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In addition to you and me it has little or any effect unless we buy imported goods like Prius' and French wine or any consumer good made in the Far East. Maybe..maybe down the road this might heat up inflation but there's no sign of that now. The Fed however says it has inflation dead in its sights. At the first sign....BLAM.
Worry, worry, worry...
Wait a minute, it is affecting all of us with ever escalating commodity prices. Its the exact reason oil prices are so high despite the market currently being awash in supply. A cheap dollar may give Cat or Deere an overseas sales lift, but concurrently it drives up materials cost adversely affecting cost of goods sold and gross margin. Its a mixed blessing for them. Instable raw material costs is a major problem for manufacturers and their vendors.
The Fed however says it has inflation dead in its sights
I believe this is true, but how many times does government or industry get timing right? Also, as our industrial base shrinks more of the products we consume are imported potentially increasing consumer impact from a sinking dollar.
I'm afraid that when the government means well and puts too much of their hands into things it too often turns out the medicine becomes worse than the illness. I don't doubt that the initial stimulus were necessary since presidents from both parties and their repective cabinets supported them. However you can't keep opening the spigot without eventually creating a flood.
Today's debt clock just crossed 12 trillion dollars.
The GDP of the U.S. is 13.84 Trillion dollars.
When the debt becomes more than a year's GDP, credit ratings and value for that nation's currency will plummet. Expect very bad things next year as a result.
I agree that like everything there's a limit. It's only in the last year that the US$ has crumbled. At the beginning of 2008 it was ~105Y : $1....then it fell to under 90 then recovered to 100 again now it's back at 90. Since this is an auto site, the US makers love the fact that imports are penalized 15% since last year. More money for them.
bpraxis, "Forget Bushisms, Biden Gaffes, We have Obama blunders" #740, 9 Nov 2009 10:44 pm
As I write this the Neon is sitting needing a valve job as the tension pully went bad, and the timing belt slipped and bent the valves. However the Neon always gave 30 + mpg. The three speed Auto was ok but the later 4speed aoto did much better. We also owned a 2001, and a 2004 Neon. They did not get quite the same mpg more in line with 28 mpg, still good compared the the replacement for the Neon the Caliber the 2.4 in the Compass we had got 22 mpg and once it got 25 mpg. We kept the Compass 4 months and 9,700 miles before trading it on a 2007 Pacifica AWD touring. WE really like the PAC gets 22-24 arround local driving, and the best has been 28 mpg on a long trip, but usually gets 23-26 on a trip. The PAC is one of the best vehicles we have ever had.
farour
Expresses what I saw and how I felt about the C4C program. . . and no, although I did buy a new car, I did not get to participate in C4C as my old vehicle didn't qualify since it had relatively good mileage. Bitter? Not really, just disgusted at seeing my tax dollars and future generations go to those who really didn't need it.
Several of my friends & co-workers did turn in their old mini-vans and SUV's for Ford Escapes - better gas mileage, but not by much.
Iraq, Afghanistan, Pakistan are entirely another thing. . . and don't EVEN get me started ;-)
As you can imagine, after Paris, I was feeling pretty good about my fleecing of America. But that was before a disturbing story from the Associated Press crossed my desk last week. It made me rethink what I had done. The news agency did an exhaustive study of the Clunker data and found some surprising, if not shocking, information. For one, the most common brand-for-brand swap was drivers replacing old pickups with new pickups that got barely better mileage: more than 8,000 people traded in a Ford F-150 for a Ford F-150, improving the mileage only one to three mpg over the older models. According to the AP, F-150 owners were 17 times more likely to make this trade than swap their vehicles for something like a Prius. Thousands more traded in Chevy and Dodge pickups for Silverado and Ram trucks.
The writer has no idea of what actually happened in the case(s) he referenced and he apparently has no idea of the math involved. Stupid people writing articles on second- and third-hand reports should not be allowed in front of a keyboard and their articles should not be published.
