Wednesday, August 05, 2009

Cash-for-Clunkers + Idiocracy = "Idiocranomics"

I'll forgive you if you haven't seen the movie Idiocracy, I fell asleep three times watching it, but laughed several times in between. The take away is that the world becomes increasingly stupid to the point that everything is manufactured by one company and (spoiler alert) no crops can grow because they are watered with a Gatorade type drink. Why do I bring this up? I believe that Cash-for-Clunkers is "Idiocranomics". The linked to piece by Cumberland Advisors does a great job of explaining some of the really dumb elements and why this program is simply a waste of money, a perpetual waste of money to the tune of at least $150 million a year in ongoing interest (assuming the senate passes the second $2 billion).

The senate is set to pass an additional $2 billion for this program this week, bringing the total we will hand out to $3 billion dollars. The top incentive is $4,500 (the lowest is $3,500). What is interesting is that if you divide $3 billion by $4,500 you get the following number: 666,666 potential cars that qualify...that's not a nice number (remember the stock market hit a low 666 this year on the S & P 500).

I say all of this only to point out that despite what some economists are saying is stimulus, this isn't. In a previous post I quoted Peter Schiff on this topic, you should read it. Latte anyone?

Last year a big stimulus package was passed by congress and the Bush administration and I commented about how stupid it was - the stimulus had zero affect. This program is further proof of the dumbing down of economics. I don't claim to be an expert economist or even an economist (as if that would be a claim to royalty), but I do know that I'm not dumb enough to fall for the notion that Cash-for-Clunkers is a good policy for the economy - its just another in what has been a long line of "idiocraconomics" policies.

Scott Dauenhauer CFP, MSFP, AIF