By on August 11, 2009

The CAR Allowance Rebate System—C.A.R.S—sounds like a ’70s Saturday morning cartoon about guys in striped jackets using trick vehicles to save the world. In fact, that would actually be preferable to the program currently airing, at cost of three billion and counting. Cash for Clunkers may be popular with a healthy segment of the population, but that group doesn’t include a lot of economists. In terms of economic policy, C4C would benefit from a little C4, if you know what I’m sayin’.

Warning. The following is not a right-wing diatribe. While there is very little in the public realm that can be cleansed of politics, attempting to look at the C.A.R.S plan unaligned does give one a different view. There are a few things about C4C that are not right. They’re not left, either. They’re wrong.

The most obvious case against the program is ideological: Keep government out of markets. Laissez-faire. Fair enough, except Uncle Sam sticks his fingers in many markets, frequently to the good of the nation. I like clean water, apples that don’t put me to sleep for 100 years and Amoxicillin that does what it reports to do (fix me up if the water or apples are bad). There are times when the federal government needs to intervene. Any point in the last 18 months can be considered one of those times. So, the laissez-faire agreement is weak.

My first real problem with C.A.R.S.: its effect on market timing. Putting a couple billion dollars on the barrel moves the market to act. The value added to older vehicles made some people move prematurely into the car market; people who might have considered dumping their POS before winter, or next spring. Extra sales made now will not be made later.

The announcement of the plan may very well have had a similar effect on potential customers in May and June. They waited for the C4C money to become available, putting their purchases off. The program creates an artificial buying season for no real reason. Other than to make this year’s data harder to use for predicting next year’s.

At the moment, there is no hard evidence that cash for clunkers increased the overall net business any car company was going to see this fiscal year. July numbers ticked upward, but that doesn’t mean sales came from customers who were otherwise out of the market.

Then there are the clunkers themselves. Once turned in the engines are filled with goo and run until useless. The destruction of a useable asset is waste. While some of the natural resources that went into that car can be reclaimed, the labor hours extinguish. It makes perfect sense for someone to turn in their Ford Explorer worth three large and take the Fed’s $4,500. The $3,000 in value the vehicle had is lost. The economy as a whole suffers.

Getting less fuel-efficient engines off the road has an environmental benefit. There’s also a huge environmental benefit in driving old cars into the ground. It takes a lot of fossil fuels to build cars in the first place, from the mining of the ore to assembly to shipping. Fouling the engine means these hulks need to shipped and processed again, using more energy. To the economy, waste is waste.

In terms of stimulus, three billion wouldn’t do a hell of a lot were it injected directly into people’s bank accounts. Current dollar gross domestic product last quarter was $14,149.8 billion, making C4C kind of a drop in the hot tub.

There is value in the perception that C4C generates. It is an understandable, and to many useful, stimulus package regardless of the final numbers. Its utility has been amplified by car dealers across the country. The recent meme that the program had run dry stoked the message even more.

In the end, though, C.A.R.S has interfered with a market finding a new equilibrium, one in which American’s buy 10 or 15 percent fewer vehicles per year. That’s actually better for the environment than the amount of hybrids sold in the next ten years. It can be painful to adjust to such market contractions, but that’s where government programs really do come in handy. Combating market forces is rarely the best use of public funds. If people want fewer cars, or want to get more life out of the ones they’ve already got, its tough to say that’s bad for America.

Fostering the growth of new markets—like renewable energy sources—and retraining a work force to fill needs in those new markets are constructive uses of tax dollars. They add to the GDP in a way junking a ’98 F-150 never will. This ain’t Saturday morning. C.A.R.S are not going to save the world.

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109 Comments on “Editorial: Why I Hate Cash for Clunkers...”


  • avatar
    turbosaab

    You lost me after your strawman dismissal of free market economics.

  • avatar
    John Horner

    “At the moment, there is no hard evidence that cash for clunkers increased the overall net business any car company was going to see this fiscal year. July numbers ticked upward, but that doesn’t mean sales came from customers who were otherwise out of the market.”

    And, there is also no hard evidence to the contrary. It always seems strange to me when people make the “no hard evidence” argument against an opposing positing while at the same time not having the corresponding hard evidence to support a contrary view. Obviously nobody knows what is going to happen in the months ahead. We do know with absolute certainty that the C4C program jump started sales in an industry which had run for over six months at something like 30% below historical sales rates. Say a person suddenly goes into cardiac arrest and the paramedic uses a defibrillator to get their heart pumping again. Maybe the lucky SOB goes on to live another 20 years. Maybe he or she dies next month. In either case, hitting ’em with the paddles was still the best choice.

    “In the end, though, C.A.R.S has interfered with a market finding a new equilibrium, one in which American’s buy 10 or 15 percent fewer vehicles per year.”

    Until C4C kicked in the market was running way, way below that 10-15% adjustment number you pulled from the air. Six to twelve months from now we will be able to better judge if C4C was a temporary boost followed by another crater or if it was an element of an economic defibrillation which gave the US automotive economy another lease on life. Many think it is the former. I think it is likely to be the later. Nobody actually knows with any degree of certainty. Which, by the way, is why the automakers are all scratching their heads trying to figure out what to do visa-vis production plans for the months ahead.

  • avatar
    lahru

    I agree that many driveable vehicles were clunked yet there is the macro economical value to the economy that provides much needed spending in the coming months to resupply dealers lots with the same vehicles that qualified for the C4C cash and due to extreme shortages of these higher mileage vehicles we will again create a pent up demand for all of the Ford Focus’, Escape’s. Civic’s etc.

  • avatar
    holydonut

    I just hate how it takes cars that have lots of spare parts and trashes them.

    If 16 year old kids don’t learn how to fix their w-body GM product by making (endless) repairs on it, how will they learn to love cars?

    Everybody should experience the fun of going through a U-Pull-It yard… but only after they get their tetanus shot from their government-provided health care program.

    And of course – what dorm room wouldn’t be complete without a front bucket seat pulled from a Cadillac and mounted on some 2x4s?

  • avatar
    RangerM

    You should Google “Broken Window Parable Fallacy“

  • avatar
    romanjetfighter

    Your first point:

    Extra sales made now means less sales later.

    That’s the point. If we were to wait, the recession would be alot longer. If enough cars are sold now, the economy would get going again and hit rock bottom alot sooner and alot better than if there wasn’t this injection of money. That’s why it’s called a stimulus plan. lol

    Old car engines are ruined:

    Yes, they are, but they’re inefficient and old anyways, and they weren’t worth alot probably.

    About the 2 billion dollars going directly to the people:

    HELLS NO! You can’t say that it’d help more, because you don’t know. When you subsidize these durable goods with big big costs, it means alot of money extra is being injected into the economy.

    i.e. 3500 dollars rebate leads to a person buying a 20000 dollar spending.

    Simply injecting two billion dollars would increase the money supply by alot, and since everyone would get like 5 bucks, they wouldn’t spend anything but save it in the bank instead.

    I can’t wait til C4C is over so we can start talking about new cars again and avoid politics. :O

  • avatar
    WetWilly

    Everybody should experience the fun of going through a U-Pull-It yard… but only after they get their tetanus shot from their government-provided health care program.

    +1

  • avatar

    “And, there is also no hard evidence to the contrary. It always seems strange to me when people make the “no hard evidence” argument against an opposing positing while at the same time not having the corresponding hard evidence to support a contrary view.”

    No evidence is no evidence, that was exactly the point. It isn’t always about negative vs positive.

  • avatar
    jkross22

    Where’s the stimulus for the back to school parents who have to buy bigger clothes and shoes for their kids?

    Where’s the stimulus for those of us who need a computer at home for their kids to be more efficient with their time?

    Where’s the stimulus for overweight people to have gym memberships paid for and lose some weight, reducing the strain on our healthcare system?

    Where’s the stimulus to provide wireless internet access to everyone for ‘free’?

    Since I’m entitled to a $4500 for buying a fuel slurping behemoth and can now cash in on its lack of resale value, why can’t I get stimulus for these other things that are arguably more important?

  • avatar
    Robert Schwartz

    “Once turned in the engines are filled with goo and run until useless.”

    I view that as a crime that no piston head should forgive.

  • avatar
    Pch101

    Extra sales made now will not be made later.

    The finance guy in me — and that guy is pretty big, in case you hadn’t noticed — bristles at this one.

    The time value of money states that a dollar received today is better than a dollar received tomorrow, because that dollar received today can be invested.

    Even if it was accurate to claim that some of the sales were merely accelerated by several months, that does not mean that the program was a bad idea. Rather, you’d have to apply a hurdle rate (required minimum rate of return) to the analysis, and determine whether it was worth paying that much to get those sales moved up.

    C.A.R.S has interfered with a market finding a new equilibrium

    And right now, that would be a damn good thing.

    Let’s understand something — we came very close to the entire western world going into economic freefall. That would have been a horrendous mistake that would have destroyed the lives of hundreds of millions or perhaps billions of people, including people who are reading this comment now and believe otherwise. You would not want an angry, hungry, well armed population with worthless stocks and 25-30% unemployment, homeless and pissed off about the American dream kicking them in the ass.

    We should not want the economy to experience the “natural” wonders of creative destruction when the results are the economic equivalent of a hydrogen bomb, any more than you’d want your gas tank to explode just for the sake of adding flavor to your next car accident. There’s recession and then there’s the end of the world as we know it for years to come.

    It is only because people have managed to avoid the realities of a worldwide meltdown that we can afford to be so sanguine about it now. Yes, this program will be inefficient and not the sort of thing we’d encourage under normal circumstances. Under normal circumstances, the free market does work better.

    But these are not normal circumstances. If this in conjunction with everything else contributes to GDP growth and increased consumer confidence, and the business development that goes with those things, then by all means, bring it on.

    The real benefit of it is that each consumer who receives it dumps a big chunk of their own change into the economy, which feeds the multiplier. This is not so much about cars, as it is about creating large pieces of consumption in a single purchase, within a relatively short time period.

  • avatar
    P71_CrownVic

    BRILLIANT!

    Brilliant, brilliant, brilliant.

    I have been saying the same things for a long time.

    This C4C is a lame attempt to “stimulate” the economy. It simply will not work.

    Once this last dose of cash runs out, the automakers and their dealers will be going through withdrawals. Sales will be piss-poor for the rest of the year…while there is HUGE inventories of automobiles that are being boosted now.

    The dealers do not like this C4C program…they are having to leverage capital to cover the $4500 (and any MFR. rebates) IN THE HOPES that the Govt. actually pays them.

    What if the Govt. doesn’t pay? Then the dealer is out all of that money. Do they have any recourse? We have already heard stories “clunkers” being accepted on day, and then not the next.

    PLUS, I predict that in 6 mo. there will be a lot of cars repoed because people cannot pay their bill.

    There are HUNDREDS why C4C is a terrible idea…but…Al Gore should be happy, and isn’t that the most important thing?

    why can’t I get stimulus for these other things that are arguably more important?

