After barely a week in full-tilt operation the “Cash for Clunkers” program has been suspended. As recently taken apart in a Mises Daily, this program is a particularly absurd example of the broken-window fallacy. But the suspension of the program has brought even more economic absurdity.
Rep. Candice Miller breathlessly tells us “The thing has exploded. It has exceeded everyone’s expectations.” Before we go on let’s just pause and reflect on these people who were surprised. Here is the amazing turn of events:
- The government starts handing out free money.
- People start grabbing it as fast as they can.
- The bureaucrats quickly realize that they are hitting the program’s budget in mere days (of the program being finalized) and suspend the program.
What is the reaction to this perfectly foreseeable sequence of events? “…dealers were amazed…”, “the explosively popular… program.”
As if the program itself and the surprise at its reception weren’t enough, there is one more bit of economic foolishness dolloped on like a cherry on top. Returning to the brilliant Rep. Miller (representative from Michigan and co-architect of the glorious program) she is enthused at the results: “‘Throughout our history, it has been auto sales that have pulled us out of recession. People are more likely to buy cars than houses. Not to be too Pollyannaish, but we’re gettin’ our mojo back. This could be the pivot’ that begins an economic recovery.”
How do you get an economic recovery going? Start raining free money down on everyone’s heads. I grew up thinking that the people from the Middle Ages were idiots… They believed the earth was flat! Turns out they didn’t actually. But Rep. Miller (and how many Americans?) really does believe this nonsense. I have found the Dark Ages and it is us.
{ 33 comments }
How did we ever recover from recessions before the invention of the automobile?
Economic Numbskulls
Thursday, July 30, 2009
“Cash For Clunkers” And The ‘Independence’ Of The Federal Reserve!
This clunkers program is a Great Depression scheme designed by economic numbskulls. In the Great Depression crops were plowed under and livestock were killed to keep prices high! Pretty stupid right!
In this Greater Depression automobiles are taken from the market and the engines are destroyed in exchange for cash. Hopefully then this funny money is used to buy cars from government-owned car companies that sell inferior cars but have in place government-conceived incentive programs to buy these poor quality vehicles.
Bailout the incompetent car manufacturers and stipulate that in exchange for the bailout the socialist government will become the majority owner. Then use the government to manipulate the market by destroying the supply of cars and subsidizing the price of the cars produced by the government-run car companies. In the true spirit of Federal Reserve ‘independence’ have the Federal Reserve make ‘credit’ available and also in the spirit of ‘independence’ encourage the banks by having the Federal Reserve strongarm them to make car loans to those who are foolish enough to buy these cars made with renowned soviet quality by the incompetent government run car companies.
Come on now, Stephen. You’ve got to remember; she’s just doing her job: giving the people what they want, as much as they want, whenever they want, all in the name of saving the environment! What could go wrong?
Yes, ladies and gentlemen, a United States congresswoman actually used the word “Pollyanaish” in support of a federal law.
“How did we ever recover from recessions before the invention of the automobile?”
Same as always – social mood turned up, after a long period of trending down, during which time bad investments and debts were liquidated and savings built up. People’s mood switched from merely holding onto what they had to a desire for expansion, and started another stretch of expanding the economy. During that expansion, people became confident enough to take on debt, banks became confident that money they lent would be paid back, lots of credit would be extended, some self-liquidating, some non-self-liquidating, some good, and some bad investments got made, the worst ones got liquidated, while more marginal investments held out and kept operating to see if they could eventually become profitable. Eventually social mood turned down again, people became fearful that they would not be able to pay back new debts, or even debts they already had, banks became fearful that any money they did lend would not be paid back, debts started getting liquidated faster than new debts were taken on, total credit outstanding contracted, the economy went into its next recession/depression, and remaining malinvestments and bad debts from the previous expansion/boom got liquidated. Then the cycle repeats.
This idea is from europe at least germany has a similar program running since beginning of year.
As far as i know it mainly boost cheap italian and french car producers and harms most people in some african states, since this is where old german cars went.