Question: Is it better for the nation that a participant trade a '95 F150 for a '09 F150 or that he trade an '02 Camry for a '10 Prius? Why? I will venture that the writer of the referenced piece is not smart enough to figure out the answer.
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thearchies - I think that is a misconception many people have regarding C4C. The "buyers" in C4C really didn't gain much versus what they could have done [price wise] under normal business conditions.
The real beneficiaries were in the auto industry including manufacturers, suppliers, salespeople, dealerships, etc. That's where most of the money went. The $3.5 or $4.5K that buyers got knocked off the transaction price for their Clunker trade could have been had last winter if they wanted it. They just would have had to negotiate a bit.
* digg
Dodgeman, you have just summarized the CFC program in just a few sentences!
Such clarity is rare these days.
Regards, DQ
at any other point in the last several years I'm afraid. And that was in addition to a well negiotiated price on the new vehicle.
Out of control capitalism will not only die, it will also bring on the end of the greatest bubble economy known to man. Let's face facts, you would of had to been buried under a rock, or just plain vanilla stupid to not have seen all of this coming. Our lovely little wealth creating machine based on debt, debt, debt and more debt would of died long ago in a more sophisticated society......Now is when reality begins to sink in.
This ponzi scheme gimmick is ill... No system is perfect, but how self destructive can one be when he allows it's citizens in a 70% consumer driven gdp economy, to believe that the over-leveraged consumer with the help of equity lines of credit on their overpriced over-leveraged homes could and would be sustainable to growth, which is absolutely critical to keeping the the great mirage of retiring comfortably on ones 401K winnings alive, flawed concept from the get-go?
Historians will one day giggle at how a young America grew so fast and strong in such a short period of time, to then in a matter of a generation or two, totally come crashing down for no other reason than plain old greed and stupidity.
Forward thinkers have been replaced by narrow minded little robots who can't put down the Kool-Aid. If not for government intervention(good money after bad) helping in keeping the scheme afloat, we would all be beating one another up at Walmart for the last loaf of bread right now....Oh, forgive me, I guess the CFC's of the world do serve us well...In postponing the enevitable!
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That's true if you received several thousand off the MSRP plus the $4500 "trade" but most people didn't. Many paid full sticker price or close to it.
Prior to C4C [last winter/spring/etc] manufacturuers/dealerships were offering HUGE discounts to get people into a new vehicle. $5000 to $10,000 off sticker deals were everywhere. Heck there were 2009 Ford Focus' offered at $4K under sticker last spring.
Along comes C4C and those deals largely disappeared. There were dealerships in my area that would have given you $12,000 or more for your 22 year old pickup last spring. You just had to buy another full-size pickup with a $45K window sticker. Presto - $33K out the door.
Absolutely correct, Mazda for instance had $5000 cash on the hood of '08 Miatas (yes they still had dozens of unsold 2008s).
During C4C there was zero rebate.
So you got $4500 for your clunker, but the price was actually $500 higher. More, actually, because of model year price increases.
“It was worth doing — it’s made a difference,” said Nigel Gault, chief economist at IHS Global Insight, a financial forecasting and analysis group based in Lexington, Mass.
Mr. Gault added: “I don’t think it’s right to look at it by saying, ‘Well, the economy is still doing extremely badly, therefore the stimulus didn’t work.’ I’m afraid the answer is, yes, we did badly but we would have done even worse without the stimulus.”
In interviews, a broad range of economists said the White House and Congress were right to structure the package as a mix of tax cuts and spending, rather than just tax cuts as Republicans prefer or just spending as many Democrats do. And it is fortuitous, many say, that the money gets doled out over two years — longer for major construction — considering the probable length of the “jobless recovery” under way as wary employers hold off on new hiring.
Among Democrats in the White House and Congress, “there was a considerable amount of hand-wringing that it was too small, and I sympathized with that argument,” said Mark Zandi, chief economist of Moody’s Economy.com and an occasional adviser to lawmakers.