    Because those things aren’t part of “the agenda” yet.

    But these are not normal circumstances.

    Market corrections are most certainly “normal”.

  • avatar
    lw

    Don’t forget that we borrowed every nickel of the $3B and will be paying interest on it forever.

  • avatar
    kipling

    jkross22, Virginia’s Sales Tax Holiday says hello on school supplies. And preventative health care has shown cost savings in certain cases.

    Would you also like to complain about business depreciation tax credits?

  • avatar
    Steven Lang

    lw nailed it. That is by far the most important reason why C4C will fail in the long run.

    We’re also rewarding bad behavior. The only folks who can benefit from this are the ones who bought gas guzzlers. The ones who kept their fuel efficient car maintained well for over 10 years or 200,000 miles will get absolutely no reward whatsoever. In fact, they will be victimized by a system that rewards the glutton.

    I have no problems with this program going through IF the budget is balanced and everyone has the opportunity to receive a subsidy so long as they improved their MPG. But even so, the reward should not come in the form of a rebate. It should come in the form of a tax credit and be completely independent from the dealership negotiations… other than to verify that the vehicle actually qualifies.

  • avatar
    baldheadeddork

    My first real problem with C.A.R.S.: its effect on market timing. Putting a couple billion dollars on the barrel moves the market to act. The value added to older vehicles made some people move prematurely into the car market; people who might have considered dumping their POS before winter, or next spring. Extra sales made now will not be made later.

    I’ve heard this argument made, but it doesn’t stand up to any real scrutiny. To qualify for C4C, the car had to be worth less than $4500, get bad gas mileage, and you had to have owned it and had it insured for at least a year.

    So you’ve limited the pool to people who own ten year-old SUV’s and have the cash or credit rating to buy a new car. Talk about niche marketing. From my experience working in a new car dealership buyers trading cars more than ten years-old on new cars were a very small group, well under ten percent of the sales. They are more likely to buy another used car, either for financial reasons or to let the first owner pay the depreciation.

    The announcement of the plan may very well have had a similar effect on potential customers in May and June. They waited for the C4C money to become available, putting their purchases off.

    Again, your claim doesn’t pass scrutiny. Sales increased in May and June. If people were holding off, we would not have seen an improvement.

    At the moment, there is no hard evidence that cash for clunkers increased the overall net business any car company was going to see this fiscal year.

    The bean counters at all of the auto makers disagree with you.

    Then there are the clunkers themselves. Once turned in the engines are filled with goo and run until useless. The destruction of a useable asset is waste.

    Again, we’re talking about vehicles that are ten years-old with a value of less than $4500. The economic value of those engines as used parts is very low, because the price of replacing the engine is close to the value of the vehicle. That means the demand for replacement engines is falling fast, and their value is dropping at a proportional rate.

    I’m confident that every junkyard in America had all of the Ford 4.0 liters and Jeep 5.3’s they needed long before C4C.

    There’s also a huge environmental benefit in driving old cars into the ground. It takes a lot of fossil fuels to build cars in the first place, from the mining of the ore to assembly to shipping. Fouling the engine means these hulks need to shipped and processed again, using more energy. To the economy, waste is waste.

    I’m beginning to question exactly what you really know about economics. You’re not talking about waste – you’re talking about costs. Which costs more: The raw resources of building a new car or the economic costs of not buying new cars, which puts a lot of people out of work and had major ripple effects through the economy.

    Here’s a hint: Take what’s behind Door #2.

    And, if you still insist on trying to make this case, at least be honest and include the economic benefit of recycling the metal in the clunker.

    In terms of stimulus, three billion wouldn’t do a hell of a lot were it injected directly into people’s bank accounts. Current dollar gross domestic product last quarter was $14,149.8 billion, making C4C kind of a drop in the hot tub.

    The three billion is leveraged by a factor of 3-5:1 at purchase. It’s projected to cause a 0.5% boost in GDP in the third quarter. If you actually know economics, you know that’s a big return on a relatively small investment.

  • avatar
    agenthex

    In the end, though, C.A.R.S has interfered with a market finding a new equilibrium, one in which American’s buy 10 or 15 percent fewer vehicles per year.

    There’s this great big lie out there that “markets” are stable and self-correcting. This shows ignorance of all historical evidence to the contrary and the work done in the present from those lessons learned to achieve this.

    Let me tell those at the bottom end of the “free market” pyramid scheme a little secret: that “free market” legislation propagated for your mindshare and vote isn’t made to benefit you.

  • avatar
    paul_y

    @jkross22: Rewarding people for being responsible is neither fun, nor politically expedient.

    Buying a new car, however, is awesome.

    Let’s face it: as a group, people are rock-stupid, and don’t know what’s best for themselves. If the human population as a whole wasn’t shortsighted, greedy and under-informed, we wouldn’t have economic-, fuel-, or healthcare-crises ever.

  • avatar
    golden2husky

    By and large, I agree with the overall assessment. I am really irked, however, by the wanton destruction of usable vehicles, even though there may be tangible reasons to do so. Think of how many poor people with all but dead guzzlers that would be thrilled to get a reliable “clunker” to replace the POS that they hope will last into the next week. Most of those vehicles driven by really poor people are gross polluters, to boot. So, whatever is “lost” in mileage improvements would more be more than offset by lower emissions.

    I do have to agree with the author position that the free markets are not always the best way to insure safety, fairness, or sustainability. The historical record of industry and fat cats is well documented.

  • avatar
    Areitu

    holydonut :
    August 11th, 2009 at 8:57 pm

    I just hate how it takes cars that have lots of spare parts and trashes them.

    From what I understand, they disable the engine, but the rest of the car can be parted out.

    “classic” or cult cars are unlikely to be threatened by this. Most of the cars being traded in are things like old Ford Explorers and Jeep Cherokees, or something with electrical problems so hideous, it cost more to fix than to clunk.

  • avatar
    agenthex

    The term “responsible” needs some explanation.

    The “responsible” thing to do economically is to make sure everyone is doing something productive, preferably something they’re decent at and don’t hate, all the while making sure the work doesn’t screw over future peeps.

    All the other BS about ideology is exact that. You either make economics do something useful for everyone, or it’s worthless.

    So let’s look at our situation from the criteria above. The currently economic state would make most people want to horde money. Maybe they want and can afford a new car but hey, it’s fair to be cautious in volatile times.

    Now think about what happens when everyone actually does this. The guys who makes computers doesn’t buy from the guy who makes cars who doesn’t buy from the dude building pools, etc.

    Pretty soon everyone’s out of a job due to lack of demand and then they’re all REALLY cautious about money. Now they’re buying less expensive food, then less food period, collecting welfare, and trying to make that money in the bank last. Of course, there aren’t any new jobs cus nobody’s going to hire in that kind of plunging economy when nobody’s buying.

    Note here it’s still basically all the same people, but much much less productive, and there’s precious little the “free market” can do except maybe the guy who was really rich at the start of it all buys everyone else who’s getting poorer due to the cost of living into slavery, which is actually what happened historically (and also ironically why the much hated “socialism” and “communism” gained popularity).

    This is essentially the “deflationary spiral” that economists talk about. Ignore it at your own peril.

  • avatar
    d002

    The C4C is not about fuel efficiency, or even really the economy, it’s about pumping more money into the US auto industry for political reasons.

    Giving billions of dollars to people who already have jobs to buy assets they already have is unlikely to pump prime the economy.

    Firstly, most people with old cars can’t afford new cars. So it is barely used second cars owned by wealthier people that are traded in.

    It doesn’t help the environment, because the other car was barely used.

    It drives up the price of old cars, so that poorer people are worse off, and the rebate is of much lower than face value, because the dealers discount less on the purchase price.

    It really is what it looks like – paying wealthier people money to buy cars. And borrowing money to do so.

  • avatar
    agenthex

    Giving billions of dollars to people who already have jobs to buy assets they already have is unlikely to pump prime the economy.

    They’re not going to have those jobs for long if everyone stopped buying.

  • avatar
    P71_CrownVic

    I’m beginning to question exactly what you really know about economics. You’re not talking about waste – you’re talking about costs. Which costs more: The raw resources of building a new car or the economic costs of not buying new cars, which puts a lot of people out of work and had major ripple effects through the economy.

    Really…..?

    What happens when car sales are DEAD in the following 3-6 months after C4C is (finally) done for?

    As for economics…well here are two key rules:

    1. You CANNOT spend your way into prosperity…Joe Biden is a moron for saying that we “must go spend money to keep from going bankrupt”.
    -http://www.drudge.com/news/123110/joe-biden-we-have-spend-money-avoid

    2. YOU DON’T SPEND WHAT YOU DON’T HAVE! (but that is just common sense…the same common sense that would have never considered a terrible scam like C4C).

  • avatar
    agenthex

    As for economics…well here are two key rules:

    Economics, ultimately, is not about accounting. Woe be unto the society of fools who think it is.

    It’s ultimately about utility of labor and productivity and the quality of life that creates. Everything else is a system of [dis]incentives to make this happen, however formalized.

  • avatar
    SherbornSean

    Oh come on. A bunch of idiots who have driven Envoys, Durangos and Expeditions for the last 10 years now have an excuse to trade them in on a Cobalt, Prius or Focus.

    While you sit there in your relatively efficient 330i, Civic Si or WRX. You don’t need $4,500, you have the pleasure of driving a real car that you enjoy.

    Let them have their clunker cash. Take heart in knowing these losers are paying it back by buying lottery tickets and cigarettes.

  • avatar
    Mike999

    P71: 1. You CANNOT spend your way into prosperity…Joe Biden is a moron for saying that we “must go spend money to keep from going bankrupt”.
    -http://www.drudge.com/news/123110/joe-biden-we-have-spend-money-avoid

    – Reagan, and Republicans have been saying and doing this for 30+ years. Not, it’s inconvenient for you?

    —-
    What your saying is A = B. Add to A and you Subtract from B. Economics, with humans involved is not that simplistic, no matter how deeply you wish it to be.

    The Author, and everyone here spouting about some Austrian Economist’s blathering doesn’t understand that a Depression is different from a Recession or a Steady State Economy. Economics have moved a long way from 1850. Your next book should be based in reality: Animal Spirits by Shiller.

    So, what Crackpot put these words into your mouth? Limbaugh, ORielly, Beck, Palin or Other?

  • avatar
    ChevyIIfan

    While you sit there in your relatively efficient 330i, Civic Si or WRX. You don’t need $4,500, you have the pleasure of driving a real car that you enjoy.

    A 330i I’ll grant you. A civic Si or WRX as a car you enjoy?

    Hahahahahaaha….. Pass

  • avatar
    haha

    Mike999: So what crackpot put your Keynesdroid words in your mouth?

    Was it Krugman?

  • avatar
    agenthex

    So what crackpot put your Keynesdroid words in your mouth?

    People need to realize that NO economy has EVER been successful with Austrian economics. Note that doesn’t mean it’s hasn’t been tried, pretty much any fourth world shithole would serve as an example to others.

