September 3rd, 2009 at 5:21 pm by Eric Halvorson under Eric Halvorson's Blog, Uncategorized
In the last few days, I’ve heard a couple of economic analysts make the same prediction: the success of Cash for Clunkers may lead to slow sales at Christmas. The analysts say many of the buyers of those new cars didn’t have car payments — until now. That means, now, they will have less money to spend for the holidays.
I asked local financial expert Peter Dunn what he thinks of that prediction. Here’s his response:
“Clunkers messed with the natural cycle of supply and demand. Supply and demand will find its balance, therefore there will be a huge period of depressed demand.
On the flipside (per your question) There has been a decrease in the supply of peoples’ disposable income. Therefore the natural balance will be found. That means they will be forced to spend less over the holidays, or they will increase their debt. Either result is an indirect side effect of cash for clunkers.”
August 5th, 2009 at 2:40 pm by Eric Halvorson under Eric Halvorson's Blog, Uncategorized
“Usually, government interference prolongs the problem.”
That’s one of the conclusions of David James of James Investment Research in Xenia, Ohio. He was interviewed on a financial news podcast I listen to. James told the interviewer government spending tends to be very inefficient. “We went back to the 1940’s,” he said, “and our data shows that it takes over $7 of government spending to have the same economic impact” as $1 spent by the rest of us.
After hearing that, I went to the JIR web site to find a little more information. The report Mr. James mentioned concluded that ”only $60 billion of the authorized $787 billion has been spent, a mere pittance in a $14 trillion economy. In addition, a lot of money is being wasted on pet projects, or will go to cover state funding shortfalls. Furthermore, in a major blow to stimulus spending, consumer savings increased by $161 billion last month, almost three times the stimulus payments.”
James also noted the “feeding frenzy” in the Cash for Clunkers program. He told the interviewer it may just take “future sales from future months.” And, while he’s glad to see the boost in business, it does not mean “this is the start of a great new economy.”
