In the global village, mistakes can be felt here on the town square

Some things have an unexpected way of introducing themselves into our lives. World affairs usually make for interesting dinner conversation, but they seem remote — outside of nuclear Armageddon or 11th-century fanatics seizing the world oil supply.

Lately however, I’ve seen a couple of examples where national and international blunderings became localized.

For instance, in speaking with a couple of folks this week about making major acquisitions, like a new vehicle or home, both mentioned they weren’t sure they should make any big purchases with possible war and unrest around the globe.

Interestingly, I think we’ve come to recognize here in western Colorado that colossal ineptitude in foreign policy or blunders in economic theory affect things like the bond market which in turn affects interest rates for things like cars, houses and really big television sets.

Locals are starting to understand that the mucking about Secretary of State John Kerry is doing affects the payment on that new F-150 pickup here in Grand Junction.

While we’re familiar with some direct examples where K Street lobbyists directly affect Colorado — like when someone in Washington D.C. decides there are not enough sage grouse and too many jobs in Colorado — some of the slightly indirect policies influences have also become apparent.

We saw some press about this week about something that affected us locally in 2009: the economic blunder called “Cash for Clunkers.” that had the federal government buying older cars, destroying them and paying owners $4,500 in cash to buy new, supposedly more fuel-efficient vehicles.

What local used car dealers told me was that this resulted in the disappearance of the good $3,000 car that everybody looks for when they send their kid to college or so their son can get a job at Taco Bell and they don’t have to loan him the family Chevy.

Turns out the program’s biggest accomplishment was not just in artificially subsidizing people to turn in otherwise viable used vehicles to be destroyed and kicking a hole in an important piece of the used car market. A study by the National Bureau for Economic Research in Cambridge, Massachusetts released last month showed the program was even more of a failure than we saw on our local car lots.

Mainly I theorize this was because the people who cooked up the idea apparently knew nothing about a market-based economy or supply and demand.

The study found it wasn’t enough that we saw a disappearance of an entire segment of the used car market, making it difficult for dealers, parents and young adults to acquire value-priced vehicles, but that the government spent $3 billion in taxpayer dollars financing the program and it ended up costing the auto industry $3 billion in lost revenue, which I would submit directly contributes to a drop in capital investment and job losses.

The study further discovered that any upsurge in buying of new vehicles as a result of the program, was offset in decreased purchasing habits during the months following it.

Adding insult to injury, Fox News reported: “Strikingly, we find that Cash for Clunkers actually reduced overall spending on new vehicles,” the researchers reported, noting households “tended to purchase less expensive and smaller vehicles such as the Toyota Corolla, which was the most popular new vehicle purchased under the program.”

That’s pretty great that we can have an economic stimulus plan that removes choice from our own market and encourages the Japanese economy.

A corollary to this is that viable used vehicles that were destroyed as part of the program, like that 125,000 mile ‘96 Civic, became artificially scarce, which means their cost was elevated while the actual utility to the final purchaser remained unchanged.

What this demonstrates is that progressives are right: It is a global village. At least if the mistakes one makes are big enough, we feel them right here in the town square.

Rick Wagner writes more about politics on his blog, The War on Wrong.

COMMENTS

Commenting is not available in this channel entry.

Seriously? No used cars on the market? Have you looked at your own paper’s want ads lately? Or how about the free newspaper that has all kinds of things for sale? Oh and then there is the pesky fact that Toyota Corolla’s sold in the US are primarily manufactured in places like Mississippi. From Wikipedia: Production in the United States (at NUMMI in Fremont, California) ended in March 2010.[4] It was resumed late in 2011, after a Toyota Motor Manufacturing Mississippi plant was opened in November 2011 in Blue Springs, Mississippi.[5]

Rick, there have been wars and unrest in the world from the beginning of history. If people are hesitant to buy a house, car, or other consumer durable on credit, it is absolutely foolish to not take advantage of the current low interest rate environment, as rates will eventually go up. And how pray tell does Mr. Kerry have anything to do with the cost of financing a new truck?








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