nvm

[mrt144]

I'm not buying an American car...I'm buying a Kia. My old car is a 1997 Mirage that is beyond Shattastic. I could wait until August at the latest for a new set of wheels.

I tried to take advantage of getting a deal on an American, but I dont have enough for a good down payment. This is my first "real" car.

What will the cost of the Kia be at the end of the 60 month financing? I'd wait and see until the bill is passed (wow, another perverse part of this whole thing) to see if they make it American brands only. On the other hand there is the real risk that interest rates could be pushed up in the next few months which would increase the total cost of the vehicle. I don't think I would let this affect me too much if the need is pressing and it yields income for you (by transporting you to a job).

Are you looking at a Rio or Rio5 by chance?

 

[civ_king]

It should give $500 per 1 MPG increase, so to get the $4,500 it would have to be 9 MPG better...

 

[mrt144]

It should give $500 per 1 MPG increase, so to get the $4,500 it would have to be 9 MPG better...

That's ridiculously more comprehensible than the current plan.

 

[Shylock]

18 MPG is a pointless pick of a number. There's almost nothing other than SUVs on the road that get mileage that bad. I got that with the 1975 Buick with a 350 engine I had back in the early 80s. There aren't more than a handful of models built in the 80s that got mileage that bad. There's a handful of full size sedans, and a handful of sports cars that got that. A very small part of the market.

It makes it look like politicians are doing something. They love jumping in front of parades and pretending they were indispensable to the whole process... even if the process was finished before they were ever elected.

 

[mrt144]

Does anyone think earnings matter any more or is merely avoiding crashing the car into the stands warrant a champagne downpour on lap 100 out of 400.

 

[potatokiosk]

Imperfect solutions for imperfect situations. The simple truth is that the vehicles of the poor pollute more than the vehicles of better off people. Those cars belong off the road. But the program mrt144 mentioned will not help them. They will not be buying new cars. So how do you help them?

I think that if a $3500 voucher is not enough to get people to scrap their old cars it is highly unlikely that they would be able to afford to replace their car under your plan which offers no assistance whatsoever. Instead their only options are to not register their vehicle and hope they don't get caught, or never use a car and face substantial inconvenience, or simply pay the fine each year because while it's bad in the long run they can't afford to pay several thousand dollars to replace their car. In other words, they choose between crime, hardship, or regressive taxation. I'm a bit surprised that you prefer this approach.

I think it makes more sense to provide vouchers and pay for them by raising the gas tax by a few cents.

 

[Cutlass]

I think that if a $3500 voucher is not enough to get people to scrap their old cars it is highly unlikely that they would be able to afford to replace their car under your plan which offers no assistance whatsoever. Instead their only options are to not register their vehicle and hope they don't get caught, or never use a car and face substantial inconvenience, or simply pay the fine each year because while it's bad in the long run they can't afford to pay several thousand dollars to replace their car. In other words, they choose between crime, hardship, or regressive taxation. I'm a bit surprised that you prefer this approach.

I think it makes more sense to provide vouchers and pay for them by raising the gas tax by a few cents.

but who are the vouchers going to? That's the point which truly fails. People who are driving old cars that get 18 MPG cannot afford new cars, even with a $3500 voucher. Not even with a $7000 voucher. So the plan helps those people not at all.

The only thought I had that would be useful and make the my plan less regressive is to take the registration fees and use them to buy up old cars at $500 or $1000 each and junk them.

But even if you prefer the Congress's plan to mine for it's impact on the poor, keep in mind that first it's talking about a tiny amount of the cars on the road that it applies to, and second that it's environmental benefit would be trivial because so many of the cars that should come off the road do not meet the qualifications for the plan.

 

[Naskra]

Green shoot du jour?:

VATICAN CITY (AP) - A Vatican official is lamenting that many faithful no longer confess their sins, and says some confuse a psychologist's couch for a confessional booth

.

 

[downtown]

What will the cost of the Kia be at the end of the 60 month financing? I'd wait and see until the bill is passed (wow, another perverse part of this whole thing) to see if they make it American brands only. On the other hand there is the real risk that interest rates could be pushed up in the next few months which would increase the total cost of the vehicle. I don't think I would let this affect me too much if the need is pressing and it yields income for you (by transporting you to a job).

Are you looking at a Rio or Rio5 by chance?

I looked at the Rio and like it a lot...but its a little too small, and the the dealership is giving a lot of special rebates for a Spectra. I'm buying it mostly on credit sadly (1,000 down), which I hate to do...but I need it before I start my new big-boy job, and I don't have much of a choice. The payments are pretty small though, and I should be able to pay the car off early. It isn't like Spectras are really expensive.

