers, techs, detail guys, tow truck drivers, junk yard employees, DOT employees etc
4. States got added sales tax and registration revenue, not to mention all the extra income tax revenue. (Even at a giveaway price, I will still gross at least $300 in commissions, bonuses, and spin money – per car, and figure 25% of that will go back to the government.)
5. Auto manufacturers now have to crank up the auto plants to replenish the inventory, so there is additional wages there as well.
I could go on.
All I want to know is what are we going to be bitching posting about on Tuesday?
One final thought about government intervention in the car market. If C4C (or some other form of car subsidy) continues, the market for cars will increase–whatever we subsidize increases. However, as liquid assets move into this sector, prices will rise accordingly. Think of the recent housing bubble. Houses were a decent investment and a reasonable purchase when only those who could afford houses bought them. The market was stable, and supply kept pace with demand. As the sector became heavily subsidized due to political influence, those who had no business buying entered the market buying with cheap borrowed money. Now, 10 years later, we can all see what happened. If the government continues to subsidize the auto industry, look for similar results.
fook it, @webmasters, this site just “ate” my comment so i have to post again
@dwford
1. who fooking cares about the greenies, fook em
2. no comment
3. ok, yea money got spread around, still it has to be returned, paid off, hello? ever thought of that. its not like you had those 4.5k/car lying around
4. o yea, if its such a good deal, you give me 4.5k and i give you 25% back. deal? oooh why not?
it;ll be good for the economy
5. o yea, they can build up all the inventories they want, but will they sell them later on?
just imagine what ppl will think, “damn i shoulda used that c4c money, i aint buying a new car now, lets wait till gov gives us CARS2”
and the inventory builds up and up and up
mpresley
+2
my missing comment:
i like the metaphore CrownVic used.
ok lets examine a real life story:
one poster said in his comment he gave his
clunker up for c4c and traded in his wifes
audi a3 to get an audi a4. sweet deal for him.
but is it a sweet deal for the economy? i think not.
the clunker gets destroyed, but what happens to the audi a3.
what if it never gets sold? noone there to pick up the “tab”?
it will be nothing more than unused assets. and what if the
carsalesman is loosing money on it and has to fire a worker
or two to break even? how does that help the economy?
those guys are fired, and cant get taxed, so the gov is
getting the middle finger as well. *yea, you go economy* (ironic)
connecting to CrownVic metaphor, look at it this way:
you think the c4c will move waves (money). it’ll start with
small waves (stimulus) and get those big waves (money) moving.
yea. sure someone will have a blast riding the waves (manufacturers)
while others will get hit by the waves (taxpayers). at the end,
when the waters calm down, it’ll be the same amount of water around
(money) – read one of my previous posts about left pocket-right pocket.
i think the truth is somewhere in the middle. yes, this C4C helped your economy to stabilize, not grow as BDB says.
That’s really splitting hairs. The point is, modern econs like our CANNOT contract. That is death, because contraction cannot be overcome except by even more overwhelmingly massive public spending (like WWII) which I’m sure the “free marketers” are trying to avoid.
—-
Inflation, on the other hand, is not strictly speaking a supply and demand phenomenon, but, rather, a function of monetary policy.
Sure, and inflation is infinitely better than deflation, which is why everyone errs on that side. So what exactly is the problem here?
—-
Houses were a decent investment and a reasonable purchase when only those who could afford houses bought them.
Are you really comparing cars to houses as investments? I wanted to make sure because that is hella dumb.
Really? You’re making entire posts out of a semantic interpretation that you know is wrong?
—
but thats wishful thinking. it doesnt come close to reality.
You better tell all of the first world, because that’s what everyone does, or at least anyone successful.
In the future, it would help everyone if you wrote with a coherent sentence structure.
@agenthex
The point is, modern econs like our CANNOT contract.
what do you call a 2007 4% unemployment to 9.5% in 2009? not a contraction? it simply CANNOT contract, coz the newsmen said so.
WOW, and you tell others their comments are dumb?
