BG: Clunkers,’ a classic government folly.

[PeterMP]

Not unless it's the proverbial "cash under the mattress." When you put your money in a bank, or invest it in a mutual fund, or buy a bond, that money is going to someone else who wants to do something with it.

Have you seen gold prices?

[PeterMP]

I never said it didn't provide ANY benefit to the car makers or to the economy for that matter.

What it didn't provide is any material benefit to the automaker OR the economy. Sure a car sale is a car sale. The goal of the program wasn't meant simply to provide X car sales to Y for a result of Z.

It was meant to stimulate auto sales and infuse life into the industry and the economy.

It did. Car sales went up. None of the relevant companies had to close.

[JMS]

That was probably true for a grand total of a month or so, and that month doesn't coincide with C4C. But I'll play along. Where, according to you, did the government get the money?

Who cares where the government got the money? They borrowed it from China, they printed it, they sold off the last few ounces of gold they had in Fort Knox...

The only issue the government was looking at was perserving the American Auto Industry which irroneously ( ie fluke ) was about to blink out of existance largely from no fault of their own....

Something like 20% of the nations manufacturing base is tied to the auto industry.... you think 9% unemployment is bad ( 16% actually )..... Try 15% unemployment (25% unadjusted)....

Using the governments 3 billion to manufacture 20 billion in demand was a very very smart and wildly sucessful program...... It is much better to put the governemnts money into programs which compound their effect like the auto industry than to put government money into programs which have the opposite effect which is often the case.

[JMS]

It did. Car sales went up. None of the relevant companies had to close.

Exactly... How much is it worth to the governemnt to have a domestic auto industry? Is it worth spending about .5% of what we spend on defense to save 20% of the countries manufacturing base and a few million jobs! Absolutely it was.

[PeterMP]

The only issue the government was looking at was perserving the American Auto Industry which irroneously ( ie fluke ) was about to blink out of existance largely from no fault of their own.

There is a reason that it was the US auto industry. There was never really any fear of Toyota, Honda, or any other number of companies going under (including really Ford).

The US auto companies have been poorly run for an extended period of time and that is completely and totally their fault.

[JMS]

There are companies/countries/people that literally have money sitting there doing nothing.

Not unless it's the proverbial "cash under the mattress." When you put your money in a bank, or invest it in a mutual fund, or buy a bond, that money is going to someone else who wants to do something with it.

Hubbs you are missing the entire point of the economic crisis. Trillions of dollars were lost in the blink of an eye in 2008. Folks were not investing their money. They were sitting on it. They were more concerned with perserving their capital than creating new capital because when you loose 20% or more of your holdings perserving sounds pretty freaking good.

The only institution which could still borrow money was the Federal governement. People were knocking down their doors to get into T-Bills because it's the safest investment in the world. We saw the interest rate on T-Bills go to near Zero percent competition was so feirce to purchess them..

The money wasn't getting into the economy, and if the governent didn't start spending the economy was set to contract on a significant scale. Why? Because people were panicing, lenders were panicing, and purchasers were panicing. That's what caused the crisis..

[zoony]

I wonder if a national "no sales tax" day would have been possible? The fed would have had to reimburse states I guess... not sure that would have been possible or comparable to the cost of cfc

I thought cash for clunkers was a decent idea, but could have been executed bettter. Guy trades in his 1998 ford explorer for a 2009 Dodge Magnum. Did we really just increase our fuel mileage?

[alexey]

I wonder if a national "no sales tax" day would have been possible? The fed would have had to reimburse states I guess... not sure that would have been possible or comparable to the cost of cfc

That would probably be more expensive and most of the money would go towards stuff people would buy anyway.

[JMS]

There is a reason that it was the US auto industry. There was never really any fear of Toyota, Honda, or any other number of companies going under (including really Ford).

The US auto companies have been poorly run for an extended period of time and that is completely and totally their fault.

Toyota and Honda are supported by the Japanese Government. They have a partnership with governemnt in the form of a protected market and financing agreements which gives them a significant advantage in economic troubling times.

The reason Ford was not existentially threatenned by the economic disaster had nothing to do with Ford's product or company. It was related to the fact they had concluded a new financing agreement with some banks just before credit got tight which effectively gauranteed them a huge line of credit. It's like you and I both loose our jobs and are broke, but I have a home equity line which will allow me to maintain my standard of living for a few years; while you are living on the streets....

It wasn't that Ford sales were any less effected by the crisis or that ford had a huge bank account. They just had some good timing on signing a credit agreement which GM and Chrystler didn't.

As for being poorly run. I would argue that is irrelivent to the scope of this discussion. I get your point that if the auto industry had smaller more fuel efficient cars, or hybrids, or electric cars as an alternative; If they had cars folks were willing to buy; They would have been better off.