Sounds pretty stupid but everybody, except the so called liberal party are fond of this.
Observe the similarity with something Heinlein prognosticated in his 1957 SF novel The Door into Summer: the “parity system of farm price supports, which in 2000 is applied to automobiles” (quoted just after that link). As I recall, at one point the hero is working making cars for a government support programme, and notices that the cars can’t work because crucial parts are missing. When he asks about this, he is told the cars are going straight to scrap anyway so it doesn’t matter. So he asks why bother making them in the first place, and is told he just doesn’t understand economics.
It’s so obvious that this program can only be funded a few ways:
1) Taxes, which just moves wealth around, and doesn’t create it.
2) Inflation, which is effectively a tax on those who see the new money last, such as the politically unconnected and those who depend on their savings.
3) Borrowing, which is is effectively a tax on the future.
So how does this create wealth?
Are there really so many people in this country who are so stupid as to believe that this shell game can actually create real wealth? Or are there just so many immoral people in this country who don’t care how dishonest this shell game is, as long as they get what they want? Either way, I’m starting to think that Alexander Hamilton had one thing right. Democracy in America is a bad idea, and George Washington should have been made king instead.
As I live in Germany I had to watch this idiotic program run for way too long. But the thing is most people know this is not a smart program. As you mentioned they are just out there to get the free money. When I talk to people about it, pretty much everyone acknoledges that it’s a waste. But what can you do when an election is just months away and there are so many people working for car manufacturers and their suppliers.
They just throw the money out of the window before the election to jack up taxes in the aftermath and get it all back.
It is just a sad state of things.
Just be glad that this madness has been stopped after a week in the US, but who knows maybe the next scheme will be even worse…
And these selfsame nincompoops want to be in charge of our health care system, 17% of the American economy. Cash for Clunkers, indeed.
It’s a shame we can’t cash in the clunkers who “represent” us. I’m certainly ready for some better models.
Having spent the bulk of my young life in Michigan’s 10th congressional district (where Ms. Miller is representative), I can assure you that she is every bit as economically illiterate as she appears in this story. I believe she actually attended the Mugabe School of Hyper-Inflationary Economics where she was taught that throwing money around actually stimulates real, long-term growth.
Not very long ago, I read one of the comments on this site that stated that, to government bureaucrats (and basically any Keynesian), history begins at 1930. This quote from the genius that is Rep. Miller proves this:
“THROUGHOUT OUR HISTORY, it has been auto sales that have pulled us out of recession.”
This statement implies that, prior to 1930, recessions did not exist. Clearly, the Panic of 1907 or the Depression of 1921 (not to mention the other previous Panics) were not really depressions, since auto sales did rescue the economy from the precipice of disaster.
The genius is outstanding, the multiplier effect derived from this program will surely pull the U.S. economy out of its recession.
I always think back to a scene in the Fifth Element where the arch nemesis cites destruction as the path to prosperity.
http://www.youtube.com/watch?v=d7VjQp7jx9s
Mikey L wrote: “Yes, ladies and gentlemen, a United States congresswoman actually used the word “Pollyanaish” in support of a federal law.”
That is funny.
I also like how she used the term “mojo”, as in, economic growth is a “mojo”.
So, to your point Russ, who cares about creating wealth when you’re “getting your mojo back”?
If I was a reporter and a politician said that, naturally my next question would be: “What are you talking about?”
It is OPM (other people’s money), and like the other opium, extremely addictive. Generally OPM is sucked, rather than inhaled, imbibed or injected. When someone uses it without being shot or seriously injured by the owner, they are certain to become hooked. Inevitably, they will return to their pusher for another fix. OPM addiction has much the same pathology as other addictive diseases such as alcoholism, compulsive gambling, etc. As the disease progresses, which it always does, its victims loose touch with reality, their physical and mentally health deteriorates and they completely lose their moral compass. The most successful route to recovery is participation in the 12-step program of AT (Anonymous Thieves). A nationwide network of treatment centers would be a blessing.