WOW, im astound! really i am. im not flaming.
edit: ok, ok
lets say it like it is, your economy will be in deep sh1t if it contracts.
how about that? it was designed to have constant growth, and you got used to it. now you think it cannot contract.
but thats wishful thinking. it doesnt come close to reality.
reality is:
1. baby boomers retire in huge numbers
the later generations (working/tax paying citizens)
cannot pay for the baby boomers retirement coz theres less of them than
theres boomers
2. debt burden, not only have you to pay off your debt but also the
interest on the debt, and its groooowing baby
3. more money goes to paying debt and the babyboomers, less money 4
new investments/factories/incentives or similar
4. less investments lead to the US being less competitive
5. koreans/japs tech is close to USs
6. growing china, also closing the gap, +they got cheap labor, which you dont
will you work for $3 dollars a day? how about $5? nooo? i guess you will have to. or the job is gone. thats reallity.
7. …
8. …
9. my favorite: peak oil. how you gonna drive your car then? LOL
edit2:
yea peak oil, which brings me to a post from robbert farago,
where he ranted how its not feasable to buy a prius coz the saving on fuel
isnt that much, yet he was considering $4.something/gallon. i
didnt comment then but i was thinking to myself HAHA and what if the price is $10-12/gallon.
is it feasable then? ;) ;)
Rammed through ” Just like when Social Security was passed.”
On 19 April 1935, House, 84 percent of Repubs voted for SS and 95 percent of Dems voted for.
You better tell all of the first world, because that’s what everyone does, or at least anyone successful.
hint: europe is also part of the first world, so i’d know too ok?
yea, people become successful by “jumping” on the
bubble early on. but that doesnt mean the bubble wont burst at some point and bite the majority in the ass.
In the future, it would help everyone if you wrote with a coherent sentence structure.
im european as you can see from my nick, and english is not my native lango, so if you try to attack my standpoint by pointing out my english flaws well … that doesnt help your cause
but lets be honest, i feel ya, i really do.
it’s hard to accept the fact that the game will
soon end. sure, for some it will be a blast, but many will loose alot.
you should listen to what i have to say, im not
blinded by partisanship, im just an outside observer. many, including you, are seeing things subjectivly, and cant really see the big picture.
and sure you have your hopes and agendas, thats ok, you will try to push your way, but that doesnt mean your way will be the outcome.
yea, people become successful by “jumping” on the
bubble early on. but that doesnt mean the bubble wont burst at some point and bite the majority in the ass.
The basic argument of growth has nothing to do the bubble, it’s how the econs fundamentally work. Sure a bubble is a bad thing since there is no good solution on the other end, which is what we’re dealing with now, but it’s also not the end of the world as long as you don’t listen to the greedy bastards who drove it into the ditch in the first place.
—
im european as you can see from my nick, and english is not my native lango
I’m pretty sure all languages use some kind of formatting to delimited sentences and paragraphs. It’s not very hard and would greatly improve readability.
—
and cant really see the big picture.
What would really help to see the big picture is to understand how the econ is set up, and thus understand why stimulus is really really important.
In the long run, the first world in general and successful developing nations will tend to equalize in terms of living standards, but that’s hardly surprising.
What would really help to see the big picture is to understand how the econ is set up, and thus understand why stimulus is really really important.
i agree. surprised? yes, the stimulus is important
coz its prevenenting a sudden collapse. its slowing things down, as they say “controlled collapse”. but what i am emphasizing is, there will be a collapse later on, wether you like it or not, c4c or no c4c.
and in my previous posts, i tried to (in a haotic-laymen way, sorry about that) explain the reason why it will collapse. so spare yourself the contemplation, will this c4c work or not, doesnt matter, the end stays the same.
but what i am emphasizing is, there will be a collapse later on, wether you like it or not, c4c or no c4c.
Don’t worry, people have been predicting the collapse of all the first world countries ever since they started becoming successful, especially those willy eastern bloc comrades.
Hey it may eventually happen in the long run, but then we’d all be dead in the long run.
In the meantime, these countries still have the highest productivity and most valuable outputs.
