An anology.

The overwhelming question of the day is why should some people be allowed to keep homes they bought but could not afford at a cost to those who made prudent decisions and either rented or purchased homes they could afford. I believe I have a suitible analogy to the situation.

Ever be sitting at a red light and when the light turns green someone in a neighboring lane figures out they are in the wrong lane and decides they want over into the lane you are in and the guy in front of you sits there and lets him in… then the guy in front of you squeezes through on the yellow and you’re stuck there for another red cycle?

Now the driver in the wrong lane could have sucked it up and found a place to turn around, or the driver in front of you could have ignored him and not let him in, but neither did. The driver in the wrong lane wanted the easiest solution to a problem of his own making. The driver in front of you wanted to a good deed to help someone. You got stuck with the bill.

When I’ve been stuck behind someone doing that I have simply layed on the horn to voice my objection and let the generous person know that there are people behind him. In all cases people look at me as if I am the problem. Why should I object to waiting an extra red signal because someone was in the wrong lane? Or maybe they cannot even conceive that their act of generosity (so the person in the wrong lane is not delayed) comes at the cost of delaying other people who were in the right lane.After all, the person in the wrong lane just made a mistake and needs some help. According to most in American society that is being courteous, to let the guy in.

Real courtesy is something rather different however. It’s the person making the mistake realizing that his mistake does not mean he gets to impose a cost on other people. If he is in the wrong lane he goes the direction of that lane and finds a place to turn around or goes around the block or makes other adjustments.

I think the way people behave in little things like driving explains their behavior in larger things. American society is one where people are expected to do good deeds for other people where the costs are placed upon a third party who had no say in the matter.



The CBO agrees, The Stimulus Will crowd out private investment.

Obama’s Stimulus Will Cause ‘Lower Wages’ for American Workers, Says Congressional Budget Office

Wow. The forces of reason are really making an impact when even part of the government agrees with Austrian theory.

The analysis concludes that the stimulus will put downward pressure on Gross Domestic Product (GDP) and wages after 2014.

But they are still a little bit off on the date. It’s going to be a lot sooner than that.

Although it gets better:

Rep. Paul Ryan (R-Wis.), the ranking Republican on the House Budget
Committee, said the CBO analysis underestimates the long-term economic
“Number one, the spending spends out very slowly, so it doesn’t give
you much of a pop,” Ryan told “Number two, it costs much
more than advertised. Number three, at the end of the day, it would
have been better to do nothing for the economy given that it [the
stimulus package] will reduce GDP growth and wages.”

In the end, all we have is a government that creates a crisis, then uses the crisis for its own benefit, and then lengthens the crisis.



The NY Times expects us to feel sorry for:

These poor people who didn’t get their five and six figure bonuses this year.

How will they ever live on mere $25,000 bonuses?

“Anthony Abraham, 33, a management consultant in Chicago, is already
figuring he will not be buying a new car, and has canceled a trip to
Paris and will be paying back less than planned on his student loans. Last year, his bonus was around $50,000. This year, it will be half that amount, he figures, give or take a few thousand.”

Really? He has to cancel his trip to Paris? Gee… such suffering. No new car? Oh my… heavens he might be seen in last year’s car! One would think with a six figure salary and fifty grand bonuses he would have paid off those student loans well before he was 33 years old.

I can see why nobody reads this paper any more and their stock price is now less than the sunday news stand edition.Could they be any more out of touch with reality?



Proping up prices.


I’m in the market for a new car. Problem is I’m not only picky and cheap but I hate car shopping. I dislike car salesman, dealerships, the entire experience. Since before it hit the showrooms I have been interested in the Shelby Mustang GT500.

Before the car came out Ford promised to build them to demand, that is to make as many as people wanted so that the dealers could not jack up the price based on a much lower volume of vehicles than buyers. Ford then changed and put them on dealer allocation. That is dealers would get a certain number of GT500s based on their sales volume and that’s it. There would be no going into a dealership and ordering it just the way I wanted it because the dealers would option theirs out in such a way to maximize their profit. This was a big minus because I really wanted to order one stripe delete. I don’t like them. I wanted a more understated car. I don’t need nor want the attention. Even worse it meant there would be much fewer cars than buyers.

When the cars hit the show room dealers started selling them at 15 – 20 thousand over sticker. Over the years this has declined to 5-15K over sticker. But you say Ford is having problems, prices should be down now? No. One local Ford dealer that is up front about their over-sticker price is still asking 5 grand over  sticker. Another which does not put that price on the window has had the same cars on their lot for months now. Business is bad, but they still don’t come down in price. I still do not buy.

I’ve been waiting for the crash for a long time now. I knew the bust would come in housing and everywhere else. I ended up buying housing because I just could not wait any longer, but I did it in such a way to minimize my exposure to the bust and so far so good. But I could hold out on cars. I have the ability to keep the cars I have going forever if I need to. I expect the bust to bring down the prices. I did not expect government bailouts to keep high prices continuing.

Without the bailouts the local dealers would need to clear these cars off their lots. With bailouts, with artifically low interest rates, they can leave the cars sit there until they find someone willing to pay the inflated price. I drove by the dealership today, the one they have in a more understated color that I could probably live with has been there since before I first noticed it in late October. They move it around every so often, but there it still sits. I stopped in once before the snow fell and asked if they were still selling them for over sticker, sure enough, they were. More GT500s and other Fords marketed as instant collectables and sold for over sticker have joined it. At last count they had 6 such cars just sitting there. In a real bust this would be impossible. The interest on such inventory alone would be killing them. But with the bailouts and federal reserve monetary policy they can afford to have the cars sit there until they get their price.

This little experience of my own shows me why government action extends and deepens depressions. Those of us who waited for the bust are the ones with the money to spend. We aren’t going to spend until prices are acceptable to us. The government works to keep prices high, but the people who bought at high prices are broke, over-extended, and so forth. They might want to spend but they aren’t capable of spending any more. They expended their resources and the resources they could borrow in the boom. All that’s available is what those of us who saved durring the boom have. The only way to get things going is to cater to savers, to cater to the patient buyers, not the reckless ones. But government and the Federal Reserve keep acting to keep prices higher than what will get a saver to part with his money and buy.

I’ll continue waiting to buy a new car until the cars I want, if it’s the GT500 or one of the others (which haven’t come down in price either as far as I can tell) is being sold for a price I am willing to pay for it. As will the rest of the people who have money to spend in this bust. The government can get out of the way and let prices fall and business can get going again or it can stay in the way and keep the pause button pressed.