But that's not really relavent to our discussion. The drop in car sales was across the board, not focused on just American cars. It was driven entirely by the banking crisis and the panic which resulted. That had nothing to do with GM or Chrystler.

[zoony]

That would probably be more expensive and most of the money would go towards stuff people would buy anyway.

what about a no sales tax day for any purchase over $5000 that is financed through a lending institution? :cool:

that would have been two birds... no, three actually

....

[JMS]

I thought cash for clunkers was a decent idea, but could have been executed bettter. Guy trades in his 1998 ford explorer for a 2009 Dodge Magnum. Did we really just increase our fuel mileage?

The program wasn't about increasing fuel efficiency. The program was about giving a starving industry a crust of bread. If we made it about more than that it ultimately wouldn't have been as sucessful at it's intended purpose.

[JMS]

what about a no sales tax day for any purchase over $5000 that is financed through a lending institution? :cool:

that would have been two birds... no, three actually

....

cough cough.... I didn't realize the federal government had a sales tax.

cough cough....

Or are you talking about the federal government paying the state sales taxes for consumers? Yeah I'm sure the republicans wouldn't have had a problem with that!

[Hubbs]

Have you seen gold prices?

That has nothing to do with the circulation of currency (at least not anymore, as Ron Paul would note with a depressed sigh). People buying gold give up cash to get it. Once the seller has that cash, it'll go towards something else. The buyers can bury their gold in the backyard for all I care. They could even try to find a government program that would destroy that gold for them if they wanted. Say, that reminds me of something....

Who cares where the government got the money? They borrowed it from China, they printed it, they sold off the last few ounces of gold they had in Fort Knox...

You said, very emphatically, that I was dead wrong about the government's action removing $3 billion from the private markets. I busted out my LOLlerskates, then asked you to go through the first step in proving that I was wrong. I was betting that you wouldn't even make it that far, and you didn't, because you can't. It is, in fact, entirely relevant where the government got the money, because there were countless individuals and companies who were borrowing from the credit market at the time. The fact that there weren't as many as there were in 2007 doesn't matter, because as long as there weren't zero, someone else could have borrowed that $3 billion at a slightly higher rate of interest and put it towards profitable enterprise. Instead, we used it to destroy things we had already built.

The only issue the government was looking at was perserving the American Auto Industry which irroneously ( ie fluke ) was about to blink out of existance largely from no fault of their own....

:rotflmao::rotflmao::rotflmao:

This has to be the single greatest sentence written in the Tailgate all year.

Exactly... How much is it worth to the governemnt to have a domestic auto industry? Is it worth spending about .5% of what we spend on defense to save 20% of the countries manufacturing base and a few million jobs! Absolutely it was.

Right. Because if GM and Chrysler had gone under, they wouldn't have filed for bankruptcy protection. The courts certainly wouldn't have tried to come to an agreement between the various parties involved that would allow the companies to re-emerge with healthier business models and labor agreements. And if that proved to be impossible, the courts absolutely wouldn't have sold off assets like car factories to investors looking to do something with car factories like, and I'm just spitballing here, building cars, perhaps under a new company name run by new management that wouldn't get itself entangled in contracts it couldn't hope to fulfill.

No, if GM and Chrysler had failed, there would have been a Factory Burnin' Jamboree, where all the locals would gather around every building owned by either company and turn them all into a giant bonfire, then roast hot dogs and marshmallows all night and reminisce about the days when Americans built cars. Because that's what happens when big companies go under in the United States. The industries simply vanish, and no one ever performs those same tasks ever again.

[deejaydana]

The only issue the government was looking at was perserving the American Auto Industry which irroneously ( ie fluke ) was about to blink out of existance largely from no fault of their own....

I nearly fell out of my chair at this comment. They'll be teaching stories about GM in business schools (under the "what not to do" section of the given course, literally, for years to come. To say their fates were not of their own doing is just laughably untrue.

[zoony]

cough cough.... I didn't realize the federal government had a sales tax.

cough cough....!

Jesus you are obnoxious sometimes. Read more carefully, or just don't say anything.

Thanks.

[alexey]

what about a no sales tax day for any purchase over $5000 that is financed through a lending institution? :cool:

that would have been two birds... no, three actually

....

Over $5000 and under $50000? That makes sense to me, but like JMS said there are other problems with that, and that does not support a particular industry.

[zoony]

The program wasn't about increasing fuel efficiency. The program was about giving a starving industry a crust of bread. If we made it about more than that it ultimately wouldn't have been as sucessful at it's intended purpose.

Oh I see, MPG had nothing to do with it. Now it's all clear. Thanks for that

....

[zoony]

that does not support a particular industry.

which, to me, is somewhat of a benefit. I thought the scope of cfc was far too narrow to be an effective spur.

If you want to shore up auto companies, and that is your only goal, there are far more efficient means to do so than the cfc program.