  • avatar
    newcarscostalot

    Like I said before, this program works for people that have the money to make a payment for a new car along with insurance. The people I know do not have the money for a payment and full coverage insurance. It works for some, not for others. Perhaps thats the point. :-)

  • avatar
    mtypex

    Krugman? Mises? am I on TTAC, or what am I on?

    Again, moral hazard: those who buy Ford Explorers are allowed to push them onto the dealer lots to pick up a Honda Civic.

    My theory is that everyone gets into a Honda eventually, but do we really need the government to bail people out of SUVs and into Japanese compacts?

  • avatar
    kamiller42

    Excellent article. Minor grammar problem: “Fouling the engine means these hulks need to shipped and processed again”
    should be
    “Fouling the engine means these hulks need to be shipped and processed again”

    RangerM and many others are right. Everyone should really Google “Parable of the broken window.” See Wikipedia. Read it and think about it. This is what CARS is.

  • avatar
    jkross22

    @kipling:

    Would you also like to complain about business depreciation tax credits?

    Sure, put me in charge for a day and all of this crap goes away… flat tax.

    Since that will never happen, we have this:

    Businesses, successful ones at least, create jobs on an ongoing basis, a tax base and the means for others who don’t start a business to earn a living. These folks should be provided incentives to do this, as it betters the broader community.

    And that’s why I still think fondly of Pinto station wagons with the port windows in back.

  • avatar
    agenthex

    Everyone should really Google “Parable of the broken window.” See Wikipedia. Read it and think about it. This is what CARS is.

    This is true. It’s happened many times in history including to the US economy during WWII.

    Apparently not enough thought has gone into this by the austrian school.

  • avatar
    agenthex

    Sure, put me in charge for a day and all of this crap goes away… flat tax.

    I’ll do you one better: no tax.

    See application of this in every undeveloped cease-pool on earth.

  • avatar
    Ronman

    @Ranger M, thank you that was enlightening. i always thought about that subject in that way, and I’m delighted to know that there is an actual line of thought behind it.

    as for the C.A.R.S program, i guess when looking at it from a political or economically ideological angle a lot of holes can be seen. also the waste factor is also to be considered, not to mention the detriment on the used car market.

    however, all modern cars, and I’m talking somewhere in the mid 90s onwards, are manufactured with what seems like a built in timer that is set to start giving you trouble and rendering the cars useless after a certain number of years. that applies to today’s cars as well.

    what i think about C.A.R.S is simple, the US new car market needs a jolt, and CARS is it, those who waited for it from may and June still bought a car, maybe a better one than they would have had they not waited for C4C. same applies for those who were inteding to wait a bit longer totrade up their cars.

    but in between lies a gray area of people that i think reap the most benefits, those who have never had the oportunity to buy a new car. this gives them this extra benefit of owning a car that meets modern safety and emissions standards, nt to mention the increase in new cars at the detriments of not so dead ones, despite the ecological catch 22 they are causing, is that the more they are, the more modern cars are comaptible in case of crash, not to mention that most will be equipped with driver aids, thus increasing public safety, and giving people an extra hand while recovering from the half spin they went through when Jack Baruth overtook them at 250mph….

    every government program has it’s plus and minus, i think C4C has more pluses than minuses, and hell… they are going to spend the money anyway, why not let some of the poor taxpayers benefit from it directly, so at least they feel that their taxes have gone somewhere to start with.

  • avatar
    Hellcakes

    I’ll do you one better: no tax. See application of this in every undeveloped cease-pool on earth.

    By ‘undeveloped cess-pool’ I assume you mean the UAE, which is pretty much the exact opposite. Real undeveloped cess-pools like Nigeria feature arbitrary and confiscatory rates (e.g. corporate taxes as high as 85%) and the resultant widespread evasion.

  • avatar
    agenthex

    By ‘undeveloped cess-pool’ I assume you mean the UAE, which is pretty much the exact opposite.

    Given the intellectual honesty of the austrians, they no doubt attribute the “success” to tax rates.

    the resultant widespread evasion.

    At last someone has the guts to challenge the useless authority of government, unlike their somali neighbors (free market paradise, that). Hope you’re cheering them on.

  • avatar
    mitchim

    This is a great topic. I would like to play devils advocate for a bit.

    Lets go out on a limb here and say that the c4c provides some ammount of stimulus to the economy. Yes the investment in the program is small. WHERE IS THE MONEY COMING FROM??

    The artical in wikipedia “Parable of the broken window” was a good read. It has one MAJOR fault in the theory.

    The little boy breaks the window. The shop owner is “Forced to spend”. Lets say the shop owner can not afford the repair bill. Now what? The wind and rain blow in the building until he can AFFORD to fix it!

    Can the US afford to stimulate the economy? I am thinking not. That government will borrow its way to third world status (who will “bail out” the US). Or will they just keep printing money? I am canadian eh? Who knows how long it will take but the bubble will burst in time. I hope I am not around.

  • avatar
    agenthex

    BTW, here’s a summary of actual tax rates for nigeria, which our knowledgeable “free market” friends decided to nit pick as cover for their ABSOLUTE lack of any success whatsoever.

    http://www.nationsencyclopedia.com/Africa/Nigeria-TAXATION.html

    I mean, if your closest model countries are doing much worse than the soviet union, that can’t be good.

  • avatar
    agenthex

    The artical in wikipedia “Parable of the broken window” was a good read. It has one MAJOR fault in the theory.

    Something akin to it is used by the fed reserve system to regulate and stabilize economic activity (ie, the degree of window brokenness).

    Parables are kind of meaningless to analyze in and of themselves, and are really only useful to illustrate analogous points.

  • avatar
    Dynamic88

    My first real problem with C.A.R.S.: its effect on market timing. Putting a couple billion dollars on the barrel moves the market to act. The value added to older vehicles made some people move prematurely into the car market; people who might have considered dumping their POS before winter, or next spring. Extra sales made now will not be made later.

    Keynes said “In the long run, we’re all dead”. IOW, it makes no sense to say that sales made now won’t be made later – we need the stimulus now.

    It also makes no sense, because if the stimulus works, then the economy improves, people go back to work, and car sales improve in the future.

    It’s not a zero sum game where all sales made today take away from future sales.

  • avatar
    Rod Panhard

    Look past the broken windows, hurdles, and all that for a second.

    Consider the teamsters who drive the trucks, add in the “buy American” folks, and the dealers and the dealers’ employees, and throw in the UAW workers.

    C4C is throwing a bone to them. Economists and little boys who break windows in parables from Austria, Australian, Milton Keynes, or Key West are not going to account for the votes and campaign support that the Dealers, Teamsters, UAW, etc., will be asked for when the Obama ’12 campaign gets into gear.

    Then there’s the people who will have gotten $3500 to $4500 off the MSRP of their car. Which bumper sticker are they gonna put on it? Do you think it will say “Vote Republican!” ???

    That’s what this is about. Factor “Votes” and “campaign support” into your economic formulas and get back to me in a couple of years.

    It’s easy to “forget” about a couple hundred bucks tax rebate here and there. It’s a lot harder to “forget” about a $3500 (minimum) kickback from a poltico when you not only see it in your driveway, but you park your fat ass in it and put your coffee in the cupholder.

  • avatar
    baldheadeddork

    @ P71_CrownVic:

    Really…..?

    What happens when car sales are DEAD in the following 3-6 months after C4C is (finally) done for?

    Won’t happen. C4C only applies to a very small group of potential new car buyers.

    To recap again, to qualify for C4C you have to own a vehicle that gets shitty mileage, is worth less than $4500, you’ve had to have owned and used it for at least one continuous year before trading it in, it has to be owned free and clear of any liens or loans, and you have to be able to afford a new car. Miss any one of those and you don’t qualify.

    Buyers that meet all of those qualifications are a very small slice of the new car market. So if their buying drops off after C4C ends it will have very little effect on the overall market. The health of the car market three and six months after C4C will depend on the health of the economy. If people are more confident about their financial position, you’ll see the much larger pool of buyers who didn’t qualify for C4C coming back.

    From my experience, I think C4C has stolen more buyers from the used car market, particularly the certified pre-owned market, than future new car sales. If you look at the profile required to buy under C4C, that points strongly toward a used car buyer.

  • avatar
    windswords

    Michael Martineck:

    “Combating market forces is rarely never the best use of public funds.”

    There, fixed it for ya’.

    Steven Lang:
    “We’re also rewarding bad behavior. The only folks who can benefit from this are the ones who bought gas guzzlers. The ones who kept their fuel efficient car maintained well for over 10 years or 200,000 miles will get absolutely no reward whatsoever.”

    Count me as one of the no rewards guys. My 2000 Ford ZX2 5 speed (123,000 miles) just got 35+ mpg taking me back ‘n’ forth to work, as calulated after my last fill-up.

    Pch101:

    “It is only because people have managed to avoid the realities of a worldwide meltdown that we can afford to be so sanguine about it now.”

    You points are well made but I have to disagree with you. Just as John Horner states we don’t know if C4C will pull ahead sales now and allow them to crater later, we really don’t know if the western world would have gone into “economic free-fall” and suffered a “hydrogen bomb” like hit without TARP, Porkulus, et. al. We’ll never know. What you state as fact is merely a prediction and an opinion of what might have happened.

    d002:
    “It really is what it looks like – paying wealthier people money to buy cars. And borrowing money to do so.”

    And all in the name of saving the environment – by throwing something away that may still be servicable.

    Mike999:

    “So, what Crackpot put these words into your mouth? Limbaugh, ORielly, Beck, Palin or Other?”

    And what Crackpot supplies your opinion, Mr. Mike? Schultz, Oberman, Moore, or do you just take money from George Soros? Do you really want to go there? Disparaging ones opinion by linking him to your definition of “crackpot” is not what I call the hallmark of good debate. Next time try to win on the merits of your argument, please.

  • avatar
    geeber

    John Horner: And, there is also no hard evidence to the contrary. It always seems strange to me when people make the “no hard evidence” argument against an opposing positing while at the same time not having the corresponding hard evidence to support a contrary view.

    That is what I’ve been saying when people proclaim the program as a success.

    John Horner: We do know with absolute certainty that the C4C program jump started sales in an industry which had run for over six months at something like 30% below historical sales rates.

    But if it merely borrowed sales from the final quarter of the year, then that is hardly an unqualified success.

    agenthex: People need to realize that NO economy has EVER been successful with Austrian economics. Note that doesn’t mean it’s hasn’t been tried, pretty much any fourth world shithole would serve as an example to others.

    Those countries aren’t using Austrian economics, and any claim that they shows a lack of knowledge about Austrian economics, and how a country’s economic system is influenced by local culture and the attitudes of the citizens to various institutions.

    Focusing on tax rates ignores the more important factors of culture (i.e., attitudes toward education, loyalty to clans versus loyalty to a central government); citizens’ attitudes towards government and business; citizens’ tolerance of corruption in government and business; and natural resources available for development.

