Comments on: Cash for Clunkers cost how much? http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Tue, 16 Mar 2010 23:26:55 -0400 http://wordpress.org/?v=2.9.2 hourly 1 By: davesonoma http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/comment-page-1/#comment-230520 davesonoma Thu, 29 Oct 2009 18:18:55 +0000 http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/#comment-230520 Average increase in housing prices in my area are at least $50K per home since the first time homebuyer's credit kicked in. If you assume the government is backstopping many of the homes being sold, the $8,000 cost has to be offset against the increased return on capital. Some stats here: http://activerain.com/blogsview/1207279/sellers-market-demolishes-first-time-home-buyer-credit Average increase in housing prices in my area are at least $50K per home since the first time homebuyer’s credit kicked in. If you assume the government is backstopping many of the homes being sold, the $8,000 cost has to be offset against the increased return on capital.

Some stats here:
http://activerain.com/blogsview/1207279/sellers-market-demolishes-first-time-home-buyer-credit

]]> By: Below The Beltway » Blog Archive » First Time Homebuyer Tax Credit Cost $ 43,000 Per House Sold http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/comment-page-1/#comment-230501 Below The Beltway » Blog Archive » First Time Homebuyer Tax Credit Cost $ 43,000 Per House Sold Thu, 29 Oct 2009 17:44:02 +0000 http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/#comment-230501 [...] say we officially call this one Cash For Houses: With 85% of 1st time home buyers who were eligible to collect the tax credit planning to buy a home [...] [...] say we officially call this one Cash For Houses: With 85% of 1st time home buyers who were eligible to collect the tax credit planning to buy a home [...]

]]> By: Cars4Charities http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/comment-page-1/#comment-230466 Cars4Charities Thu, 29 Oct 2009 14:07:20 +0000 http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/#comment-230466 Just another "unintended consequence" of cash for clunkers, along with the increase in used car prices and the decrease in car donation. Just another “unintended consequence” of cash for clunkers, along with the increase in used car prices and the decrease in car donation.

]]> By: Steko http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/comment-page-1/#comment-230462 Steko Thu, 29 Oct 2009 13:41:49 +0000 http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/#comment-230462 "And the other $4,500 that the person-who-would-have-bought-a-car-anyway had in his/her pocket vaporized into the atmosphere? " Exactly. No matter how many times they push these same deceptive numbers won't make it true. ... "one argument against it is why give a credit to someone who planned on buying a home anyway" 'One argument' is that it will help keep hundreds of thousands more mortgages from defaulting due to a vicious cycle of dropping prices -> more underwater homeowners defaulting -> more banks fail and dump inventory -> dropping prices. This isn't rocket science. Get more good mortgages in the system, provide modest price support and stimulate the economy with a reward targetted squarely at the middle class and people that weren't part of the bubble. “And the other $4,500 that the person-who-would-have-bought-a-car-anyway had in his/her pocket vaporized into the atmosphere? ”

Exactly. No matter how many times they push these same deceptive numbers won’t make it true.

…

“one argument against it is why give a credit to someone who planned on buying a home anyway”

‘One argument’ is that it will help keep hundreds of thousands more mortgages from defaulting due to a vicious cycle of dropping prices -> more underwater homeowners defaulting -> more banks fail and dump inventory -> dropping prices.

This isn’t rocket science. Get more good mortgages in the system, provide modest price support and stimulate the economy with a reward targetted squarely at the middle class and people that weren’t part of the bubble.

]]> By: davossherman@gmail.com http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/comment-page-1/#comment-230438 davossherman@gmail.com Thu, 29 Oct 2009 12:40:10 +0000 http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/#comment-230438 @dark1p: +1 !!! $700,000,000,000.00 in exchange for troubled assets and it quickly became "Here take the money." The bottom line though: These morons created the mess and they are now making it worse. http://www.pbs.org/wgbh/pages/frontline/warning/view/ @dark1p: +1 !!! $700,000,000,000.00 in exchange for troubled assets and it quickly became “Here take the money.”