I'm not really sweating it, but if I could save a few grand by waiting a teensy bit longer, I'd do that.

 

[Stolen Rutters]

Depression watch? Where is a 10% year over year drop in GDP? Did I miss something?

 

[Stolen Rutters]

is in us if u take account the real inflation not the government cpi bs which they obviously keep smaller than real prices(they would be idiots not to).

and the thing is, cpi doesnt say how much prices would actually fall due to increased productibity when money wouldnt be printed to prevent it so it doesnt reveal the actual extent of wealth confiscation by inflationg the money supply

also. even with government cpi figures down where i live gdp has fallen 15% from last year

Pardon my ignorance, but housing, fuel, and appliances have been getting cheaper for almost a year now. I got a steep discount on my roof and everything is selling for a song around here. Furthermore at work, I have seen raw material prices collapse across the board, especially metals and plastics, and I am having a hard time finding other price increases there too.

Where is this "real inflation" measured? Please supply data, since my personal experiences seem to belie claims of high inflation.

edit - I'm not saying it might not be appropriate to use the word depression. I just haven't seen the numbers yet. Inflation doesn't seem to be out of control here in the US, so I can't see how that would adjust the numbers the way you say.

 

[Stolen Rutters]

no one is measuring it to my knowledge. as usual, the state creates a coercive monopoly which makes it nearly impossible for other guys to offer those services at a profit.

as far as capital goods getting cheaper, that is absolutely correct, and absolutely what the ABCT says it would be like.

So then I'm doing the math backwards? I thought you were implying real inflation was increasing, instead you were saying real inflation was falling through the floor? Got it.

edit - or you are saying wages are falling faster than prices increasing a "real" inflation value? I can't get a handle on what you are saying, sorry.

 

[Stolen Rutters]

I'm an engineer, and I don't know economics or market as well as I should. I know some things in economics are somewhat non-intuitive. There are effects in physics that are the same way, so I understand I might just be thinking about the problem the wrong way.

The claim that inflation was accelerating didn't sound right. However, I think from a consumer perspective, that a broad decrease in prices means a reduction in inflation. I am not thinking about things like purchasing power being impacted by all the new unemployed. Maybe it is truly harder to buy things we want, but it's done in a way we can't see it. Where is the basis of the "real inflation"? Maybe the denominator is the shrinking value.

edit - I didn't mean to threadjack. I was just having trouble following the conversation. Sorry.

 

[PiMan]

is in us if u take account the real inflation not the government cpi bs which they obviously keep smaller than real prices(they would be idiots not to).

and the thing is, cpi doesnt say how much prices would actually fall due to increased productibity when money wouldnt be printed to prevent it so it doesnt reveal the actual extent of wealth confiscation by inflationg the money supply

also. even with government cpi figures down where i live gdp has fallen 15% from last year

Spelling and grammar would really help here. You've taken reasonably simple economic concepts, and made them nearly incomprehensible.

 

[Stolen Rutters]

basically, the prices of goods are dropping less slowly than they would due to state printing money and confiscating value from people by doing so, thus keeping prices up

Ah, that I understand. Yep, makes sense now. I am inclined to agree. Thanks.

edit - Though, I don't know if that alone would be enough to push this economic decline into a "depression" status, I get the fiddling-with-deflation part. (Actually I think staving off deflation was one of the stated goals of the stimulus package too, no?)

 

[Naskra]

See here for alternate measures of inflation: http://www.shadowstats.com

The BoLabor has changed their inflation measuring method several times since 1982, always in the house's favor.

"Deflationary pressures" is one the Fed's more inexplicable delusions. These guys need to get out more. Is there anyone who expects their cost of living to be lower next year? Food? Medical?
Fuel? Taxes? Rent? Central Banking + Fiat Money = Persistent Inflation is as close as economics gets to a law of nature.

 

[Integral]

See here for alternate measures of inflation: http://www.shadowstats.com

The BoLabor has changed their inflation measuring method several times since 1982, always in the house's favor.

This tends to come up every once in a while.

What specific criticisms do you have regarding the CPI's methodological changes over the past 25 years?

Indeed, the CPI tends to report higher inflation than our other mainstream price indicies (PCE deflator and GDP deflator). The changes of the Boskin Commission in '95 have brought the three together somewhat, but CPI still tends report the highest inflation of the three.

 

[Whomp]

The money supply argument is M x V = P x T. M =money supply, V = velocity of money, P = level of prices and T= number of transactions in the economy. The problem with the argument is M is increasing at a substantial rate but assumes "V" is constant. This is where the argument fails as we saw in Japan. They had a very accomodative central bank but no velocity of money and hence no inflation.

