Thursday, August 06, 2009

Cash for Clunkers or Sustainable Capitalism? The choice is ours.

It is fascinating to watch the fiasco that is Washington, D.C. It is an indication of the decline of Western Civilization. To wit:

[1] Not enough cars are being purchased due to the down economy.
[2] The U.S. Government (with its resources*) bails out (buys) GM & Chrysler.
[3] The U.S. Government pours billions into a program** to encourage people to buy cars
[4] The program is so successful (throwing money away always is!), that they triple the total amount, from $1 billion to $3 billion!
[5] They do so by stealing money from loan-guarantee programs for renewable energy projects.

What are real consequences of such (shortsighted, politically-motivated) actions?

[A] Funds for long-term renewable energy projects are reduced for short-term reasons. Consequence: Energy will be more expensive, later.

[B] The true environmental costs increase. Why? Because the cost to make cars has not been taken into the calculation.

[C] The price of cars will increase later. Why? Because continuing to pour $s into consuming will create inflation. Which will increase the price of everything. And since we are not investing in renewable energy projects, energy will also become more expensive.

[D] The spike in sales will mostly deplete vehicle inventories, rather than spur new (& innovative) manufacturing. Consequence: No real boost in employment will occur.

[E] Interest rates will increase, due to the major borrowing that is occurring. Supply and demand will make it happen.

[F] The biggy is this: Where is the learning? Without market forces driving auto manufacturers, they are not incentivized to learn how to respond to - and predict consumer behavior. That is, if people want more fuel-efficient cars, then the Bog 3 ought to marshal their forces to design and develop these vehicles. If not, they will be heading out of business. Then other manufacturers - who do listen to customers (instead of the government) will take their place. Maybe even American manufacturers, like those who make electric vehicles. (ex: Tesla, Brammo, GrrenLite Motors and others.)

This is a market-distorting program that is ill-conceived, ill-planned and ill-managed. Just like the prior Government focus (& subsequent spending) on corn-ethanol. Ahh... Washintonians. Come to think of it, we voted them in! The decline of civilization, indeed.

Bottom line? Let the market take care of itself. Let the auto manufacturers learn, or die. Let competition drive better, lower-cost products. Just look at the unregulated, unstimulated computer market. Look what $1000 used to buy and what it buys now. Why? Sustainable capitalism. Not unsustainable capital-infusion.

What should happen? Government's role is to create an environment for long-term, business-oriented solutions for renewable energy to occur. A deeper discussion on this can be found in The 21st Century Energy Initiative. A specific solution is NXergy, Inc.

* "Resources": read taxed from U.S. citizens and borrowed from (mainly) foreign countries.
** Forget for the moment that the "program" helps foreign companies as much as U.S. companies, or the fact that someone with an 18 mpg car could purchase a 15 mpg truck(!!)



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