The bottom line though: These morons created the mess and they are now making it worse.

http://www.pbs.org/wgbh/pages/frontline/warning/view/

]]> By: dark1p http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/comment-page-1/#comment-230427 dark1p Thu, 29 Oct 2009 12:00:07 +0000 http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/#comment-230427 "This is based on the belief that 85% of the almost 2mm buyers are getting free money" And where is the evidence for this belief? Or is this just a matter of faith, like the ideology that drives the Brookings Institute? I don't like these government incentives one bit, but I understand where they're coming from. Brookings has a vested ideological interest in killing them and 'proving' that the Democrats are terrible. Where were they when Bush and Paulson gave billions away to Wall Street? THAT wasn't a total waste of money??? “This is based on the belief that 85% of the almost 2mm buyers are getting free money”

And where is the evidence for this belief? Or is this just a matter of faith, like the ideology that drives the Brookings Institute?

I don’t like these government incentives one bit, but I understand where they’re coming from. Brookings has a vested ideological interest in killing them and ‘proving’ that the Democrats are terrible.

Where were they when Bush and Paulson gave billions away to Wall Street? THAT wasn’t a total waste of money???

]]> By: davossherman@gmail.com http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/comment-page-1/#comment-230382 davossherman@gmail.com Thu, 29 Oct 2009 01:32:31 +0000 http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/#comment-230382 @Branden: Don't think so. Insolvent IS insolvent. Our books (GDP CPI off balance debt) are all as cooked as Enrons. And when you get into a 2 trillion dollar deficit the gig is up, the debt can can't be kicked down the road. Time will tell. I do agree with you on oil. Quite frankly, I think we are well past peak given the demand in Asia. With oil above 70, which is where they need it to get to the harder to get to oil, the economy won't be going anywhere but down. No stimulus will change that. @Branden: Don’t think so. Insolvent IS insolvent. Our books (GDP CPI off balance debt) are all as cooked as Enrons. And when you get into a 2 trillion dollar deficit the gig is up, the debt can can’t be kicked down the road.

Time will tell.

I do agree with you on oil. Quite frankly, I think we are well past peak given the demand in Asia. With oil above 70, which is where they need it to get to the harder to get to oil, the economy won’t be going anywhere but down. No stimulus will change that.

]]> By: Brendan http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/comment-page-1/#comment-230369 Brendan Wed, 28 Oct 2009 23:48:50 +0000 http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/#comment-230369 @davoss..., Enron is not a national economy, it's a company. You can't compare the two. Enron was purposefully disrupting deliveries (of which they had a critical share of) of a product (electricity - critical to the functioning of our economy) to create artificial scarcity and increase prices by hundreds of percent. Even that couldn't stop California in its tracks. What the government is doing, at worst, is artificially decreasing prices (on a luxury item) and increasing demand in a sector of the economy at the expense of causing a minuscule devaluation of the overall currency of the much larger economy. The idea is that the intended consequences will outweigh the worst-case costs. I understand perfectly well that printing money devalues a currency. However, we're printing it at a rate no where close enough to cause a collapse. Exporting billions of dollars for oil is a problem. Letting some Japanese holders of Toyota stock get a slightly bigger dividend from what little actually makes its way to the corporate level is not a crisis. Part of the beauty of the program was that, in the long run, the reduction in foreign oil demand should outweigh any trade deficit increases incurred by the program. At the end of the day, the only thing that has potential to cause true catastrophic economic harm is our reliance on imported energy, and that is only because we're not prepared if the tap was cut. Everything else we import is icing on the cake that would be absorbed by the overall US economy. @davoss…, Enron is not a national economy, it’s a company. You can’t compare the two. Enron was purposefully disrupting deliveries (of which they had a critical share of) of a product (electricity – critical to the functioning of our economy) to create artificial scarcity and increase prices by hundreds of percent. Even that couldn’t stop California in its tracks. What the government is doing, at worst, is artificially decreasing prices (on a luxury item) and increasing demand in a sector of the economy at the expense of causing a minuscule devaluation of the overall currency of the much larger economy. The idea is that the intended consequences will outweigh the worst-case costs. I understand perfectly well that printing money devalues a currency. However, we’re printing it at a rate no where close enough to cause a collapse. Exporting billions of dollars for oil is a problem. Letting some Japanese holders of Toyota stock get a slightly bigger dividend from what little actually makes its way to the corporate level is not a crisis. Part of the beauty of the program was that, in the long run, the reduction in foreign oil demand should outweigh any trade deficit increases incurred by the program.

At the end of the day, the only thing that has potential to cause true catastrophic economic harm is our reliance on imported energy, and that is only because we’re not prepared if the tap was cut. Everything else we import is icing on the cake that would be absorbed by the overall US economy.

