Professor Elam

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Priming the Pump

Washington politicians are forever fiddling with rules and spending. The result is more rules and spending but rarely anything is accomplished. 

Here is the latest on Cash for clunkers

CARS WILL LEAVE SCARS

The scuttlebutt is that the cash-for-clunkers triggered an even greater rush of activity in August and that we will see 14.3 million (annualized) units of auto sales on the month, which would be the highest tally since April 2008 and a 27% MoM increase over July. But the folks at Edmunds.com are noting that sales towards the end of the month were tapering off towards an 8 million rate. 

As we have discussed in class, this simply robs future car sales and leaves buyers with debt when they had a paid for car. The results no doubt show up a quarter or two from now in even lower sales. The same thing will be true for the 8K rebate for first time home buyers. 

Spending will only change when mood changes, a fundamental of socionomics. 

I suspect we have a permanent shift to saving money and spending what one has rather than borrowing. No amount of govt fiddling is going to change that. 

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2 responses to “Priming the Pump”

  1. Brianna Moltz Avatar
    Brianna Moltz

    The CARS program been over for about two weeks. I was able to experience the increase in vehicle sales first-hand; two weeks later, our sales are down. This was to be expected; however, I believe Edmunds has a good point that the sales will continue to fall. Our GSM just made a comment today of how we are only doing three a day. Our sales were averageing 14 a day.
    From a dealership standpoint, this program was great to boost sales for month but, unfortunatly, it has flooded the market with new cars. With everyone driving a new car, there is no need to make a trip to a dealership.

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  2. uaRTERL Avatar
    uaRTERL

    Brianna reflects what most American have concluded this simply moved future sales into this quarter, leaving next quarter rather dry.
    this is the problem, among others, with short sighted politicians governing by reading polls once a day, every day.

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