James Glassman, a senior economist at JPMorgan Chase & Company, said: “If we could be absolutely convinced that the growth we’re getting is for reasons beyond the help the government is giving, then that would make sense. But the fact is we can’t be certain of that
Paul Krugman had been pushing for an increase of 50% in the stimulus bill from the beginning. Other's may be coming around to that position now.
C4C, Part II
An increasing national debt then means that "the reserves" of the nation are expended. So when the next economic recession occurs in the future, the cupboard will be empty, the last bullet has been fired, and the US $ is worth about the cost of the paper and ink it is printed on. The ability of the U.S. government to continue to go deeper into debt, is all based on the willingness of the world to loan them $$ thru treasury-bill sales and the like. At some point people say the U.S. owes too much; no more loans.
Now people say it is okay to run deficit-spending during a recession and I say fine to a small point. However that needs to be balanced by surplus years. This is not in the forecasts for the next 10 years. The forecast calls for continued debt and a weaker/poorer U.S.
This country needs to come to a balance where we don't spend more than we make. So yes a lot of people will need to work more and lower their expectations. The track we're on now with these stimuluses simply weakens us for the future. The $$ and jobs continue to flow out of this country, more people are collecting, homeless and unemployed.
So if others are coming around to that position - God help us. I guess desperate people eat their seed, rather than figuring out how to grow a crop next month.
China and Germany are already there. I think that Obama got an ear full on his trip to China.
Germany’s new finance minister has echoed Chinese warnings about the growing threat of fresh global asset price bubbles, fueled by low US interest rates and a weak dollar.
http://www.ft.com/cms/s/0/4ec41a1a-d616-11de-b80f-00144feabdc0.html
India dumping dollars and running up Gold to new highs should get someone's attention in Washington DC. I think they are too busy handing out stimulus money as favors to political cronies. A lot of it to districts that do not exist. It makes you wonder how many vehicles were purchased under the C4C plan that did not exist.
" So yes a lot of people will need to work more"
Don't Americans already work more than their counterparts, and more than anyone in the developed world?
"This country needs to come to a balance where we don't spend more than we make"
That goes against the ideal of the "free market" globalists, who survive via the dumping of endless slave-labor trinkets on the consumer market, as a means of keeping the masses contented and submissive. Spending less than you make means you have to discard consumerism as the defining trait of a society. Can it be done?
Lower expectations...aint globalization grand.
Do the research yourself on the actual websites that have actual info. Don't accept 3rd or 4th hand 'reports'. Those reports are for the weak-minded that won't do the smple work of looking up facts for themselves.
That may be a bit harsh unless you are referring to the members of Congress.
News, if you call it that, and guidance on how to live for the weak-minded....on both sides.
2013 LX 570 2016 LS 460
If not the plan is a bad idea.
PS
I am watching for a clean pre 1996 F250 with a Powerstroke diesel just in case the next C4C is as screwed up as the last one.
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I agree. The bailed out U.S. automakers (GM / Chrysler) will not make to 2011 without another C4C type program next year. It will be C4C II or hand GM billions more and hope they make money in 2011.
GM lost $1.6 billion in the 3rd quarter '09 WITH C4C! Surely they would have lost OVER $2 billion without it. 4Q09 and 1Q10 will be a disaster for GM and by spring we'll be looking at C4C Round II.
But IF there's a C4C-2, I think a sliding scale will be used, on some sort of consumption based formula--gallons per ten thousand miles, not miles per gallon. There might also be additional incentives to buy ZEVs or PZEVs.
The most politically popular proposed alteration--basing the rebate on where the new car is assembled--simply can't be implemented at all without violating at least half a dozen major trade agreements. Expect some political grandstanding on this issue, even though everyone involved knows it's not going to happen.