Quote: # mpresley :
August 21st, 2009 at 7:25 pm
Anent monetary policy and inflation, one factor that could influence a continued decline in prices regardless of monetary policy is consumer psychology about the future. Right now equity and real estate assets have precipitously declined. An injection of money into the banking system along with interest rates at near zero has yet to stimulate consumer buying across the board. I’m not sure how much liquidity (measured by M1) will have to be present for people to start buying, once again. I think most people who could buy, or could afford to go into debt, are very afraid of the future.
In this light, C4C was likely just a little blip. I don’t think it will have any long term effect. The government takeover of the auto industry kept these “toxic assets” from being thrown overboard by the market. Obviously, in the near term, economic displacement would increase, but as long as government GM and government Chrysler are sucking up money that would be better allocated by more efficient market oriented investments–investments that people actually want, the long term is even bleaker.
Absolutely nailed it.
Despite the bear market stock rally of late, people are getting decimated on home and asset value prices, unemployment is fantastically high and rising (in even areas formerly immune), credit is tight and getting tighter, banks are in horrid shape as the congress gave them carte blanch to used fraudulent accounting methods (suspending M2M) so as to be able to show fake profits or lower losses, and the government is running massive deficits (all time high; 13% of GDP).
The real unemployment rate in the U.S. is 19% if you used the older, more accurate U6 measure.
On top of all this, the biggest segment of the U.S. population, the boomers, are retiring, and becoming net sellers of their assets, as they want safety and liquidity in retirement, and this will further put deflationary prices on asset values.
You don’t even know what he’s talking about. He’s just stating the same thing all the economists are saying about a liquidity trap, and then adding some bullshit “free market” PR copy at the end.
Where was this doom and gloom when the banks were happily taking off the reigns which eventually led to an inevitable unwind? You late-comers realize this stuff was well studied before the new pres or congress came in and the talking points got flipped around?
Really, it’s pretty hilarious the freepers still can’t decide whether it’s inflation or deflation to fear monger about.
agenthex,
there are only two ways how an economy can grow.
thru resources and technological innovations.
everything else fits into one of those 2 categories. sounds simplified, but let me explain
in detail. i will take the US for an example.
1. resources:
the first basic “resource” was land.
using the land to grow food, the woods to make fire and build houses.
you had that since the first settlements
to lets say 1850s when most of the mainland was part of the US.
expantion, conquering and wars have the same goal, get more resources to grow the economy.
but you cant grow anymore in that way (the other option would be a biiiig war).
then comes the oil/steel production. you had a blast since 1900s to 1970s.
and it was cheap energy. but then the US oil production peaked in the 1970s. so you cant grow in that
direction either.the rust belt declined at the same time. i think theres a subtle connection
between those 2 phenomenons.
in the 1970s comes the idea of liberal capitalism/free market, it was just a mumbo-jumbo
idea of the elite to keep the US growing. so they thought of the petrodollar which could be used
to buy resources. why wage war for resources when you can just print paper and buy whatever you like with it.
sounds clever enough. the petrodollar had its dominance ever since. and those where the times frm the 1970s till about now.
they just didnt think of one thing: whats going to happen when the rest of the world also runs out of the resources.
needless to say that some countries start selling their resources for euros and other currencies. iraq started it.
just before it got invaded. saddam was selling his petrol for euros. yes. and iran jumping on that wagon too. how long will it take that the arab countries do the same, i ask you?
and the dollar is loosing its dominance. look at china, they made their yuan convertible. they will do most of their
transactions in a “cocktail” of currencies. not just in dollars.
2. tech innovations:
tech innovations also improve lifestyles and can help grow the economy. but it comes with a cost. it needs money and people to fuel it.
lets talk about the people. have you ever been to an engineering college in the US. i was.
just look at the number of foreign students there. its overwhelming. all are chinese or hindus.
look at the percentage of medical doctors that also come from india. i think we can agree that the US
was “importing” smart people. sure, both sides benefited, smart people got to go after the american dream
and the US gots its “brainpower”. but look at the trend now. many smart peoples arent coming to the US anymore.
needles to say outsourcing or to mention that you’ve got 9.5% unemployment (official figures, god only knows how
big it really is). whos gonna pull America forward if not smart people. but where are they?
and about money. the US got so distorted thats unbelievable. some MTV whore gets millions paid, while
there’s no money for R&D or engineering paychecks. heck why would anyone bust his balls to get paid 40k-50k
while a stupid celebrity can get millions for having a boob job.
even without that, there will be less money around coz more money will go for paying for the retirement monies
of the baby boomers.
