Category Archives: Currency and Monetary Policy
“Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren, America has a debt problem and a failure of leadership.”
— Senator Barack Obama (Ill), 2006
— President Barack Obama, 2009.
Many auto industry analysts and dealers expect sales volumes to fall now that the program is over. They worry that many people who took advantage of the program were merely accelerating purchases they would have made later in the year.
If that’s true, the premature sales could hurt automakers, which increased production in the third quarter to replenish clunker-depleted inventories that had already grown low because of factory shutdowns over the summer.
Cash for Clunkers is essentially an inflationary policy. This is a policy well described by
Adam Smith Milton Friedman, with the exact same consequence:
In a dynamic world demands are always shifting, some prices going up, some going down. The general signal of increasing demand will be confused with the specific signals reflecting changes in relative demands. That is why the initial side of faster monetary growth is an appearance of prosperity and greater employment. But sooner or later the signal will get through.
As it does, workers, manufacturers, retailers will discover that they have been fooled. They reacted to higher demand for the small number of things they sell in the mistaken belief that the higher demand was special to them and hence would not much affect the prices of the many things they buy.
The government has arbitrarily and falsely increased demand for a specific good (new cars). They’ve done so by throwing money at it (a locally inflationary policy) and the automakers are ramping up production in response to what they THINK is a more stable recovery. But they may soon find, as
Adam Smith Friedman predicted, that they have been fooled.
Continuing his George Costanzaesque presidency, Obama has decided to reappoint Ben “Helicopter” Bernanke to another term on the Fed.
Here’s what Obama had to say:
Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and outside-the-box thinking that has helped put the brakes on our economic freefall
I thought it might be useful to take a look at some highlights of this Solon, this central – planner whom George Bush put in charge of the money supply:
Of course, as usual, Obama is dead wrong: the Federal Reserve’s actions have actually prolonged the downturn, made it worse, and have laid the foundations for an even bigger crash down the road.
In the days before the election, I told many of my fellow Massachusetts residents that Obama was not so much a break from George Bush as a continuation of his worst policies. I am sorry to say that he has been proving me right since. And this is yet another nail in the coffin of an administration that is showing itself to be even more incompetent than the Bush presidency.
CNS News provides the following quote (emphasis added) from Vice President Joe Biden:
“And folks look, AARP knows and the people with me here today know, the president knows, and I know, that the status quo is simply not acceptable,” Biden said at the event on Thursday in Alexandria, Va. “It’s totally unacceptable. And it’s completely unsustainable. Even if we wanted to keep it the way we have it now. It can’t do it financially.”
“We’re going to go bankrupt as a nation,” Biden said.
“Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, that’s what I’m telling you.”
My response is simple enough even for Twitter:
Earth to Joe Biden: Spending to avoid bankruptcy is like f***ing for virginity.
Considering the way Congress spends our money, perhaps ” orgy for sexual abstinence” may have been a better analogy.
Insert joke about stimulating the economy below.