Wednesday, August 05, 2009
Now, I don't think that's exactly fair - Cash for Clunkers is as much or more of a Congressional horror as it is a creature of the Administration. But the White House has made the decision to defer to Congress & enthusiastically supports, prepares, and serves for supper the monstrosities that careless blind giant vomits out upon the national kitchen table. Obama's minions are fully committed to this destruction of wealth, to this assault upon the resources of the industrious poor. It is a welfare program which transfers government funds to those who can *almost* afford new cars, while wasting marginal & distressed assets which would otherwise populate the purchasable stock for those with the time and skills to maintain creaky old vehicles who also are without the funds to buy new cars, even with a 4.5k helping hand by the government.
Frex - a guy here at work bought a new F150, a bigger truck, with a handshake deal with a third party who was going to buy his six-year-old extended-bed Ranger. That third party's planned financing fell through, and for a while this guy had two trucks (and two truck payments!) on his hands. The third party eventually re-negotiated a less generous financing plan, but my co-worker was stuck with the additional cost of carrying that payment for an extra month. Cash for Clunkers encourages people like my co-worker to buy, oh, I don't know, some hypothetical hybrid truck with miracle gas mileage, and destroy the Ranger. The struggling third-party buyer, who could barely wrangle financing for a six-year-old Ranger, would then be utterly SOL.
Update: This guy has a clever, if nasty, idea, but I rather think that if the Cash for Clunkers thing runs out, and many people follow his particular scam, that the resale value of CfC vehicles will be artificially depressed by the drug of his fellow scammers' assets on the market. Using assets to launder money tends to reduce the price of the asset in question in a manner roughly related to the convenience and difficulties of cleaning and the easiness of the unearned profit. In short, the transaction costs will consume some of the 4.5k, the final end-user will claim her share of the 4.5k, and a certain portion of the windfall will simply be a dead loss lost to the friction of the scam.
This is somewhat related to how my exploit of the first-time home buyer credit of this season will not be fully captured in value by yours truly, because I expect the asset I just bought was partially inflated by the prospect of the credit in the market. When December rolls around & the tax credit window closes, I expect that inflation will drain out of the market as well, thus reducing the apparent value of my asset. A certain part of that inflation was not real, but rather a temporary artificial fluctuation in response to the government incentive. The seller captured that portion of the value, insofar as I was willing to pay the premium. Now, it wasn't the full 8,000, because qualified first-time buyers are not the whole of the buying public - they aren't even a majority, although they might be a slight plurality. In weighing the advantages and disadvantages of this, I had to take into account the natural and direct governmental components in future inflationary trends, which *won't* disappear in December with the expiration of the first-time buyer tax credit.
Also, 8,000 is 8,000. I was willing to pay what I paid to get the house then. It was the reasonable cost of the asset, and if I can recapture some portion of that after the fact, great! But I don't expect to cash in on my place like a short-time investment. For one thing, I've committed to living in it for the medium-to-long term. I was living in the same rented apartment for nine years. I don't have happy feet.