Monday, August 03, 2009

Inflating the next bubble

Think if you will about "cash for clunkers", as well as the $8000 tax credit for first time homebuyers. Now who is driving a clunker, or renting? If you answered "people not in a position to buy a nice car or home," move to the head of the class.

So we must assume that a large portion of those taking advantage of these programs are those who would not qualify to do so otherwise, right? So here's my prediction; after the initial down payment/payments provided by Uncle Sam (picked right from your pocket) is spent, large numbers of the buyers of new cars or homes will default, plunging the country into at least a second, if not a third, dip in the Pelosi/Reid/Obama recession.

Plan accordingly. I am not a prophet, but these are the choices being made today. The question is not IF the bubble will pop, but when, and what factors deflate it.

See also: Mr. Dilletante's point that it's really all about the "fallacy of broken windows", and Chad's point that the whole deal is really a monstrous accounting trick. We could play "count the fallacies" here and have hours and hours of fun--and frustration that a man with two Ivy League degrees apparently hasn't mastered some of the most basic economic concepts.

Send the President a link to Bastiat's work for his birthday!


Mr. D said...

Good post, BB. Exactly right.

Bike Bubba said...

Many thanks; your point on it being a problem with regards to the "fallacy of broken windows" noted by Bastiat is also appreciated.