Thursday, October 6, 2011

Nontrepreneurism Part 3 - Cars and Clunkers

Nontrepreneurism Part 3 - Cars and Clunkers

Continuing Discussion of : How Nontrepreneurism is Killing the U.S.

Sheldon Filger in the Huffington Post: “Cash for Clunkers is Really Economics for Dummies
“In confronting a crisis of epic proportions, one can do the heavy work of crafting a well conceived, comprehensive strategy. But why bother, when short-term gimmicks are politically more feasible.”
[Editor’s note: Wonder if HuffPo saw the BusinessInsider article below?]

Nikhil Rheja on Seeking Alpha: “Cash for Clunkers: Wasteful and Stupid
If the debt is high in the country, consumers become more likely to default on their obligations and also increase their savings… The Cash for Clunkers program, however, attempts to force the consumers to go into deeper debt which they can probably not afford to service if they lose their jobs.
[Editor’s note: Nikhil's analysis, that is his job title @ Keystone State Capital Corporation, is right on the mark.]

Kristen Korosec on BNET News: “Cash for Clunkers Pilfers Renewable Energy Loan Program
For all of the benefits touted by its supporters – both economic and environmental – it’s worth noting that the money has been taken from another program aimed at creating jobs, reducing emissions and making the country more energy independent.
The $2 billion used to extend cash for clunkers was drawn from the Department of Energy’s loan guarantee program, a $6 billion fund to support clean energy projects that use innovative technologies. That means projects using biomass, hydrogen, solar, wind and carbon sequestration technology would qualify.
[Editor’s note: I guess we may never know if Solyndra II was avoided because of C4C. Did we dodge a bullet here, or did we just chamber another round?]

Vincent Fernando and Lamelia Angelova in the Business Insider: “Cash for Clunkers MASSIVELY distorted GDP
According to the Bureau of Economic Analysis (BEA), motor vehicle output spiked a seasonally-adjusted 157.6% quarter on quarter. This is completely unprecedented. Vehicle output is clearly going off a cliff next quarter…

Bottom Line:

Cash for Clunkers was a mess and not a solution. It distorted the economy while helping some groups over others at the expense of the taxpayer. 

I'm watching for the inevitable "C4C Loans Start to Go Bad" headline.


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