GM is hemorrhaging money, it's true--but unlike Chrysler, there's enough of GM left to save. They have viable product in most sectors of the market, and more on the way, while Chrysler's R&D has been essentially shut down for the last two or three years.
http://www.nbc.com/saturday-night-live/video/clips/china-cold-open/1178451/
please read this link,
http://www.detnews.com/article/20091211/AUTO01/912110345/1148/auto01/Detroit-aut- - omakers-say-Japan-s--cash-for-clunkers--excludes-U.S.-vehicles
Wake up America !!!!!!
You make a valid point, but the US sells very few vehicles in Japan for a reason. Most US vehicles are too large for Japanese roads and infrastructure and most don't offer right hand drive. I think Ford and GM are smart focusing on China and India over there, because that's where the volume and growth are. Japan is a relatively small market that remains stagnant. Even if it were fully open the volume wouldn't do much for Detroit. That's probably why Europe hasn't made a big deal about it either.
Cash for clunkers will screw the consumer over there just like here, the manufacturers will find it mostly just moved up sales rather than creating a bigger volume over time, and the car dealers will be the primary beneficiary!
Having said all of that, I do feel the US is dumb in international matters. We seem to be all too willing to make bigger contributions or compromises than everyone else. We'll probably get hosed in Copenhagen and see our utility bills go up disportionately. For that matter, why are we footing most of the bill for middle east security? We don't even get the majority of our oil from over there.
There's a book out called Meltdown, that explains the idiocy of our government much better than I can.
1. The destruction of used cars drives up prices of used cars and makes them unafordable to lower income people.
2. The C4C encourages consumers to take on more debt when we need to do is reduce debt and rebuild our balance sheets.
3. The C4C is another form of corporate welfare favoring one industry over another with money we do not have. This is another way of creating the false image of prosperity to buy votes.
4. C4C is moving future sales into the present simply postponing the economic adjustments that we must make.
I could go on and on but you get the pic as the road to hell is paved with good intentions.
A society becomes prosperous by:
1. Hard Work
2. Saving
3. Entrepreneurship
Socialism punishes the aforementioned.
Maybe it's time for Mr. LaHood to be locked in the trunk (figuratively speaking, of course).
So the decision was made to save the Big 3 and to stimulate some auto sales with Cash for Clunkers.
So you have to consider the unseen consequences of piling an economic disaster (the auto industry) on top of economic disaster (banking and construction/real estate) while wearing your 20-20 hindsight glasses.
I think we got off cheap.
We really didn't "get off" yet economically. We had a housing bubble created by loose credi and risky lending encouraged by the government thru different "do-good" legislative bills. We've had the government create Fannie Mae and Freddie Mac as buyers and insurers of those risky mortgages. We ended up with expensive houses being sold to people with little or no income, and housing appreciating while wages were stagnant. So when the market goes to readjust, to get back to sensible, historic prices: personal income, and loans be offered to people with some equity, what does the government do - they come in with tax credits and refinancing to prop up the artificially high house prices, which even after adjustments many places are still too high.
If the government withdraws those housing credits or C4C for that matter then we see that the prices and number of sales drop to what they would naturally be.
The government can't continue to add debt every year like this one. The government will have to cut spending that creates the temporary jobs they've added, they will need to stop giving money to people buying housing, and they will need to stop suporting auto companies in various ways.
The government needs to stop creating bubbles in the economy, and then trying to support them. The government is not the cure for problems, the government is the origianl and ongoing cause of the problems! Read 10 or more pages of Meltdown, and see if this is not the likely case.
I think there are enough encouraging signs out there right now that political will to do another auto Cash for Clunkers isn't going to happen. Back in November, I wouldn't have been surprised to see another one floated.
First the C4C was intended to benefit the auto industry, specifically the many dealers in every Congressional District throughout the US. That was the stated intention. Secondarily it was intended to inject up to $3 Billion into the economy.
It is so important that we examine the seen and the unseen consequences of economic policy.