    That goes for Somalia, too, so we can dispense with that red-herring argument as well, even before it surfaces in the discussion. Somalia is NOT a libertarian paradise, and it is not being “governed” according to libertarian philosophy.

    agenthex: BTW, here’s a summary of actual tax rates for nigeria, which our knowledgeable “free market” friends decided to nit pick as cover for their ABSOLUTE lack of any success whatsoever.

    Nigeria wasn’t being held up as an example of success, so I don’t’ know what the point of that one is. And only the naive really believe that countries such as Nigeria achieve anything close to U.S. levels of compliance regarding the payment of taxes by either individual citizens or businesses.

  • avatar
    dingram01

    Getting less fuel-efficient engines off the road has an environmental benefit. There’s also a huge environmental benefit in driving old cars into the ground. It takes a lot of fossil fuels to build cars in the first place, from the mining of the ore to assembly to shipping. Fouling the engine means these hulks need to shipped and processed again, using more energy.

    RF, how about an article with links to various sources so we can (attempt to) settle the question of whether keeping an old car on the road is comparable, or better than, the energy/resource requirements for new car manufacture? I believe it is not so.

    On to the larger point of whether CFC has worked? I can only say, in my case, I would NEVER have bought a new car if not for the CFC deal working well for me. So you can add at least one new-car buyer to the list that wouldn’t have existed otherwise.

    Hard to argue with the point that the program rewards irresponsible people who bought guzzlers in the first place. But in my case, I bought mine used for $3500 and did most of the repair/maintenance work myself. As I have done with all my cars for 12 years. Though we’re a minority in all probability, there must be others like me who were at least responsibly irresponsible.

  • avatar
    P71_CrownVic

    So, what Crackpot put these words into your mouth? Limbaugh, ORielly, Beck, Palin or Other?

    It is the simple, common sense truth.

    By Biden’s (il)logic, California should be the richest state in the nation.

    We’re also rewarding bad behavior. The only folks who can benefit from this are the ones who bought gas guzzlers.

    How is it bad behavior? They bought what they wanted with their own money.

    You want bad behavior? How about lying to the American people that their way of life is murdering this planet and the only way to fix that is to drive small, cracker box cars and have curly light bulbs.

    That is bad behavior/

  • avatar
    PeteMoran

    @ dingram01

    …(attempt to) settle the question of whether keeping an old car on the road is comparable, or better than, the energy/resource requirements for new car manufacture?

    I’ve tried a number of times to respond to THAT particular red-herring, but for no success.

    As a quick summary; over the average lifetime of the average car, ~80% of the energy in the vehicle’s life-cycle is as fuel to run it. After about 8 years, you only need about a 10% improvement in fuel efficiency to make switching to a brand new car the less energy intensive choice.

  • avatar
    baldheadeddork

    RF, how about an article with links to various sources so we can (attempt to) settle the question of whether keeping an old car on the road is comparable, or better than, the energy/resource requirements for new car manufacture? I believe it is not so.

    I laid it out over here using your deal as an example. The short answer is, over the life of the car you will save enough energy by trading your old 540i for the TDI Sportwagen to build nine new cars.

    The energy it took to build your Jetta will be earned back in less than two years.

  • avatar
    love2drive

    I agree with one of the earlier posters, that it’ll be nice when TTAC is again only about cars and not politics nor partisan issues.

    The truth is a lot of both sides of the story is true. The market is not a zero sum game, but it is contracting, and was contracting at a rate that car makers were unprepared for, similar to other segments of the economy. So in the end this debate is more about the effectiveness of government stimulus in general, which in this case was just applied to a particular segment of the economy. And in the scheme of government spending, this was a drop in the bucket (I know, enough drops like this and you get real money…). Far less than the bailout of the car companies themselves, which is a greater debate of economic role of government – and also not the best use of TTAC in my mind. I think TTAC is at its best when discussing the product, not the (sometimes dysfunctional) car makers themselves.

    A good TTAC thread, to me, would just be around the cars being crushed – how that affects the hobby if it all (in the end it’ll amount to probably 400K mass market cars, maybe not a lot of impact).

  • avatar
    wsn

    agenthex :
    August 11th, 2009 at 10:15 pm

    Let me tell those at the bottom end of the “free market” pyramid scheme a little secret: that “free market” legislation propagated for your mindshare and vote isn’t made to benefit you.

    ——————————————–
    Let me tell those at the bottom end of the “central planned economy” pyramid scheme a little secret: that “central planned economy” legislation is worse.

    USSR did it. China did it. North Korea is doing it. Vote with your feet, please.

  • avatar
    wsn

    dingram01 :
    August 12th, 2009 at 10:28 am

    RF, how about an article with links to various sources so we can (attempt to) settle the question of whether keeping an old car on the road is comparable, or better than, the energy/resource requirements for new car manufacture? I believe it is not so.

    ——————————————–

    Instead of comparing keeping an old car to building a new one, how about comparing it to not building a new one.

    I mean, the ultimate green doesn’t come with hybrid or electric. It comes with reduced production and reduced consumption.

    When the annual sales drops from 16M to 10M, there’s a 37.5% reduction of pollution right away. Fool proof.

    The stimulus package, in it goal to increase the total number of cars on the road, is anti-environment.

  • avatar
    TRL

    First – I love old cars. There is a 72 Cougar convertible in my garage right now.

    Second – I agree some cars better than what my 17 year old son is driving are probably being destroyed.

    In spite of both, I am a big supporter of C4C.

    There are plenty of old cars that will not be junked. Either they have not been owned long enough, or the owner can’t swing the cost of a new car even with the C4C bucks. So what?

    I don’t get the junk yard “problem” at all. There will now be available in the nations junk yards a lot of fresh cars. OK, so you can’t use the engines, who cares? Everyone I know that ever went to a junk yard looking for an engine was looking for a low mileage hit in the rear wreck, not a tired old hulk anyhow. That’s what I always did. The number of them is completely unaffected by C4C.

    Since as has been pointed out, there is no evidence, I will take the position that this has been a very successful program. Those that took advantage (a minority of tax payers, just like those on food stamps, medicare,what ever)either bought a car sooner than they would (not bad for anyone) or bought a new car rather than a used one (unless you sell used cars, also not bad). The buyers definitely benefited from the program.

    The manufactures and dealers turned dead inventory (as an ex retailer I can tell in this country most of a companies profit dollars come from turns more than from GM%.) If you have ever run a company with your own P&L you know profit is all about how fast you make money. Expenses are typically fixed (rent, etc.)

    Other than an argument revolving around national debt, all others come across as “The government is stupid so this must be bad”.

    Wall Street is up (your 401k is starting to look better – again not bad). All those that wanted this program to fail, go find something else to complain about – it didn’t.

  • avatar
    baldheadeddork

    Instead of comparing keeping an old car to building a new one, how about comparing it to not building a new one.

    I mean, the ultimate green doesn’t come with hybrid or electric. It comes with reduced production and reduced consumption.

    When the annual sales drops from 16M to 10M, there’s a 37.5% reduction of pollution right away. Fool proof.

    The stimulus package, in it goal to increase the total number of cars on the road, is anti-environment.

    Where to start on this one?

    The equation I laid out works in both directions. Keeping a higher mileage car on the road will use a lot more energy than building a new one that gets better mileage.

    Cutting sales from 16m to 10m does not equal a proportional drop in energy use for manufacturing. You only save energy when you eliminate shifts and turn out the lights. A plant designed to make 120,000 cars a year on a single shift will have only a slight savings in energy costs if they cut back to 100,000 cars a year. It works like this all the way through the supply chain.

    And the C4C program is neutral. Every new car sold replaces one that is not going to be driven again.

  • avatar
    dingram01

    Instead of comparing keeping an old car to building a new one, how about comparing it to not building a new one.

    If you follow baldheadeddork’s link you’ll see how, compared to keeping my old BMW 540 on the road, building my new Jetta TDI actually saves energy.

    The stimulus package, in it goal to increase the total number of cars on the road, is anti-environment.

    It doesn’t increase the number of cars on the road. The old one is swapped for the new one, for a net increase of zero. But a newer, more-efficient car does certainly hold better promise for the environment in most cases.

  • avatar
    GS650G

    I was going to take the bait on C4C but came to a different conclusion.

    I’ll sell the F150 for around 2000 dollars and go buy a used car that has depreciated at least 4000 dollars. Then I get to buy what I want without The Chosen One setting parameters on my purchase. I also get to apply the 2000 directly to the price, a price that can be easily negotiated because there isn’t an artificial subsidy on the table.

    With the current slop being dished out prices are firming up quick on fuel efficient new cars. The used ones are not part of the handout so they are still in play.

    Once again you have to work the numbers and come to a proper conclusion. Even if I only drag a thousand out of the truck, buying a depressed 2 year old car can easily beat the 3500 or 4500 amount.

    If they gave the option of buying whatever you wanted without mileage restrictions, or even allowed a used car deal up to 3 years old, it would be better. But the very rules they imposed made it an average deal for most and a good deal only for a few.

    Now tell us what they plan to do with 250,000 junked cars? No environmental impact, right?

  • avatar
    carguy

    Michael – some good points made but I would disagree with the notion that lowering the price of a good or service does not increase demand. This would run counter to fundamental supply and demand market theory. You are right in that it most likely also moves forward some sales and will cause a sales hangover when finished, but it also generates additional sales as the government is actually reducing the cost of the new car which in turn raises demand.

    Having said that, I still think C4C is a waste of money.

  • avatar
    agenthex

    we really don’t know if the western world would have gone into “economic free-fall” and suffered a “hydrogen bomb” like hit without TARP, Porkulus, et. al. We’ll never know. What you state as fact is merely a prediction and an opinion of what might have happened.

    The predictions of people who understand how econ works can’t really be compared to the “opinions” of those ignorant of…everything, really.

    It’s not as if these events (cascading bank failure, etc) have never happen before.

    And what Crackpot supplies your opinion, Mr. Mike?

    The crackpots are the ones who have NEVER EVER been right, like say the austrian school all its followers. Words have meaning, and should be used appropriately.

    That is what I’ve been saying when people proclaim the program as a success.

    The accuracy of statements have little to do with the confidence of the messenger. Just because people who know what they’re talking about cannot be “certain” of their statements doesn’t mean it’s less accurate than morons who’re always sure of their worthless opinions.

    But if it merely borrowed sales from the final quarter of the year, then that is hardly an unqualified success.

    This has already been addressed in prior threads, so I see by this point dodging arguments and repeating yourself is already in effect.

    Those countries aren’t using Austrian economics, and any claim that they shows a lack of knowledge about Austrian economics,

    They are by far the closest examples. Of course no “free market” austrian will ever admit this, just as they can’t hold up any shining examples of success–only a long history of failure.

    Contrast this with all economies of the developed world. There really is no argument. The “free market” school is the modern equivalent of the Flat Earth Society or Creationism. They would be amusing anachronisms if they didn’t have such a following of really poorly educated people.

    Nigeria wasn’t being held up as an example of success, so I don’t’ know what the point of that one is.

