Intended Consequences

Remember President Obama’s Cash for Clunkers program? Trade in an old
car for a more fuel-efficient one, get up to $4,500 in federal rebate
money. Your clunker was crushed. The effect of the program was to
distort the used car market, driving up prices of starter vehicles for
the young and poor, making it harder for them to get to work. The
distortion took months to settle out.
Remember the Obama administration pushing mortgages for minority
borrowers? It was actually possible to get into a house with less
out-of-pocket investment than getting into an apartment; I saw lots of
examples in the land records. The effect of that program was to distort
the lending market and when sub-prime mortgages crashed, it took a
decade for the foreclosures and bankruptcies to settle out.
Governor Walz issued his Stay Home order closing businesses and throwing
more than a million Minnesotans out of work (we know this because a
million people filed for unemployment, which is not available to youth,
part-time, casual, contract or small business owners; therefore, the
total who lost their incomes is much, much higher). The mortgage
delinquency rate is the highest in 20 years but Congress put
foreclosures of federally insured mortgages are on hold and Governor
Walz imposed a moratorium on evictions. The effect is to distort the
housing market again. There’s a flood of foreclosures and evictions
coming down the pike as soon as the pandemic restrictions are lifted.
That flood will cause a slump in home values as lenders dump foreclosed
homes, which will drive home prices down, which will be reflected in
worse economic numbers for whomever is President at the time. It may
take years to settle out, again.
None of this was unforeseen. The foreseeable consequences of the lock
down were ignored in order to gin up support for mail in voting to make
the election easier to steal. The cost of that decision is going up
every day.
Joe Doakes

This is what happens when there’s no real check on power.

Posted

November 11, 2020

Business, The Economy and The Markets, Covid19, Uncategorized

Mitch Berg

Tags:

The Endless Emergency

Comments

8 responses to “Intended Consequences”

Pig Bodine

November 11, 2020

The downstream effects of “Cash for Clunkers” are still there – I’ve been trying for over a month to find a rebuilt transmission for my 1983 Suburban or even trying to find a used transmission from a scrapyard to send out to be rebuilt.
Yes I am aware that it only gets 9mpg city/11mpg highway but when I hit a deer at 65 mph I just replace the headlight, scrape off the hair, spot weld the grill, and keep going because the car hasn’t been totaled. The sweet conjunction of mass and horsepower!
shakingmyhead

November 11, 2020

I was shocked when I brought up 2nd and 3rd order effects to someone, and they gave me a blank stare. That was 10+ years ago, and I’m not shocked anymore.

If there were only some sort of test that people desiring to hold elected office could take to prove basic competence. Sure it would be shouted down as racist or privilege, but it feels like we are creeping towards Idiocracy.
jdm

November 11, 2020

Pig, that was a great comment. I got a chuckle out of that. Especially because it’s true.

Creeping, smh? With all the shenanigans in this recent election, it seems like the Democrats have decided to pile into something like Pig’s Suburban and floor it towards Idiocracy.
bikebubba

November 11, 2020

How many miles are on that beast, Pig? I had friends who had one from a couple of years later with about 450k. Two or three transmissions, but otherwise, it was a wonderful vehicle.

Agreed 100% that the consequences of Cash for Clunkers (ironically not the name of the program that paid President Obama’s salary, but I digress) continue today. You start with a lack of availability of larger family vehicles for the poor and tradesmen, continue with it being an implicit subsidy for the middle and upper classes at the expense of the poor, and finally you end up pushing the poor to drive more decrepit vehicles with far worse emissions than the ones that were being replaced.

Worth noting as well is that the push to fund minority mortgages dates back at least to the Clinton administration’s weaponizing of the CRA and other regulations against banks. I remember getting notes from my sister-in-law and her husband about a mortgage they were being offered and responding “this is not going to end well”. I think the CRA itself dates back to the Carter administration, too.
mjb003

November 11, 2020

CRA definitely dates back to Carter and that itself was evolved from earlier programs. CRA was amended and built upon by Clinton, yes, but also both Bushes. During W Bush’s term, Fannie Mae and Freddie Mac were used to “help” communities that weren’t quite reaching their CRA quotas get more loans in poor communities.

I agree with W Bush, which at the time he said home ownership is a good path towards economic freedom. It still is, but these types of programs definitely inflate home prices in marginal areas.
bosshoss429

November 11, 2020

mjb003

I also remember that in late 2006, financial types were starting to worry about the defaults on mortgages, so Bush sounded the alarm that Freddie and Sallie may be headed for trouble. Of course, Barney Frank and Chris Dodd were there to rail against Bush, claiming that the President was not paying attention. Then, when the SHTF in 2008, who did the lefties blame (and continue to blame to this day)?
Bill C

November 11, 2020

<offtopic>
pigbodine: You might have to look for a different/newer tranny, possibly a 200R4 instead of a turbo 350 or 400. My dad has a 200R4 in his 72 Chevelle, you should be able to put one in your Suburban.
</offtopic>
Pig Bodine

November 11, 2020

BB
it has 139k original miles, I bought it with 121k from the original owner who retired it to the property next door,his “hunting shack”, in the early 90s. He sold his shack (3600 sqft, 5bdrm, 2bath, 4 stall garage, 132 acres) 4 yrs ago and and I got the Suburban <$1k. Its basically a K10 Pickup with an inconvenient shell. I use it like a pickup, mostly in the woods and fields where the 4wd 350 V8 comes in handy. Best part about the body & chassis is nothing bad happens when you bump into a tree, although the doors do leak water when the creek is deeper than 2 feet. Sitting in a garage for 15+ years didn't do it any good.

Bill
Yeah you're right about the models, the tranny I need was only installed in the Suburbans for 18 months then they switched to one they used in several subsequent model years. If price were no object I'd retrofit it with a stick but I can buy a much newer pickup for what that would cost.
For a car that old you've got an equal chance that every used tranny you put in will be no better than what you've already got so I want a rebuilt tranny from someone like Jaspers with a nationwide warranty. Putting a similar but off spec tranny in means No Warranty.