1. The destruction of used cars drives up prices of used cars and makes them unafordable to lower income people. See the first stated objective above. Yes taking 700,000 clunkers off the roads did reduce the supply ( temporarily ) of Used Cars but it also made those remaining more valuable both to traders ( ! ) and to retailers. Used Vehicle buyers did pay more, if they chose to buy.
2. The C4C encourages consumers to take on more debt when we need to do is reduce debt and rebuild our balance sheets. This is true but the ones that did take on the debt were exactly the ones that needed to be induced to get back into the market, the well-to-do and those sound credit-wise. In fact the 'Get-Me-Dones' were almost entirely excluded from the program. Our economy is built around growth through purchases on debt. You can rail against the way our economy is structured over on economy.com. To do so though is to scream for the wind to stop blowing.
3. The C4C is another form of corporate welfare favoring one industry over another with money we do not have. This is another way of creating the false image of prosperity to buy votes. Yes as part of the stimulus package this was the part directed to the retail auto industry. Other industries got their share, the auto industry was not going to sit quietly aside and allow every other segment of the economy to 'get theirs'.
4. C4C is moving future sales into the present simply postponing the economic adjustments that we must make. This is simply NOT true.
I could go on and on but you get the pic as the road to hell is paved with good intentions.
A society becomes prosperous by:
1. Hard Work
2. Saving
3. Entrepreneurship
Socialism punishes the aforementioned.
A small society becomes prosperous by: .............. FYP, we don't live in Iceland.
At the time that C4C I was created the auto industry was on a SAAR of 9.5 MM units. All the way up 'til June this was the figure that everyone had including Edmunds herein. C4C was created only to give a temporary boost to retail auto sales. It was originally forseen to add 1 MM units but it was cut back to ~700,000 units
At conclusion C4C added ~500,000 units to the year-end total. Anyone involved could see it from the type of customer that took advantage of the program. It was the once-in-a-decade buyer with money to spare that was able to jump immediately and take advantage.
The economy improved slightly in 4th Qtr, after C4C was done. The Year-end total was 10.4 MM units. C4C added about 500,000 units to the year-end total. It accomplished its goal. It worked perfectly as planned.
I hear what you're saying but to me these stimulus programs to support the housing prices and continue to add more debt, is nothing more than asking an ailing person to keep blowing air into a balloon with a hole in the side. It is making the person (government) weaker and will not achieve its objectives. The economy must reach equilibrium. Housing prices must come down to match incomes, and we can not consume more than we create.
The U.S. federal government have been covering up the decline of the U.S. economy - the loss of its middle class manufacturing, and its educational failures, and societal softness that U.S. workers are spoiled, by financing the economy on borrowed money. We are borrowing more and more $ from foreigners each year, to give the U.S. public the perception that the country has not declined economically, and is losing the global competition battles on most fronts.
One of these years when the debt reaches $20B or $25B, probably around 2020 foreigners are going to say - "U.S. you can't reasonably pay us back, or the risk is too high and we want 20% interest on those Treasury bills your selling". Take a look at the Obama numbers for the coming years, and see where we're going. With that sort of debt there are no stimulus's possible, there are no budget deficits allowed. There will be no aid to states, no aid to people who need help with utilities, and in general reductions across the board. That will slow the economy, and the higher taxes that will be needed will also slow the economy.
I rather take my medicine now, and put the government on a lean diet with a balanced budget, with our populace told to get hungry and work hard. What you guys are promoting to keep spending now and keeping the bubbles, is just leading to more and worse trouble in the future.
Look back the last few years and you'll see increasing stimulus's to the economy, and you'll see short improvement, followed by a worse situation followed by bigger stimulus. Take a look at Jobs lost in Dec. and the housing numbers and you will see that the numbers weren't so good.
It accomplished its goal. It worked perfectly as planned.
Short-term yes; it just made the long-term problems in the economy worse.
It's not just pulling a purchase forward, it's motivating a purchase that otherwise would not have happened at all.
Some times these perks do work they way they're intended.