    Read carefully. Nigeria was held up an example of debilitating corporate taxes (85%!). Of course the author had no idea what he was talking about like ALL free marketers. Not to mention the irony when he brings up the UAE as the shining example when these tax havens are leeches who take advantage of their sovereign border to steal tax revenue from where profits are realized not unlike the tax frauds in Nigeria he was quick to disparage. It perfectly illustrates the idiotic talking points these denialists of reality are brought up on.

  • avatar
    agenthex

    The truth is a lot of both sides of the story is true.

    No, there is no truth to austrian free market economics. It’s been proven over many decades of history. Academically, it’s something of a joke, and only the least educated faux-intellectuals cling onto it as they do a religion.

    the bottom end of the “central planned economy” pyramid scheme a little secret: that “central planned economy” legislation is worse.

    USSR did it. China did it. North Korea is doing it. Vote with your feet, please.

    As has been repeated numerous times, people who say this are just woefully ignorant of the centralized management of all modern economies.

    I mean, their education on econ basically stopped with that first pamphlet on capitalism vs. socialism and never actually looked at how the world works now.

    Don’t take economic advice from these people.

  • avatar
    agenthex

    By Biden’s (il)logic, California should be the richest state in the nation.

    BTW, it actually is, except these bumpkins from red states keep taking its money to the tune of $50 billion a year.

    I’ve already proposed that everyone here should support the succession of california and all the states like it from the Union, and they would be up about $100 billion in the black. Didn’t seem to get much cheers for some reason, though.

  • avatar
    geeber

    For a change of pace…one of the local Honda dealers has all of the cash-for-clunkers trade-ins lined up behind the dealership. It is two rows of vehicles that seem to stretch forever. (All of the vehicles were marked as cash-for-clunkers trade-ins, and therefore not for resale).

    I would estimate that 90 percent of the vehicles were SUVs and pickups from the 1990s. So, if the goal was to remove worn examples of this type of vehicle off of the road, this Honda dealer, at least, was successful.

    Some of the more interesting trades:

    1989 Mustang GT hatchback (very well worn, but I still felt an urge to save it)
    1989 Chrysler M-body Fifth Avenue
    1996 Saab 900 Turbo hatchback
    2001 VW Passat wagon
    2001 Honda Odyssey minivan

  • avatar
    geeber

    agenthex: BTW, it actually is, except these bumpkins from red states keep taking its money to the tune of $50 billion a year.

    California is in trouble because the politicians in Sacramento are addicted to spending, while the populace doesn’t want to raise taxes, but also doesn’t want to dramatically reduce spending.

  • avatar
    Tommy Jefferson

    > turbosaab: “You lost me after your strawman dismissal of free market economics“.

    +11

  • avatar
    NeonCat93

    ” the bottom end of the “central planned economy” pyramid scheme a little secret: that “central planned economy” legislation is worse.

    USSR did it. China did it. North Korea is doing it. Vote with your feet, please.

    As has been repeated numerous times, people who say this are just woefully ignorant of the centralized management of all modern economies.

    I mean, their education on econ basically stopped with that first pamphlet on capitalism vs. socialism and never actually looked at how the world works now.

    Don’t take economic advice from these people.”

    If this is true, agenthex, then what happened to the global economy? Did evul Austrian economists and their retarded minions do something to it?

    Oh, if only I was as CORRECT as you are, hexy.

    Show us on the wallet where the free-market proponent touched you…

  • avatar
    agenthex

    If this is true, agenthex, then what happened to the global economy? Did evul Austrian economists and their retarded minions do something to it?

    What happened to the global economy is that among other things investment fraudsters found that they can repackage loans in sneaky ways and make massive profits selling these (many trillions worth) to rubes as A++++ securities (and all this stuff was insured, too, remember aig?). This fed a large credit bubble which inevitably burst and now everyone pays.

    Austrian economics is really quite irrelevant today and has nothing to do with anything except as a bait and switch tactic to push through legislation for the wealthy.

  • avatar
    GS650G

    Socialism – bankrupting successful people since who knows when. It’s also an easy sell.

    There is nothing quite like the ability of the state to reduce productive people to the level of non productive types through support of the masses.

    As GBS once said, if the government robs Peter to pay Paul he can always count on the support of Paul.

    Atlas is getting ready to shrug and when he does the look of shock and dismay on the crowd will be memorable. I recall the outraged look of the people outside the burned out post office in LA right after the Rodney King riots. They wanted to know where the checks were and why they hadn’t received them yet. Oh the horror of it all.

    It’s entertaining to have a good socialist lecturing us all on the evils of free markets and capitalism. In fact you can’t disagree with them on any of it, since they peddle instant fixes while real progress takes time. And therein lies the rub. Any fool can steal money and hand it out, it takes real wisdom to earn it yourself and foster a climate of self sufficiency that allows a man to take care of himself. But if you teach a man to fish then Obama loses another supporter.

    We are taking the economy short when we should be going long, but the bills come due long after the current leadership retires. It will be someone else’s problem once again.

  • avatar

    In the way that the impact of a Prius was analyzed, I’d love to see a Carbon Footprint analysis of the production of an average car.

    It would be interesting to handicap the Projected Future Impact of a given old engine being clunked vs. the whole new Carbon-Buy of a new car.

  • avatar
    GS650G

    Presuming that you’re one of those prime movers, I’ll make the same challenge to you that I make to all of the Randian idiots.

    Do it.

    If you’re so fed up, then close up your shop, take your money, and get the hell out of town. If you don’t want to take care of your customers, I bet I can find twenty companies or people who will be glad to.

    In case you haven’t noticed, it’s already happening. It’s called a recession and soon followed by a depression. When looters like yourself look to Washington DC for your daily bread it speaks to the truth of the matter. If your not a looter then you better start learning how to become one.

    There is a difference between customers who pay with their own money and those who pay with mine.

  • avatar
    ihatetrees

    C4C isn’t the worst government program (farm subsidies are much worse), but it’s far from the best. (New Silverados are an allowed purchase, but better milage RX8’s are not).

    We’re rewarding some bad behavior. There WAS some justification for bailing out credit degenerate homeowners – the size of the problem could have been deflationary.

    But 3 Billion for autos? Maybe this allows New Chrysler to avoid another filing before the 2010 elections – but I doubt it changes long term sales.

    Ron Panhard:
    Factor “Votes” and “campaign support” into your economic formulas and get back to me in a couple of years.

    Politically, it’s anyone’s guess how it’ll play. The types of people you generally cited don’t have long memories – and such transparent vote buying via bailout can generate its own backlash.

    Also, I’d guess there’s a number of ‘quiet’ wealthy who owned old trucks and cashed in.

  • avatar
    wsn

    baldheadeddork :
    August 12th, 2009 at 11:59 am

    The equation I laid out works in both directions. Keeping a higher mileage car on the road will use a lot more energy than building a new one that gets better mileage.

    Cutting sales from 16m to 10m does not equal a proportional drop in energy use for manufacturing. You only save energy when you eliminate shifts and turn out the lights. A plant designed to make 120,000 cars a year on a single shift will have only a slight savings in energy costs if they cut back to 100,000 cars a year. It works like this all the way through the supply chain.

    ————————————————

    1) Please read my post again. I repeat, this is not “old vs. new”. It’s “old vs. none”, because on the macro scale the sales went from 16M to 10M and the old ones cannot last much longer. Those whose old one are gone will have to use feet, bike, bus, carpool or simply “moving down” from 2 cars per person to 1.

    2) Energy reduction may not be proportional to sales decline, but natural resource is. Think of the amount of steel and rubber not produced and gasoline not consumed.

  • avatar
    agenthex

    When looters like yourself look to Washington DC for your daily bread it speaks to the truth of the matter.

    So do it, move out from the society which feeds you, preferably to a place where there is little to no government to protect your wealth. Soon enough these selfish peeps will figure out why people congregated in the first.

    It’s entertaining to have a good socialist lecturing us all on the evils of free markets and capitalism. In fact you can’t disagree with them on any of it, since they peddle instant fixes while real progress takes time.

    Apparently the “real progress” takes so much time that no successful modern economy exists yet which adheres to its principle. So how long before the Somali’s finally succeed with their free market? What’s really hilarious about the largely unmanaged currency situation there is that their “gold standard” for significant purchases is the US dollar, one of the best regulated monies out there.

    There are two types of free marketers. One is the ignorant type who eat this stuff up like a religion despite all empirical evidence to the contrary. The other are the folk who look to benefit from society’s ignorance and provide the feed.

  • avatar
    agenthex

    1) Please read my post again. I repeat, this is not “old vs. new”. It’s “old vs. none”, because on the macro scale the sales went from 16M to 10M and the old ones cannot last much longer. Those whose old one are gone will have to use feet, bike, bus, carpool or simply “moving down” from 2 cars per person to 1.

    While that may eventually happen, you wouldn’t want this to occur overnight. Again, economic stability matters, “markets” are not self-regulating no matter what that free market pamphlet says. Markets easily crashed and the “middle class” were regularly wiped out before people figured out how to regulate economics properly. Why do you think all successful developing countries are always going on about steady _consistent_ growth?

    2) Energy reduction may not be proportional to sales decline, but natural resource is. Think of the amount of steel and rubber not produced and gasoline not consumed.

    The amount of actual new steel and other materials that go into a car is pretty negligible in comparison. People don’t seem to realize that driving takes a LOT of energy.

    You know those electric cars? They need to charge their massive batteries overnight at high power before they can go a few miles. Compare that to anything else that uses electricity to get a sense of scale.

  • avatar
    wsn

    agenthex :
    August 12th, 2009 at 5:28 pm

    Why do you think all successful developing countries are always going on about steady _consistent_ growth?

    “Successful developing countries?” I suppose you are talking about BRIC. I don’t know for other countries, but since I grew up in China, I can tell you it’s the adoption of market economy that gave China the growth.

    Back in the days of Mao, it’s entirely planned economy. After Mao’s death, Deng reversed it and went into market economy as far as he possibly can do.

    ———

    The amount of actual new steel and other materials that go into a car is pretty negligible in comparison. People don’t seem to realize that driving takes a LOT of energy.

    You don’t seem to realize 16M cars uses more gas than 10M. Amazing. Even three year olds are supposed to know that.

  • avatar
    agenthex

    I can tell you it’s the adoption of market economy that gave China the growth. Back in the days of Mao, it’s entirely planned economy.

    Not really. What happened is that they reopened their closed society and re-introduced capitalism under very tight centralized control in order to increase economic growth. What’s happened in china is nothing like what the “free market” advocates want. Currency is strictly controlled by state banks, and when the gov says jump, the joint ventures ask how high.

    You don’t seem to realize 16M cars uses more gas than 10M. Amazing. Even three year olds are supposed to know that.

    How many cars can you drive at one time?

  • avatar
    BDB

    Libertarianism/Austrian Economics=the Marxism of the Right.

