Thursday, August 13, 2009

More Clunky Economic News

What are we to make of today's economic news that foreclosures were up in July, retails sales on everything but cars were down in July, and jobless claims for the last week jumped over a half million?

The Associated Press would like us to think that we need more "Cash for Clunkers" type stimuli.
While autos, helped by the start of the Cash for Clunkers program, showed a 2.4 percent jump -- the biggest in six months -- there was widespread weakness elsewhere. Gasoline stations, department stores, electronics outlets and furniture stores all reported declines.

Some of Europe's largest economies also benefited from government programs to support the auto industry. Germany and France returned to economic growth in the second quarter, raising hopes the recession in the 16-country euro area may end sooner than thought. Europe's two biggest economies each grew 0.3 percent from the previous three-month period, surprising analysts and technically ending their worst recession in decades.
The Euro-version of "Cash for Clunkers" has grown into a permanent plan, which has to be much appreciated in France where militant jihadists are burning hundreds of cars every month. But anyone with half a brain, even a government economist, knows that you aren't actually producing anything when you take one set of taxes (or borrowed funds, in our case) and redistribute it to another group. You temporarily alter behavior, true, but you produce nothing. In fact, you destroy since you are taking vehicles off the road that have serviceable life in them. That is waste, pure and simple.

Even with clunker cash, retail sales overall fell .1 percent in July. Spin that, Pillsbury Spokes-Boy!

There is much official hand-wringing over consumers' stubborn behavior of paying off debt and increasing their savings, which are historically laudable activities. Naturally you can expect our government to despise this trend.

There was one quote of which I approve:
"Households are in no position to drive a decent economic recovery," Paul Dales, U.S. economist at Capital Economics, wrote in a note to clients.
Amen to that. And households are in no position to absorb new taxes (direct or hidden) on health care and energy. You want to watch an economy in free-fall? Just keep pushing the socialist transformation of America!

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