Monday, September 6, 2010

The Law of Unintended Consequenses strikes yet again................

 September 1, 2010 story from Edmunds.com - here

      "Prices of used cars jumped 10.3 percent overall in July
       from a year earlier, or by $1,800 on average, according
       to Edmunds.com."

My favorite law in action- here

     "Why are used-car prices rocketing?"


     ".....part of the answer is that the supply of used cars is
     artificially low, because your Uncle Sam decided last year
     to destroy hundreds of thousands of perfectly good
     automobiles as part of its hare-brained Car Allowance
     Rebate System — or, as most of us called it, Cash for
     Clunkers. That was the program under which the
     government paid consumers up to $4,500 when they traded
     in an old car and bought a new one with better gas mileage.
     The traded-in cars — which had to be in drivable condition
     to qualify for the rebate — were then demolished...."


     "Congress and the Obama administration trumpeted Cash for
     Clunkers as a triumph — the president pronounced it
    “successful beyond anybody’s imagination.’’ Which it was, if
     you define success as getting people to take “free’’ money to
     make a purchase most of them are going to make anyway,
     while simultaneously wiping out productive assets that could
     provide value to many other consumers for years to come. By
     any rational standard, however, this program was sheer
     folly."


     "No great insight was needed to realize that Cash for Clunkers
      would work a hardship on people unable to afford a new car.
      'All this program did for them,' I wrote last August, 'was
      guarantee that used cars will become more expensive. Poorer
      drivers will be penalized to subsidize new cars for wealthier
      drivers.'  Alec Gutierrez, a senior analyst for Kelley Blue Book,
      predicted that used-car prices would surge by up to 10
      percent. “It’s going to drive prices up on some of the most
     affordable vehicles we have on the road,’’ he told USA Today.
     In short, Washington spent nearly $3 billion to raise the price
     of mobility for drivers on a budget......."

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