    Tho those grasping at straws trying to paint C4C as a failure: just stop. You’re embarrassing yourselves. First you said nobody was going to participate in the program. You were wrong. Then you said people would be trading in way more cars than light trucks. You were wrong. Then you said there was going to be massive fraud. You were wrong. So now we’re into the realm of theology (i.e., the Prophet Mises/High Priest Paul says government never works, so this MUST be a failure, somehow! Etc., etc, etc. Just give up already.

    You sound (ironically) like doctrinaire Marxists who can’t admit their theory isn’t 100% correct all the time.

    BTW, California IS a wealthy state. You really think Alabama and West Virginia have more wealth? Pfft. Of the top 10 wealthiest states, McCain didn’t win a single one. In the top 20 wealthiest, he won ONE (Alaska).

    Among the ten poorest, he won nine (New Mexico voted for Obama). The poor states are red states.

  • avatar
    GS650G

    So many economic experts willing to sell us all out to a nice friendly government.

  • avatar
    BDB

    So many nice friendly economic “experts” willing to lick the boots of CEOs thinking it will make their fantasies of being millionaires come true.

    OH, to the person who mentioned the UAE: you’re stuck in 2006 apparently. The UAE’s economy has crashed through the floor. What’s next, you’re going to cite Ireland as a low-tax success story? Well, whaddayaknow, the same thing happened to Ireland! A boom and catastrophic bust, that’s what lax regulation and low taxes will get you. Cutting the tax rates of the wealthy to get economic growth is like taking methamphetamine because you’re feeling a little drowsy.

  • avatar
    Geotpf

    baldheadeddork :
    August 12th, 2009 at 9:03 am

    From my experience, I think C4C has stolen more buyers from the used car market, particularly the certified pre-owned market, than future new car sales. If you look at the profile required to buy under C4C, that points strongly toward a used car buyer.

    Bingo. This hurt used car sales and helps new car sales, which, at least in theory, should help all automakers, foreign and domestic.

    The one person I know who used this program was in the market for a used car but instead traded in her 2000ish GMC Safari with broken air conditioning for a new Ford Edge.

    This program was effective in the two goals it had:

    1. Help domestic automakers, the domestic auto plants of foreign automakers, and car dealerships. Of course, it also helped foreign automakers who sold cars made overseas, but that couldn’t be helped under WTO rules.
    2. Remove older gas guzzlers and reduce foreign oil usage.

    Now, it wasn’t a cure-all for either, but it did in fact help.

    I am a Keynesian, and I believe in recessions such as this one, the government needs to step to the plate and help out to jump start the economy. This is one way to do so.

  • avatar
    golden2husky

    You want bad behavior? How about lying to the American people that their way of life is murdering this planet and the only way to fix that is to drive small, cracker box cars and have curly light bulbs.…

    Your use of the term “cracker boxes” indicates a closed mind. A lot of the vehicles traded in for these cracker boxes were SUVs…funny how they now only “need” a small car now.

    What is wrong with “curly light bulbs?” Seems to me if you can get equal or better performance for much less energy, whats not to like? Cost used to be an issue, but as demand ramps up costs have plummeted. CFL’s can now be had for little more than a buck at Home Depot. You are really going to be angry in 2012 when almost all incandescent lamps are scheduled to join the vacuum tube.

    Nothing wrong with a big car if you need/want it, but please, when is America’s “bigger is always better” mindless mentality going to die?

  • avatar
    stuki

    The reason C4C could appear to be working to those seemingly constitutionally incapable of knowing better, is that it pulls forward demand. Simply that. Nothing more. $3billion borrowed by government, and likely another $5-$10 billion in loans taken out by people who otherwise would have shown more prudence. So, in sum, perhaps $10billion of high visibility spending in a few months.

    As the program is also associated with a darling of the mainstream media, it gets a lots of coverage during the pulled forward demand stage. 2 Years from now, low car sales, to the extent such is mentioned at all as it’s really not all that relevant to most people, will be blamed on “the poor economy/slow recovery/blah/blah.” Not on the fact the reason the “economy” is so “poor”, is due to its participants now having to pay for the stuff deficit induced pulled forward demand allowed them to consume earlier. Or that the resources devoted to pulling forward demand for consumer goods, were not available to invest in the capital goods required for productive processes to become more efficient over time, aka. growing the economy.

    In a world where having a clue plays distant second fiddle to feigning being “intelligent” by aping whatever nonsensical stutter emanates from some currently en vogue clown billed as an “expert” by the man on TV, that’s about par for the course, I guess.

    Still, none of this changes the fact that every dollar borrowed to be spent on this media stunt today, will have to be paid back over the next 5-10 years. Nor that in those instances where the spend today / pay tomorrow tradeoff was indigenously worth vile, it would have taken place regardless of C4C, or any other coercive program.

  • avatar
    GS650G

    So many nice friendly economic “experts” willing to lick the boots of CEOs thinking it will make their fantasies of being millionaires come true.
    It just might.

    You can learn a lot more from successful people about being rich than you can from a government.

    Economic bust cycles bring out all types with quick fixes and I told you so. Lost in their analysis is how government F-ed up the economy in the first place. And yet we hear all these calls for more government action. Something has to be done!

    C4C will become at least a yearly event. Car sales will slump and yet another round of taking from the productive to jump start the economy will commence.

    What’s really interesting is this notion the government is the source of wealth and runs the economy. Not true.

    So do it, move out from the society which feeds you, preferably to a place where there is little to no government to protect your wealth. Soon enough these selfish peeps will figure out why people congregated in the first.

    And oh Agenthex, if you are sure your wealth would be protected in those urban areas and cities you admire think again. Us poor dumb rural types don’t lock our doors at night for a reason.

  • avatar
    agenthex

    I am a Keynesian, and I believe in recessions such as this one, the government needs to step to the plate and help out to jump start the economy.

    The war of those ideologies in economics is long over. There’s no need to be a Keynesian. We know what works, and what doesn’t.

    Well, whaddayaknow, the same thing happened to Ireland! A boom and catastrophic bust, that’s what lax regulation and low taxes will get you.

    Similar disasters also happened in south america. Chile is the classic example of lassiez faire creating massive bubbles and driving the economy into bankruptcy (20’s america another). They were finally successful after adopting orthodox centralized banking doctrine of regulated moderate inflation.

  • avatar
    agenthex

    Or that the resources devoted to pulling forward demand for consumer goods, were not available to invest in the capital goods required for productive processes to become more efficient over time, aka. growing the economy.

    So the people who aren’t buying cars are due to make capital investments instead? So are you denying the existence of the spiral or just don’t have clue that you’re making a distinction without a difference?

    In a world where having a clue plays distant second fiddle to feigning being “intelligent” by aping whatever nonsensical stutter emanates from some currently en vogue clown billed as an “expert” by the man on TV, that’s about par for the course, I guess.

    This is very poignant, because that’s exactly what the laissez crowd does. They are exactly the climate change deniers of economics who are easily fooled by FAKE materials.

    People should realize they made “think tanks” because universities don’t want that stain of idiocy on their grounds.

    —-

    What’s really interesting is this notion the government is the source of wealth and runs the economy. Not true.

    Human society is the source of wealth. Governance is the leadership of said societies. Smart and observant people over long periods of time have carefully studied these societies and found what constitutes good governance.

    None of this is really controversial in an academic sense. The controversy comes from fraudsters making up fake theories for the rubes. When you don’t have much of any background to learn this stuff, it’s easy to get fooled because if there’s one thing these scumbags are good at doing, it’s lying to the uneducated

    And oh Agenthex, if you are sure your wealth would be protected in those urban areas and cities you admire think again.

    This is bumpkin thinking straight from people who’ve never experienced “free” governmentless ceasepools. Seriously, a decent american city and its rural outskirts seem to be the whole range of their thought process. No wonder they’re so easily fooled by fake academic credentials.

  • avatar
    PeteMoran

    @ stuki

    As the program is also associated with a darling of the mainstream media, it gets a lots of coverage

    The election was SO last year…. Maybe you missed it.

    every dollar borrowed to be spent on this media stunt today, will have to be paid back over the next 5-10 years.

    Where does this arbitrary time-frame come from?

    People here behave like the (unstated) alternative is necessarily better. Did you compare the costs on the larger economy of doing nothing?? Please present your workings.

    The US national debt is large but not impossible given the depths the country has been in while fighting a war.

    If the nation sets it’s mind to productivity and the population expands, it WILL be possible to close the gap.

    Here’s an interesting article on debt. See if it fits all your fears.

  • avatar
    BDB

    You can learn a lot more from successful people about being rich than you can from a government.

    Rich doesn’t mean successful. Rick Wagner is rich, for God’s sake. In what universe is he a “success”? How about Roger Smith? Jacques Nasser? And I’m just talking about auto failed auto CEOs that got paid big bucks. You can go down the list in other industries. Are they “successes?” I mean, they sure are rich!

    In developed democracies, when a politician is a failure, he loses an election or has his policies repudiated by the country. When a CEO is a failure, he is paid millions to go away.

  • avatar
    GS650G

    This is bumpkin thinking straight from people who’ve never experienced “free” governmentless ceasepools. Seriously, a decent american city and its rural outskirts seem to be the whole range of their thought process. No wonder they’re so easily fooled by fake academic credentials.

    Are you insulting the rural folk or just Lording it over The Great Unwashed in general?

    Just wondering.

    Don’t worry, when you go to buy bread it will be there thanks to some dippy bumpkin that planted this year. How’s that hamburger taste?

    I know it’s tough sharing a planet with such inferior beings that should just get out of the way and let smart people fix everything in a week or so but that’s the way it is.

  • avatar
    baldheadeddork

    @ stuki

    The reason C4C could appear to be working to those seemingly constitutionally incapable of knowing better, is that it pulls forward demand. Simply that. Nothing more.

    We went over this earlier.

    To recap again, to qualify for C4C you have to own a vehicle that gets shitty mileage, is worth less than $4500, you’ve had to have owned and used it for at least one continuous year before trading it in, it has to be owned free and clear of any liens or loans, and you have to be able to afford a new car. Miss any one of those and you don’t qualify.

    Buyers that meet all of those qualifications are a very small slice of the new car market. So if their buying drops off after C4C ends it will have very little effect on the overall market. The health of the car market three and six months after C4C will depend on the health of the economy. If people are more confident about their financial position, you’ll see the much larger pool of buyers who didn’t qualify for C4C coming back.

  • avatar
    agenthex

    Here’s an interesting article on debt. See if it fits all your fears.

    Please please don’t take the heritage foundation at their word. While that one article isn’t horrible, think tanks in general are intellectual poison.

    For example, they try to let GWB off the hook for tax cuts, and right in the explanation they admitted that it’s the greatest contributor to lower revenues. But at least they’re somewhat honest with the data, which is often not the case.

  • avatar
    BDB

    Don’t worry, when you go to buy bread it will be there thanks to Big Agribusiness, illegal migrant workers, and government agro subsidies

    FTFY. At least that’s true for 95% of Americans.

    Where do people get this idea that all rural areas are conservative, anyway? Ever been to Vermont? Maine? The whole Upper Midwest?