=========
so lets sum it up,
you are out of your own resources, the “magic stick” petrodollar loosing its dominance and you will have to compete for the remaining world resources, which will be hard to accomplish coz you’re lacking smart people who can turn the tide.
and you still think the collapse isnt coming? the only difference between the soviet and the US collapse will be
the soviets didnt have the magic petrodollar to postpone the collapse.
and no im not a fear monger, a collapse isnt certain death like some crazy radio host claims to be (wink wink).
but your standards will drop, and that drop will be substantial. many wont be willing to accept that, and blame
anyone they can (e.g. minutemen vs illegals). there will be alot of turbulence.
all i can recommend is, make your plans NOW for the gas to be $10/gallon (price the europeans are already paying anyways). buy a car that fits your needs for the coming 10-15 years. if you plan (additional) kids in those years,
dont buy a mustang or camaro, but a car that will haul you and the kids. buy a car that will be reliable for those
10-15 years coz you wont be able to afford a new one. the previous basically means, buy toyota/honda/nissan.
well i end my enourmos post here, making a connection to the TTAC topic, cars.
agenthex : Are you really comparing cars to houses as investments? I wanted to make sure because that is hella dumb.
Surely they are different in many respects, but the principle regarding purchasing is very similar. Houses cost more, and take longer to build. They also last “forever.” These things cannot be said about a car.
Yet the point I was making, since you either did not understand or I was not particularly clear (for which I apologize), is that the expansion of credit to those who should not be given credit is foolish, and, when multiplied and spread throughout the economy, is disastrous. So, it is the same principle. Again, your characterization of the principle as “hella dumb” (whatever that means) shows either a lack of ability to abstract on your part, or a lack of ability on my part to write clearly.
I have not seen any hard figures about who is actually receiving the C4C subsidy. Obviously it’s a combination of those who don’t need a subsidy, and those who do. A subsidy for the former is superfluous, and for the latter wrongheaded and very questionable from an economic point of view. Especially since these people must have had a working clunker to begin with. In effect, they have traded ownership for debt (debt they may not be able to retire). One could even make the moral argument that in their ignorance they have been wrongly used by the government in order to “pay off” other constituents, or used simply as pawns in a blatant economic power grab.
Of course, if the latter group is a minuscule portion of the whole C4C pie, then the potential for loan defaults and subsequent harm to the larger economy is minimzed. We shall see.
Right now, for instance, VW is offering 0% financing for up to 60 months, and I’m guessing that other companies are offering similar deals to those with good credit. If, on top of this, the government has to subsidize consumer car buying, then what does this say about real consumer demand? Demand should be the arbiter of business decisions, not artificial government subsidy.
I’ll say this again: government Chrysler and government GM should have been allowed to fail. Their bad paper would have then been flushed out of the system. It would hurt in the short term, but in the long term things would be (barring more ridiculous government intervention) better.
“If, as could be likely, foreign investors decline to purchase our debt … ”
Let us assume for a moment that China decides it doesn’t want to buy any more US Treasury Bills. What then is China going to do with the US currency it brings in by exporting far more to the US than it imports from the US? As long as China and other countries continue to have massive trade imbalances with the US they have little choice but to use the US dollars accumulated to buy debt or assets denominated in US dollars. German, Japan, Taiwan, Singapore, Canada, Saudi Arabia and many more countries also continue to run large trade imbalances with the US.
The only way “foreigners” can refuse to buy US debt over the long haul is if they also bring their trade imbalances way down.
” used fraudulent accounting methods (suspending M2M) ”
Mark to market accounting rules were not in place during the Sainted Reign of Ronald Reagan either.
