Friday, February 06, 2009

$1500 New Auto Credit

Oh goodie. Straight from the taxpayer's pocketbook to the GMAC black hole. Let's be clear what the Senate is trying to do. They are trying to get consumers to take on more debt. This is a microcosm of their whole game plan. Time for someone to talk about the emperors clothes. Every single proposal from the smallest to the grandest ultimately involves some form of additional debt. This has to fail. It doesn't matter how many Nobel wanna bes make powerpoint and blog posts. The flaw is not inside the bounds of their thinking.

Okay, what is the practical effect of a $1500 new auto discount? Just the biggest unintended consequence imaginable. Every used car in the nation is now worth that much less. Used prices are tied to new. There are a whole lot more used vehicles than new. Instant deflation and another kick to the spiral.

4 comments:

Sweet Cashback said...

First, snowflake will buy 100 cars to get $150K cashback, then immediately default on the loans, then invest the proceeds in an Air Conditioning business in Antarctica.....

w said...

Niall Ferguson had an interesting column in the LA Times today about how to structure a bailout. Did anyone else see it? Keynes can't help us now

He suggests that mortgages are offered with low rates and for long periods of time to lower payments without handing out reduced principle loans. I agree. I do not want to help some asshat get sweet appreciation 10 years from now. They need to be anchored to this debt in a kind of work furlow situation where they slave away to pay for the damned house they bought.

The problem is that the liberals in Washington have taken over and truly believe that they can direct this economy to a successful resolution. Central planning will somehow master complex systems. The same people that could not see this coming now profess to see the way out.

Rob Dawg said...

The problem is that the liberals in Washington have taken over and truly believe that they can direct this economy to a successful resolution.

To be fair it isn't/wasn't just Liberals. They are just the latest and unfortunately seem to have tossed all caution away in a zeal to do something, anything.

w said...

Very fair. Yet as fate would have it the liberals are fully in charge now. As they have become confident they open their mouths and espouse the belief that they know what will make the private sector stronger and it is government direction. Not to let the GOP off the hook but I just don't see them taking things to the level that the Dems will.

Of course the first thing Bush's two appointments to the supreme court did was allow big businesses to price fix by forcing distributers to maintain price floors on products. Not exactly conducive to free markets and competition when big companies control things like medicine. The point being that when government starts directing businesses what to do it is not usually good for the customers.