  • avatar
    Mike999

    “The reason C4C could appear to be working to those seemingly constitutionally incapable of knowing better, is that it pulls forward demand. Simply that. Nothing more. $3billion borrowed by government, and likely another $5-$10 billion in loans taken out by people who otherwise would have shown more prudence. So, in sum, perhaps $10billion of high visibility spending in a few months.”

    So, what you don’t understand is the concept of an “Investment”. It pulled forward demand, stopped auto dealership defaults and bankruptcy’s, emptied dealer lots and now the auto industry has to resupply inventory. So, the “investment” actually paid off hugely, as the tax increase we might see, will be significantly cheaper then the domino effect of more business closings and more personal bankruptcy’s.

    Or, in your simplistic economic world, no one makes a profit from an investment? It’s you that are not seeing all the angles of an economic investment.

    Dealer lots empty, auto workers not laid off, factories starting up, more taxes collected, less unemployment paid. Success.

    I was once a Republican, and believed that wacky BS they spout as Economics, then I saw what they did to this country. From Enron, WorldCom to Wall Street and Madoff. From the US getting Poorer with “Free Trade” while China grows an Empire. If you want a Successful Economically Strong America you’d better start seeing the real world.

  • avatar
    PeteMoran

    @ agenthex

    Please please don’t take the heritage foundation at their word.

    I won’t, but it’s interesting to see them arguing that a debt “problem” isn’t so bad in Sept 2008.

    A change of government suddenly makes the previous debt apologists rabid anti-debt ideologues.

  • avatar
    agenthex

    Are you insulting the rural folk or just Lording it over The Great Unwashed in general?

    I have nothing against the bumpkins. I fact I quite enjoy the countryside and lived formative years there. Rural americans are some of most earnest folks anywhere.

    However they are not the peeps to turn to for national policy, and I very seriously blame the scumbags who formulate the talking points to take advantage of their naivety in these subjects.

  • avatar
    BDB

    PeteMoran:

    “Reagan proved deficits don’t matter.”

    –Dick Cheney, 2002

    @agenthex

    Rural folks in New England and the Upper Midwest most likely share your views.

  • avatar
    agenthex

    A change of government suddenly makes the previous debt apologists rabid anti-debt ideologues.

    What’s really messed up is these “think tanks” are more or less professional liars. They’ve perfected this setup where they purposely write deceptively academic material while maintaining enough plausible deniability to cut bait if need be. They’re nothing but con men with something profitable (worldviews) to sell.

    Just as it’s a bad idea to learn your math from the securities sales rep, it’s a bad idea to learn about economics from a think tank.

    What’s terrible is that most all media has mistaken and become dependent on their press releases as actual news sources (because real news is often ambiguous and perplexing vs. the clean style of a think tank doc). It’s somewhat of a industry secret that this is why they’re created and funded.

  • avatar
    stuki

    ” So the people who aren’t buying cars are due to make capital investments instead?”

    People who lend money to be spent on a car, would otherwise have more money to lend to someone buying a tractor. Seriously, is this difficult?

    “So are you denying the existence of the spiral or just don’t have clue that you’re making a distinction without a difference?”

    Allright, dude, educate me on the existence of the ominous “spiral”. I’m all ears. In my world a spiral is just a mathematical function. Nothing to bow down to, and submit to having ones children’s livelihood confiscated over.

    “This is very poignant, because that’s exactly what the laissez crowd does. They are exactly the climate change deniers of economics who are easily fooled by FAKE materials.”

    Yeah, you nailed it. And spirals and multipliers and stuff…….

    “People should realize they made “think tanks” because universities don’t want that stain of idiocy on their grounds.”

    First thing that comes to mind every time I pass by the Hoover Institution…..

    ” The election was SO last year…. Maybe you missed it.”

    Kind of hard to, when you’re stuck paying for it every day for the rest of your life.

    “Where does this arbitrary time-frame come from?”

    Eh, experience with common auto loan terms?
    In all honesty, the government’s share may well be paid back slower, or rolled over indefinitely until cumulative interest expenses on the $3 billion dwarfs the original amount. Or maybe, just maybe, Geithner is serious about doing something about the deficit, and pays it back within that 5-10 year time frame. What do I know? I’m just a guy who don’t know about spirals and stuff…

    baldheadeddork’

    “Pulling forward demand” is not limited to pulling forward demand for cars only. If I borrow $10,000 to buy a car today, I have to pay those $10,000 back later (actually a bit more.) Meaning my effective demand for stuff produced by the “economy” will be that much smaller at some period in the future. The $3 billion the government is borrowing, is $3 billion they, or more likely our kids, will not spend in the future. Ergo, pulled forward demand, no? Economics, as applied to public policy, is primarily about reminding the electorate, and their representatives, to look at _all_ effects of an action, for _all_ people, over _all_ time frames. Instead of focusing only on direct beneficiaries in the current, to the exclusion of the quiet men footing the bill today, and the even quieter (as most unborns are) ones stuck footing it tomorrow.

    ” So, what you don’t understand is the concept of an “Investment”. It pulled forward demand, stopped auto dealership defaults and bankruptcy’s, emptied dealer lots and now the auto industry has to resupply inventory. So, the “investment” actually paid off hugely, as the tax increase we might see, will be significantly cheaper then the domino effect of more business closings and more personal bankruptcy’s.”

    As above, all that pulled forward demand is taken out of somewhere tomorrow. Every penny. And it’s not just taken back from the car makers enjoying extra sales today. Makers of every good other than cars, will see lower sales in the future as a result of this, as their potential customers will be paying off an auto loan other than buying new stuff.

    In addition, every car dealer “saved” by this will be exactly where when this program ends? If he couldn’t get by on indigenous sales today, what makes you think he will be able to once the program is over? Especially since some of the customers he would otherwise have had then, are now driving around in a brand new Kia on my children’s tab.

    And if using government borrowing capacity to pull forward demand for consumer goods has such wonderful consequences, why not do more of it? Why not have the government pitch in for TV’s, Fridges, Guns (to get the GOP votes) and tennis balls? Or, perhaps houses. Well,gee, we already did that, didn’t we? By allowing preferential tax breaks for mortgage interest, and having Fannie and Freddie subsidize loans. Didn’t that work out well in the end…..

  • avatar
    BDB

    Or, perhaps houses.

    You’re telling me homeowners don’t take that big fat mortgage deduction on their taxes? Yeah, try again.

    As for Fannie and Freddie:

    * More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

    * Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

    * Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics.

    http://www.mcclatchydc.com/251/story/53802.html

  • avatar
    agenthex

    People who lend money to be spent on a car, would otherwise have more money to lend to someone buying a tractor. Seriously, is this difficult?

    What’s apparently difficult for some to understand is that there’s a third choice where no money is spent, thus setting up a deflationary spiral.

    Allright, dude, educate me on the existence of the ominous “spiral”. I’m all ears. In my world a spiral is just a mathematical function. Nothing to bow down to, and submit to having ones children’s livelihood confiscated over.

    I already talked about the spiral in a post above. It’s death for a modern economy because banks/currency fails and that’s what economies are built on.

    Yeah, you nailed it. And spirals and multipliers and stuff…….

    If you’re not even going to bother to learn basic econ concepts, it rather proves that it’s an ignorance-based ideology.

    Economics, as applied to public policy, is primarily about reminding the electorate, and their representatives, to look at _all_ effects of an action, for _all_ people, over _all_ time frames.

    Interestingly, a lot of failure of the austrian school comes from the fact that they only really prized looking at the small stuff trying to build causality, and never really understood how that was not fruitful to studying economies working as a whole due to the many complexities and subtle game theory of econ in the small.

    It really was the absolute worse sense of “social science“, because when their hypothesis utterly failed to meet any empirical validation, they refused to believe that their methodology was bankrupt. Thus they became the kind of ideologues who keep thinking invalidation after invalidation of their ideas was absolutely inconceivable and unpossible despite the reality.

    Still, I guess they retained their disciples because whatever they were saying “made sense” to some, much like freud “made sense”. Fortunately that’s not how science works, and in the intervening years we’ve learned a lot more about how econ in the small works, and you only have to look at the game theory stuff to recognize it’s often not intuitive at all, at least at a superficial level.

    As above, all that pulled forward demand is taken out of somewhere tomorrow.

    I had to pull this quote out due to how absolutely hilarious it is. These are the same fools trying to argue against “socialism” by arguing econ is not a zero sum game. Lulz

  • avatar
    GS650G

    Where do people get this idea that all rural areas are conservative, anyway? Ever been to Vermont? Maine? The whole Upper Midwest?

    I don’t and didn’t say that. You did. Nice try.

    And yes I’ve been to those places and more. Do you have a point? Believe it or not, all kinds of people live everywhere.

    Except in San Fran. They are another world out there.

  • avatar
    stuki

    BDB,
    Even Bernanke must have realized his “contained to subprime” sales job was simply gibberish by now. Or, if not him, those at treasury charged with continuously extending F&F more and more credit must have. Also, were it not for F&F artificially keeping real mortgage costs below alternative uses for money, prices would not have run up as far as they did, hence not encouraging speculation to the same extent. While more of the money that were plowed into real estate would instead have found its way into other areas, some which would have been productive investment. So, Americans as a whole would not be as singularly exposed to real estate. It’s that pesky “all effects” thing again…

    agenthex,
    money not spent today are money available to spend tomorrow. Hence provide a mechanism for increased demand tomorrow. Hence helps cushion future deflation. Evil spirals notwithstanding.

    In the real world, economies are built on legal and social frameworks that encourage capital accumulation and specialization. As an economy grows, the facet of providing intermediation between those with accumulated capital and those in need of it, tends to be taken on full time by some people. We call them bankers. They’re part of an economy, not what it’s “built on.” Although I’m sure Goldman Sachs, and those dependent on GS’s contributions for their political future, will be happy to tell and sell you otherwise.

    Basic econ concepts are supply and demand. And the insight that actors free to trade will only enter into trades mutually beneficial. Spirals are definitely an “advanced” concept. Generally taught by professors wearing tinfoil hats.

    So, now; because you don’t like some Austrians, we are supposed to conclude that it is BAD for electorates to look at all consequences? That it is actually preferable to only consider those aspects of a policy which favors some constituencies over others? I’m really at a loss here.

    Exactly how does “econ” not being a “zero sum game” have any bearing on the notion that if I borrow $1 today to spend, I have to pay it back tomorrow, at which point I cannot spend it?

    Seriously, agenthex. The world is not comprised of evil spirals and cabals of rich racists in Austrian think tanks, trying to screw poor little you over by letting you freely do what you want to with your own time and belongings. With the only thing standing between you and all these evils being Barack the Benevolent or some such. And neither does economics have anything to do with mindlessly regurgitating whatever jargon filled drivel some Goldman Sachs sales hack spews on CNBC, in an effort to get said Sir Benevolent to hand them everyone else’s children’s money for their own annual bonus fest. It really isn’t, or doesn’t.