Matt Wing wrote:
“So, to your point Russ, who cares about creating wealth when you’re “getting your mojo back”?”
Heh. Here is an internet dictionary definition of mojo:
1) A magic charm or spell.
2) An amulet, often a small flannel bag containing one or more magic items, worn by adherents of hoodoo or voodoo.
I guess this means that we are truly in the age of “voodoo economics” now!
Oops, I meant to say since auto sales did NOT rescue…
Ned, you are absolutely correct about the addiction that is OPM.
I can haz free money?
It’s funny that Rep. Miller believes this boondoggle is both a good and original idea. Our corrupt politicians in Arizona did something similar almost 10 years ago.
http://www.stateline.org/live/ViewPage.action?siteNodeId=136&languageId=1&contentId=14196
The same thing happened in Arizona few years back, the “alt-fuels” scandal. What a bunch of idiots.
This whole “Cash for Clunkers” idea is just another scam in my opinion. Where exactly does all of this fountain of unlimited money come from to buy these clunkers? That is right, it comes right out of the thin air in the form of more taxpayer debt and boy is there a lot of that!
The government just keeps buying up every worthless piece of crap that it can find. I wonder what is next? The government will now pay taxpayer dollars to taxpayers for worthless computers so that those taxpayers can go back out and buy a brand new computer from a failing computer business?
Shows what you know. The brain trust just doubled down…
http://www.cnbc.com/id/32235069
“In the Great Depression crops were plowed under and livestock were killed to keep prices high! Pretty stupid right!”
And it got worse. After the failure of the above policies they went on to flattening entire cities and enslaving and killing millions of people. Cash for klunkers is the first baby step on this highway to hell.
I just read that the House voted to drop $2 Billion more down this particular rathole. Get those kids some rocks, gotta break some more windows!
Happy Days Are Here Again!
um appears we have another $2 billion for this: http://money.cnn.com/2009/07/31/autos/cash_for_clunkers_update/index.htm
um appears we have another $2 billion for this: http://money.cnn.com/2009/07/31/autos/cash_for_clunkers_update/index.htm
“The move came after reports on Thursday had raised concerns that the program was out of money.”
hmm, concerns that the program was out of money lead to shoveling more money into the program. Perhaps one should consider why it is out of money. But when you have a monopoly on printing of money and legalized theft, money is no concern, right?
“Obama, in his Friday speech, presented the program as a success: “I’m happy to report that it has already succeeded beyond our expectations. It’s working so well that there are legitimate concerns that the original funds might already be exhausted.”
This guy has a very strange way of gauging success: the money is exhausted so it is working. By that standard this guy is set to be the most successful president in our history.
They must create wealth by destroying it.
And they think they can run healthcare!!!!
Better get some practice running a lemonade stand.
Soon they will make inspection of old cars mandatory, just like in Japan.
Of course, this money is not “free;” what about the billions used to bail out the banks? At least it’s an attempt to directly help business. Whether it is the right move to make, only time will tell.
The Cash for Clunker program has helped the struggling auto industry, but it has inadvertently helped auto recycling too. We’ve seen a significant increase in the amount of scrap vehicles since the program began.
How to make money- do not believe in the religions of this world- believe in science and bust the people invading your privacy illegally and make them pay! When you know that people are illegally exploiting you based on their religions and politics, use your knowledge of Psychology to sue the living crap out of them for taking advantage of you!! Show no mercy and stand up for yourself! If Hollywood actors and actresses can sue for 30 million dollars because of and obstruction of their view and people like Clifford Olson can get a pension for murdering people, what does that tell you about religion and this society!! I am a subject to both these variables and I will make all these people pay!!
please, i need 400 dollars to fully start my
sub domain bulk sms business website
(www.transact.bccs3.com) . for purchase of laptop and bulk sms credit.
LIBERTY RESERVE ACCOUNT
ACCOUNT NAME. ABIDEMI ADEKITAN
ACCOUNT NUMBER. U9136815
THANKS AND GOD BLESS.
Comments on this entry are closed.