Catching Up With the Past

Could the cash-for-clunkers program be catching up with the past?

Faulkner famously remarked, “The past is not dead. In fact, it’s not even past.” What he meant is that our heritage of years ago always informs and affects our thoughts and actions of today.

Well, It’s become commonplace lately to dismiss the cash-for-clunkers program as borrowing from the future: the purchases would have happened anyway, but the government program is moving those future purchases into the present. By this analysis, auto sales should go below their depressed winter levels once the program is over.

But a recent study indicates that this program is actually borrowing from the past. During the downturn people began scrimping on everything, from power ties to peanut butter. Since we normally junk around a million cars per month, auto sales of 750 thousand per month weren’t keeping up with the rate of scrappage. We just kept driving those old hulks longer.

Well, now those clunkers that have been limping along can get hauled off to the junk-yard. The deferred scrappage of some two million vehicles can get done, and new cars can replace them. Since those new cars need to get built somewhere, auto makers can ramp up production and auto workers and miners and shippers can get back to work.
This is how a stimulus program is supposed to work. Consumption delayed will not be denied. The past is always with us. It isn’t even past.

Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
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By |2014-09-18T09:41:08+00:00August 30th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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