    GS650G,
    There is some diversity in SF as well. Cato was founded here, and I believe the Libertarian Party may have either been founded, or at least had early supporters here. And some (or at least one) of those Prius driving San Franciscans bought their car to make the trip up to Oregon cheaper, where they can stock up on stuff without paying 10% to the Sacramento mafia. And perhaps keep a cache of .50bmg rifles and ammo, just in case.

  • avatar
    agenthex

    money not spent today are money available to spend tomorrow. Hence provide a mechanism for increased demand tomorrow. Hence helps cushion future deflation.

    This clearly isn’t true which is why we see the spirals empirically. Though it’s pretty typical of austrians like to ignore anything that doesn’t fit their crappy failed hypothesis.

    We call them bankers. They’re part of an economy, not what it’s “built on.”

    You really don’t know anything about econ. Banks are the exact basic mechanism through which currency (you know, the stuff that is borrowed and used to buy stuff) is controlled. Without banks (and the currency they pass), NOTHING in a modern econ would function. What, do you think people live on money stashed under the mattress?

    Basic econ concepts are supply and demand. And the insight that actors free to trade will only enter into trades mutually beneficial. Spirals are definitely an “advanced” concept. Generally taught by professors wearing tinfoil hats.

    Which really just confirms the free marketers are faithful to a ignorance-based theory. They believe think tanks and not real research. Think about how dumb that is.

    Exactly how does “econ” not being a “zero sum game” have any bearing on the notion that if I borrow $1 today to spend, I have to pay it back tomorrow, at which point I cannot spend it?

    A great portion of the “money” in an economy is “borrowed” through the reserve multiplier (or more recently just loaned out straight up by banks), created through accounting magic. As I’ve been saying, the accounting is just there to sustain productivity, and the austrians could never venture beyond their little bubble grasp how it worked.


    So, now; because you don’t like some Austrians, we are supposed to conclude that it is BAD for electorates to look at all consequences?

    Everyone should note this is the same tactic pulled by science and knowledge deniers of all varieties (evolution, AGW, etc).

    There really isn’t that much controversy on the basics among people who study and understand this stuff. The only confusion from the sidelines and peanut gallery where folks who don’t have much of a clue try their hand at “analysis” and usually with some outside agenda in mind.

    Again, this isn’t attacking austrians as much as mocking how ignorant and poorly educated they are.

  • avatar
    Geotpf

    agenthex :
    August 12th, 2009 at 9:44 pm

    I am a Keynesian, and I believe in recessions such as this one, the government needs to step to the plate and help out to jump start the economy.

    The war of those ideologies in economics is long over. There’s no need to be a Keynesian. We know what works, and what doesn’t.

    Tell that to Ron Paul.

  • avatar
    Geotpf

    BDB :
    August 12th, 2009 at 10:26 pm

    Where do people get this idea that all rural areas are conservative, anyway? Ever been to Vermont? Maine? The whole Upper Midwest?

    Rural areas, in general, are much more conservative than outer suburbs which are much more conservative than inner suburbs which are much more conservative than urban areas. The percentage of people voting Democratic tracks very strongly with population density in the area in which they live, especially if you give a regional bonus to the Republicans in the South and a regional bonus to the Democrats in New England-that’s a reglious and cultural thing.

    This is also logical. First, the regional bonus-in New England, your religion is mainly considered a private matter. In the South, you are expected to preach it from on high. So, the overtly religious party gets a bonus in the South and the tolerant party gets a bonus in New England.

    Second, the population density gap. Rural people are more likely to have never met/known well a gay person, never have met/known well a foreign born person. Rural people are more likely to be gun owners. Urban people are more likely to come in contact with government entities on a daily basis (for example, using public transit). So, rural people are more ignorant of the world outside their little bubble and are more likely to support gun rights (like a stereotypical Republican), and urban dwellers are more likely to support expanded government and are more tolerant of people not like themselves (like a stereotypical Democrat).

    Edit: I could also add areas with lots of ethnic miniorities get a heavy bonus for the Democrats. The place where this is most apparent is on the Texas border with Mexico. It’s Southern and rural, but heavily Democratic since it’s majority-Hispanic.

  • avatar
    Mike999

    Stuki,

    Here’s the problem, you understand the concept of a “linear equation”, but, you don’t understand an “exponential equation”. Just because you don’t get exponential equations, doesn’t mean they don’t exist.

  • avatar
    stuki

    “This clearly isn’t true which is why we see the spirals empirically.”

    What clearly isn’t true? That if I have $1000 tomorrow, I am in a position to demand more than if I have $0? And “we” don’t see spirals all over the place. You might, but if that is the case, psychiatry is likely better at answering why than economics will ever be.

    “Without banks (and the currency they pass), NOTHING in a modern econ would function”

    Hey, at least we agree on something! But try being more precise. More specifically, without any of the services performed by modern banks, a modern economy would likely not remain modern for long. But think about why that is so. Is it not because said banks, over centuries of having been exposed to competition, have settled on a set of services to perform, and ways of performing them, that create more value to their customers than they cost to perform? And that those attempts at running banks that did not hold up to this scrutiny, have ceased to be banks? Clearly, just calling an institution a bank does not mean the economy of wherever this institution is located suddenly becomes a modern economy, however much New York bank CEO’s and Goldman Sachs bonus babies may want governments with confiscatory powers to believe this to be so.

    “Which really just confirms the free marketers are faithful to a ignorance-based theory. They believe think tanks and not real research. Think about how dumb that is.”

    So, believing supply and demand to be basic concepts of economics is an indication of faith in ignorance based theory? And believing the basic concept is instead nefarious “spirals” is not so?

    “A great portion of the “money” in an economy is “borrowed” through the reserve multiplier (or more recently just loaned out straight up by banks), created through accounting magic. As I’ve been saying, the accounting is just there to sustain productivity.”

    OK. So if I understand you right, productivity is sustained by accounting magic. Hence, logically, without accounting magic, productivity could not be sustained. Did you, per chance, ever work in accounting at Enron? Your beliefs seem to be remarkably consistent with theirs.

    “Everyone should note this is the same tactic pulled by science and knowledge deniers of all varieties (evolution, AGW, etc).”

    So, admonishing people to look at all sides of an issue is the hallmark of science deniers where you’re from?

    “There really isn’t that much controversy on the basics among people who study and understand this stuff. The only confusion from the sidelines and peanut gallery where folks who don’t have much of a clue try their hand at “analysis” and usually with some outside agenda in mind.”

    Well, again, I guess we agree. As long as you recognize the outside agenda of the peanut gallery “analysts” never ceases to be that of justifying why they in particular, as opposed to all others, are so “important” to “the system” that they should be uniquely allowed to take stuff from everybody else, and pay it to themselves as bonuses or pensions.

    “The war of those ideologies in economics is long over. There’s no need to be a Keynesian. We know what works, and what doesn’t.”

    Which is why we have close to 10% and rising U3 unemployment, and record low numbers for workforce participation, as well as at least one generation of people with hardly any savings at all going into what they were once led to believe was retirement age.

    “Tell that to Ron Paul.”

    Or to anyone else even semi sentient, for that matter.

  • avatar
    stuki

    Mike999.
    You nailed it, didn’t you! The exponential equation! That’s it! That’s what I don’t understand, and why I’m so ignorant as to not realize my only hope is to let my children go into debt slavery to support bonus payouts at Goldman Sachs! And those spirals are exponentials too, aren’t they, which is why I don’t see them everywhere? Like the golden spiral. Or, perhaps, ta-da, the Goldman spiral? That’s the one that’s fundamental to “econ”, isn’t it; not those darned intersecting supply and demand curves the evil Austrians in think tanks keep going on about. Silly me, for daring to think otherwise.

  • avatar
    agenthex

    Clearly, just calling an institution a bank does not mean the economy of wherever this institution is located suddenly becomes a modern economy

    No it doesn’t. But it doesn’t really matter because you clearly don’t know how modern banking works and have absolutely no desire to learn. Just reading the basic wiki entry on the fed reserve system would enlighten you, but that’s not going to happen because obviously access to knowledge is not the problem.

    That if I have $1000 tomorrow, I am in a position to demand more than if I have $0?

    This is not microecon, you should learn the difference. Seriously. I even explained it above. In this case, that $1000 used today is going to sustain productivity (and salaries of others) such that there will be more tomorrow. The problem I think is some people have trouble with systematic effects. Everyone holding onto their $1000 means everyone starves as that pile dwindles. In fact, have and using money today instead of tomorrow is so important that we created banks to aid this.

    So, believing supply and demand to be basic concepts of economics is an indication of faith in ignorance based theory?

    Supply and demand is the really basic stuff taught in the first chapter of econ. Like many areas of study, people have found the real world is more complex. Again, this is hardly secret or controversial. The only people who are confused are those who lack the will to learn anything.

    It’s about the equivalent of someone has trouble with arithmetic, hates math, and can’t begin to grasp why computers compute 1 + 1 = 10. They insist it’s written like 2 and no one can tell them otherwise! Where do you begin with idiocy like that? Symbolic representation vs. value?

    Hence, logically, without accounting magic, productivity could not be sustained.

    As has been aptly proven over and over again with primitive banking. Again, this is not some secret. It’s well known information.

    So, admonishing people to look at all sides of an issue is the hallmark of science deniers where you’re from?

    Their strategy is to raise credibility for viewpoints that have none. Backward people who are willfully ignorant should be mocked so everyone can aware of their drag on human knowledge and progress.

    As long as you recognize the outside agenda of the peanut gallery “analysts” never ceases to be that of justifying why they in particular, as opposed to all others, are so “important” to “the system” that they should be uniquely allowed to take stuff from everybody else, and pay it to themselves as bonuses or pensions.

    No one is defending the compensation, it’s clearly somewhat corrupt in that regard. But that’s hardly the issue at hand.

    Which is why we have close to 10% and rising U3 unemployment, and record low numbers for workforce participation, as well as at least one generation of people with hardly any savings at all going into what they were once led to believe was retirement age.

    The system became somewhat broken due to systematic fraud of specific sectors. Just because there’s miscarriage of justice doesn’t mean the basis of a legal system is unfounded.

    You seem to be just angry about banks as they are, which I guess is fair, but that’s a rather different matter than how the economics works.

  • avatar
    agenthex

    That’s what I don’t understand, and why I’m so ignorant as to not realize my only hope is to let my children go into debt slavery to support bonus payouts at Goldman Sachs!

    You should’ve been paying attention when the corporatist movement was afoot to deregulate finance year back.

    What many lay peeps don’t realize is that there is no good solution once you start deflating. There is only the least worst solution.

    The only real answer is avoid that position in the first place which was why the finance regs and watchdogs were created. Sadly and ironically the morons blaming the gov now were the very ones cheering on what led to loosening or dropping of the ground rules and the subsequent catastrophe.

    In other words, these are the same morons who thought government oversight of banks was what’s unnecessarily dragging down their potential profits. Smart people tried to warn them, but they’re not called morons for nothing.

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