Earnings do matter and when we view past secular bear markets they go as follows:
1835-1843 was caused by low real earnings growth
1853-1861 was caused by high inflation
1881-1896 was caused by low real earnings growth
1906-1921 was caused by high inflation
1929-1949 was caused by low real earnings growth
1966-1982 was caused by high inflation
2000-???? seems to follow suit as we'll continue to experience low real earnings growth

This is becoming apparent as the average consumer is saving more (check the savings rate from earlier this week which was 5.7%. The highest in 14 years and likely headed to more normal 8% levels.) and discretionary spending is less and will continue. In fact, 1 in 20 50+ year old is taking a 2nd job. Their wealth has been destroyed and they're going to look for a place to save their $7.5 trillion earning zero. Watch velocity of money if you think inflation is going to rear its ugly head.

 

[mrt144]

The money supply argument is M x V = P x T. M =money supply, V = velocity of money, P = level of prices and T= number of transactions in the economy. The problem with the argument is M is increasing at a substantial rate but assumes "V" is constant. This is where the argument fails as we saw in Japan. They had a very accomodative central bank but no velocity of money and hence no inflation.

Earnings do matter and when we view past secular bear markets they go as follows:
1835-1843 was caused by low real earnings growth
1853-1861 was caused by high inflation
1881-1896 was caused by low real earnings growth
1906-1921 was caused by high inflation
1929-1949 was caused by low real earnings growth
1966-1982 was caused by high inflation
2000-???? seems to follow suit as we'll continue to experience low real earnings growth

This is becoming apparent as the average consumer is saving more (check the savings rate from earlier this week which was 5.7%. The highest in 14 years and likely headed to more normal 8% levels.) and discretionary spending is less and will continue. In fact, 1 in 20 50+ year old is taking a 2nd job. Their wealth has been destroyed and they're going to look for a place to save their $7.5 trillion earning zero. Watch velocity of money if you think inflation is going to rear its ugly head.

Which completely thrashes the idea that we are going to return to "normal" (or what I like to think of as "magical money" time where there was a negative savings rate and credit flowed into consumer spending from sources like HELOCs and Credit Cards. The way some people talk about "normal" is like an alcoholic only being functional while drunk. Drunk should not be normal.) based on deferred consumption through savings.

The only way to induce that amount of consumption again is to either find more people to consume or make savings not pay off.

 

[Integral]

The money supply argument is M x V = P x T. M =money supply, V = velocity of money, P = level of prices and T= number of transactions in the economy. The problem with the argument is M is increasing at a substantial rate but assumes "V" is constant. This is where the argument fails as we saw in Japan. They had a very accomodative central bank but no velocity of money and hence no inflation.

Earnings do matter and when we view past secular bear markets they go as follows:
1835-1843 was caused by low real earnings growth
1853-1861 was caused by high inflation
1881-1896 was caused by low real earnings growth
1906-1921 was caused by high inflation
1929-1949 was caused by low real earnings growth
1966-1982 was caused by high inflation
2000-???? seems to follow suit as we'll continue to experience low real earnings growth

This is becoming apparent as the average consumer is saving more (check the savings rate from earlier this week which was 5.7%. The highest in 14 years and likely headed to more normal 8% levels.) and discretionary spending is less and will continue. In fact, 1 in 20 50+ year old is taking a 2nd job. Their wealth has been destroyed and they're going to look for a place to save their $7.5 trillion earning zero. Watch velocity of money if you think inflation is going to rear its ugly head.

This is all true and I would like to make a brief comment on private savings. I've been tracking those kinds of numbers through the balance of payments as a proxy - and despite record government borrowing, the trade deficit has closed rapidly in the past two quarters. Household and firm borrowing has essentially collapsed. We'll see how it goes, but that trend may well continue.

Regarding velocity, how effectively do you think the Fed will be able to draw down its balance sheet as the economy recovers? What I'm mostly worried about on that front is a 'v-shaped recovery' for velocity, which may occur too swiftly for the Fed to react appropriately.



@xarthas, that would be a good point except (a) it is irrelevant to the point I was making, and (b) it's absolute rubbish.

Well, it's rubbish from a normative point of view. It is trivially true that if you fix the money supply while increasing the aggregate quantity of output, you'll probably see deflation. However, what makes you think that price deflation would be useful or even desirable? Money is long-run neutral; an inflation- and output-targeted policy rule would be far superior to a gold standard or the like.



@mrt: if by 'normal' you mean levels of consumption in excess of 70% of GDP, then I agree that we won't be going back to normal - and that's a good thing. The US has had a consumption/investment mismatch for some time now, and that was going to correct itself eventually. That mismatch has made the financial crisis much more painful than it otherwise would have been.