[Hubbs]

I run a used car business with my Dad. I'll tell you right now, this program was a giant failure for us. It may have stimulated bigger business and got money flowing again to the bigger name companies for a short time, but at the expense of small business owners like myself. By law, we are not allowed to deal with a new car. Because of that law, cash for clunkers didn't help me in anyway whatsoever. It actually just took any potential clients away from me and sent them to the front doors of franchise dealerships for Ford, GM, Honda etc. Only thing it really did was terribly mess with the normal trickle down system of how I buy cars. Normally what happens to your car after you trade it in, it gets processed by the dealer you traded it in to. If it is found to have good enough value to be resold at that dealer, they will clean it up and sell it there. Not many cars make this cut, as conditions of the car have to be perfect. If the car fails to make the cut, the dealer will send the car to an auto auction where people like myself have the opportunity to bid and purchase the car. This is where cash for clunkers went wrong. Every car that was traded in was considered a clunker. While some where clunkers, a lot were not close to being clunkers. Not everyone was trading in a car made in 1983. This dried up the used car auctions so bad, that it has been almost impossible to find a deal on any used car for nearly 8 months now. I have watched auctions in Orlando, Virginia, Texas. I mean anywhere there was rumored to be good deals I watched. But what I saw yesterday blew my mind, and it is a perfect example of how overpriced the used car business is right now. I bought a 2005 Infiniti G35x with 35k miles at auction in September of 2008 for $11,300. I sold that car in November 2008 for $13,900. Yesterday, I watched a 2005 Infiniti G35x with 65k miles run thru the auction and pull close $15,000. Tell me there isn't something totally #$%*ed right now. I was on the phone a couple months ago with my licensing official here in Florida. She stated that just in Florida, 3,000 dealerships have closed since cash for clunkers. We are doing everything we can to just break even and ride this thing out till the market corrects itself again, but I don't know how long that will be. I'm sincerely happy this program helped out some of you guys, but it will more the likely put me and my pops company out of business.

The Law of Unintended Consequences.

It sucks that you're in such a tight spot. I hope you make it through this whole economic mess to some brighter days.

[PeterMP]

which, to me, is somewhat of a benefit. I thought the scope of cfc was far too narrow to be an effective spur.

If you want to shore up auto companies, and that is your only goal, there are far more efficient means to do so than the cfc program.

It has to be done in a manner that wasn't specific to the US automakers. The Japanese and others were already screaming about some of our actions reking of protectionism.

We didn't want to start a trade war and have another Smoot-Hawley.

[JMS]

Oh I see, MPG had nothing to do with it. Now it's all clear. Thanks for that

....

The cash for clunkers program didn't do a lot of things. But what it did, it did pretty well. In one of the most depressed automotive markets ever, it inspired tens of thousands to buy new cars...

For every 1 dollar the Government spent on the program. The consumers spent 5. Over a few month period it was a pretty good life support system for a very important industry which wildly needed it.

[JMS]

which, to me, is somewhat of a benefit. I thought the scope of cfc was far too narrow to be an effective spur.

If you want to shore up auto companies, and that is your only goal, there are far more efficient means to do so than the cfc program.

:doh, like what? Name one... just one...

( knowing that GM and Chrystler weren't the targets of the CFC program, it was the American auto industry which also includes numerous foreign automakers now that they are "oblidged" to manufacture a percentage of their cars on our shores).

[mardi gras skin]

If you want to argue that cash for clunkers is a bad idea this is it.

I think nehneh's post (number 63) is a solid argument against the clunkers program.

[JMS]

It has to be done in a manner that wasn't specific to the US automakers. The Japanese and others were already screaming about some of our actions reking of protectionism.

We didn't want to start a trade war and have another Smoot-Hawley.

Also those foreign automakers are part of the US auto industry too. BMW, Toyota, Honda etc.. are all required to manufacture a percentage of their cars in the United States and have since the mid 1990's when we gave up on free trade in this country.

In the 1990's Clinton's trade Czar (Mickey Kanter) told Japan that we had been dicking around with them and free trade for nearly 30 years and they still hadn't openned their markets. That we were tired of it, and that from now on until they openned their markets ( reviewed annually) they had to manufacture a percentage of their cars here. Also a percentage of their parts had to be manufactured here. That's how Mississippi, Alabama, and Louisiana got auto industries.

That's also how we effectively got control of our out of control trade deficite with Japan. Good old Protectionism.

[PeterMP]

I think nehneh's post (number 63) is a solid argument against the clunkers program.

Not to be rude, but the used car dealerships in this country don't have the same economic impact as a GM.

In reality, if you had to chose between EVERY used car dealership in the country closing their doors or GM closing their doors, it would be better for the US economy if the used car dealers took the hit.

Even if he closes, once things return to normal other used car dealers will open. If GM goes, there won't be another US GM.