]]> By: davossherman@gmail.com http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/comment-page-1/#comment-230363 davossherman@gmail.com Wed, 28 Oct 2009 22:58:50 +0000 http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/#comment-230363 @Brendan: You don't get it. We are as insolvent as Enron. The fix is to devalue the dollar and re-denominate it. Stimulating the economy is one thing when you: A.) have a plan that puts more than .06 cents of a dollar back into the economy and B.) When you are a creditor nation - not the worlds larges debtor nation. In other words, if we had a solvent balance sheet and we put this into solar, wind and EV cars yeah. Giving a crack addict more crack will OD him. You are being robbed each day with the printing. You work from January to September to pay taxes. You might want to read up a bit more before you commend the idiots and morons who are robbing you all the way to the poorhouse. @Brendan: You don’t get it. We are as insolvent as Enron. The fix is to devalue the dollar and re-denominate it.

Stimulating the economy is one thing when you: A.) have a plan that puts more than .06 cents of a dollar back into the economy and B.) When you are a creditor nation – not the worlds larges debtor nation. In other words, if we had a solvent balance sheet and we put this into solar, wind and EV cars yeah.

Giving a crack addict more crack will OD him.

You are being robbed each day with the printing. You work from January to September to pay taxes. You might want to read up a bit more before you commend the idiots and morons who are robbing you all the way to the poorhouse.

]]> By: Brendan http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/comment-page-1/#comment-230356 Brendan Wed, 28 Oct 2009 22:35:25 +0000 http://www.ritholtz.com/blog/2009/10/cash-for-clunkers-cost-how-much/#comment-230356 @Davoss..., what's robbing our "wealth" is 10's of million of people continuing to sit around and not add "wealth" to the economy because they don't have a job. A few billion on feel good programs like "cash for clunkers" to restore consumer confidence (and keep a few auto workers working in the process) pays for itself pretty quickly. This is exactly my point: you can't say it cost $24K per car, because the effect looks absolutely nothing like that. This is the same reason you don't just have Uncle Sam buy a few billion worth of $24K new cars and crush them. That does not produce the same effect. For one, it doesn't have the time-value-of-money that the program did. And more importantly, it does not have the psychological effect. If you refuse to accept that human psychology is a big part of this, then you'll fail to understand how to fix it. That's not to say a balancing the budget doesn't have some advantages, especially during boom times, but it's not something you worry about too much during a recession. On top of that, the US continues to carry a trade deficit, even though the dollar is apparently doomed to lose most of it's value. If they're so worthless, why do people keep giving us stuff for them? If the dollar really does go down that much, our export economy will be so amazing, it's hard to fathom. There might be a little pain getting used to the change back to more domestic manufacturing, and some might need to move from buying Merc's to Caddy's, but being a well educated resource rich country, we would quickly regain our economic dominance if that were the case! So all we really have to worry about is those pesky Canadians, with their economy so closely tied to our and their vast natural resources. @Davoss…, what’s robbing our “wealth” is 10’s of million of people continuing to sit around and not add “wealth” to the economy because they don’t have a job. A few billion on feel good programs like “cash for clunkers” to restore consumer confidence (and keep a few auto workers working in the process) pays for itself pretty quickly. This is exactly my point: you can’t say it cost $24K per car, because the effect looks absolutely nothing like that. This is the same reason you don’t just have Uncle Sam buy a few billion worth of $24K new cars and crush them. That does not produce the same effect. For one, it doesn’t have the time-value-of-money that the program did. And more importantly, it does not have the psychological effect. If you refuse to accept that human psychology is a big part of this, then you’ll fail to understand how to fix it. That’s not to say a balancing the budget doesn’t have some advantages, especially during boom times, but it’s not something you worry about too much during a recession.

On top of that, the US continues to carry a trade deficit, even though the dollar is apparently doomed to lose most of it’s value. If they’re so worthless, why do people keep giving us stuff for them? If the dollar really does go down that much, our export economy will be so amazing, it’s hard to fathom. There might be a little pain getting used to the change back to more domestic manufacturing, and some might need to move from buying Merc’s to Caddy’s, but being a well educated resource rich country, we would quickly regain our economic dominance if that were the case! So all we really have to worry about is those pesky Canadians, with their economy so closely tied to our and their vast natural resources.

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