Thursday, 6 August 2009

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On Cash For Clunkers

Here is an excerpt from Bob Prechter's latest Elliot Wave Theorist that I think makes a good point. "After millions of Americans "took advantage" of this tax break (the government providing a tax break in the 2000s to people who bought three-ton, gas guzzling SUVs), the apparent boon was exposed as a bad deal when gasoline prices tripled and such cars fell precipitously in value while costing as much as a dollar's worth of gas for every four miles they rolled. Ironically, the taxpayers who never owned such cars paid for the subsidy. The same thing is happening with the "cash for clunkers" plan. It rewards people who have been persistently driving gas-guzzlers while sending the bill to, and thus penalizing, the socially responsible, environmentally conscious taxpayers who bought fuel-efficient cars. The worse the guzzler you have been driving, the more money the government takes from others to give to you, up to $4500. Irony attends both financial markets and government plans. Put them together-as we have witnessed throughout the financial crisis so far-and you get Kafka."

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