@John Horner
The only way “foreigners” can refuse to buy US debt over the long haul is if they also bring their trade imbalances way down.
you’re so right! they will bring their trade imbalances down by not exporting to the US. maybe not stop completely the exports, but wind it down.
now you will comment how they have no market but
the USs and that they HAVE to export to the US.
yea right. keep on dreaming. they’ll just divert their exports to countries that can give them what they need, not just green paper money.
or in the case of china, divert it to their domestic market. google BRIC countries, etc.
such new alliances are being made as we speek.
but what John said, and i will repeat it here again
The only way “foreigners” can refuse to buy US debt over the long haul is if they also bring their trade imbalances way down.
see, that will be the cause for the US collapse.
coz if other countries lower their exports to the US, no matter what reason (if you dont agree with my point above), you are foooked because you are so hooked on imports. most of the food, consumer goods, oil, gas (from canada) etc is coming from abroad.
now try to imagine what happens when those imports dry up?
is that the expansion of credit to those who should not be given credit is foolish, and, when multiplied and spread throughout the economy, is disastrous.
First, this is a limited time offer on a small segment of purchases.
Second, all indications are in this the currently environment, only the credit-worthy consumers are getting loans.
Third, the sales chart shows pretty clears the same consumers are looking for value.
So basically your broad generalization is based on absolutely nothing. However, your purpose in pursuing such a ridiculous notion is to push the bankrupt idea that “markets” ever sustained themselves in a self-sustained way, and the government touched it so they own all the negatives (and your guys or whatever own all the positives).
—
It would hurt in the short term, but in the long term things would be (barring more ridiculous government intervention) better.
There are absolutely NO examples of successful societies without fairly meticulous and consistent government intervention. Your ignorance of such mechanisms does not mean they cease to exist.
There are absolutely NO examples of successful societies without fairly meticulous and consistent government intervention. Your ignorance of such mechanisms does not mean they cease to exist.
wow, sure the commies had
“consistent government intervention”.
how did that turn out?
[Comment edited by Staff]
is that the expansion of credit to those who should not be given credit is foolish
Anyone who is going to make this argument needs to begin by proving that those who are receiving credit don’t qualify for it. I’ve seen no evidence to date that supports this argument.
In any case, those who would like to critique need to begin by at least understanding it. The primary goal is to increase consumption. The theory is that the government contributes $X to a purchase, in order to induce the consumer to contribute some multiple of X, which in turn gets multiplied through the economy.
The most costly consumption items that the average person will purchase in his lifetime are homes and cars. We currently have credits for both. If there is an advantage of C4C, it’s that the government can hand out a fixed number of rebates, and get a fairly predictable level of spending out of the commitment.
The question mark that is up to debate is whether it stimulates enough new consumption that it creates real benefit. Most of the other rebuttals being made here against it are frankly not very sound and don’t have much grounding in economics.
I put together some good resources, if you’re interested in the Cash for Clunkers program.
http://www.autostimulusplan.org
I gathered a list of Pros and Cons for the individual (4-Pro, 6-Con), and Pros and Cons for the Collective Soul (6-Pro, 12-Con).
After the results are in, I’d like to post the statistics to show benefits vs. consequences.
wow, sure the commies had
“consistent government intervention”.
how did that turn out?
How is that any kind of rebuttal? I knew a guy from europe who was a dumbass, so you MUST by LAW of association be a dumbass, too?
Like cars, some work better than others, is that really so hard to understand?
ok, whutever
i aint arguing or trying to convince you anymore
i’d recommend you save this webpage, file/save as,
for future evidence.
i predict march ’10 some more shakedowns for the US
(edit: market will drop heavily again),
after 2 years you will see some hints of CHANGE but not what you expected
(edit: jobs arent getting back, ppl are getting more depressed and everything that accompanies that),
while in 5 years you’ll be living in a completely upside-down world
(edit: another big conflict/war or substantially higher taxes, oil at $10/gallon).
and you WILL remember my words.
so long
completely upside-down world. and hopefully you’ll
remember my advice.
You should write it on a large sign, hold it up at a prominent spot in town, to warn all of the end of days perils ahead.