In the summer of 2009, I started working at a Hyundai car dealership in Harrisburg, Pennsylvania. Being a college student on summer break, I took the part-time position of detailer/reconditioner. My job was cleaning and preparing newly sold cars. I started in the month of May and prior to the implementation of "cash for clunkers," sales were steady. On average, three to four new cars were sold on weekdays. On Saturdays, about six to seven new cars were sold. By law in Pennsylvania, car dealerships must remain closed on Sundays — clearly another case of government knows best.
Once "cash for clunkers" went into effect, new-car sales shot up. Weekday average car sales increased to Saturday levels. Saturdays became a zoo with close to ten new cars being sold throughout the day. With so many car sales, I never had any downtime those weekends. Normally the dealership would close at 8 p.m. unless there was a pending sale. It was normal to stay until 10 or 11 p.m. on the days "cash for clunkers" was in effect, as customers waited for approved credit applications and cars needed to be cleaned.
From the perspective of immediate consumption, "cash for clunkers" was an astounding success. Working so many consecutive hours provided a substantial boost to my paycheck. The car salesmen increased their commissions. The dealership was very profitable. But like all government stimulus efforts, this effect was short-lived.
Around the time "cash for clunkers" ended, I started the fall semester. I still returned to work on Fridays and Saturdays but sales began to slow down dramatically following the program's end. Throughout September, Saturday sales fell with only four to five new cars sold each day. From what I heard, weekday sales had slowed down significantly. During October, I was lucky to clean two or three newly sold cars on a Saturday. Some Saturdays went by in November with zero cars sold. Car salesmen began to be laid off. The assistant manager of the dealership was let go, as were many of the mechanics and staff running the automotive-parts department. Because I only worked a day and a half a week and was paid a dollar an hour less than the other experienced detailers, I was kept around. Once December hit, the dealership finally shut down for good. It was quite the Christmas present.On to the news of the day. Well, it had to happen sooner or later; it looks like Dexia, the largest lender in Belgium, is going to be the first casualty in the coming Greece default, via Bloomberg Businessweek:
Oct. 3 (Bloomberg) -- The board of Dexia SA, Belgium’s biggest lender, is meeting to discuss options including a possible breakup after Europe’s debt crisis reduced its funding, a person with knowledge of the talks said.
Dexia, which finances municipalities in France and Belgium, may split off its French business partly under the oversight of state-owned Banque Postale SA, said the person, who declined to be identified because the matter is confidential. The discussions are complex because Dexia is based in Brussels and Paris, and has both governments as shareholders. An announcement may come as soon as tonight, the person said.
So what does this mean for the U.S., well Reggie Middleton has some interesting charts outlining Goldman Sachs' amount of exposure to French banks:
Here is a bit more on Goldman Sachs:
With Dexia most likely being "saved" (nationalized with taxpayer money) tonight, it will be interesting to see where we go from here. French banks are currently undergoing an institutional bank run, Goldman's next move should be fun to watch. Good thing Goldman practically rules the world and will likely be saved by any central banker on the planet, even more so that a former exec. is about to take the reigns of the ECB and one has been nominated to head the Financial Stability Board. I should also mention that there are rumors floating around that the Fed is exposed to Dexia but with the power to create liquidity on demand, that is no problem.
For some reason, today seems to have an extra filling of economic idiocy, at least more than normal. First up is the list of proposed demands from the Occupy Wall Street crowd. The list seems to be composed by a sophomore political science major and contains such gems as these:
Demand one: Restoration of the living wage. This demand can only be met by ending "Freetrade" by re-imposing trade tariffs on all imported goods entering the American market to level the playing field for domestic family farming and domestic manufacturing as most nations that are dumping cheap products onto the American market have radical wage and environmental regulation advantages. Another policy that must be instituted is raise the minimum wage to twenty dollars an hr.It's hard not to pound your head against the wall reading this. It looks copied and pasted from the American Communist Party website. One of the commentors made a very fitting addition to the demand list:
Demand two: Institute a universal single payer healthcare system. To do this all private insurers must be banned from the healthcare market as their only effect on the health of patients is to take money away from doctors, nurses and hospitals preventing them from doing their jobs and hand that money to wall st. investors.
Demand three: Guaranteed living wage income regardless of employment.
Demand four: Free college education.
Demand five: Begin a fast track process to bring the fossil fuel economy to an end while at the same bringing the alternative energy economy up to energy demand.
I'd like to add a few more:I find the immediate above list more feasible than the actual demands. While the Occupy Wall Street kids don't have a clue on how the real world works outside of their dorm rooms, they aren't all hopeless:
Make the Middle East stop fighting.
Everyone gets a helicopter that runs on children's laughter.
Gummy bears are free.
Nobody judges anyone for having dumb ideas or lists of demands. (cough)
Finally someone actually gets it. Mad props to this kid for actually having a brain.
Next up in the sideshow is the U.S. Senate who has begun to consider passing some kind of bill to punish China for manipulating its currency, via Reuters:
(Reuters) - An angry China warned Washington on Tuesday that passage of a bill aimed at forcing Beijing to let its currency rise could lead to a trade war between the world's top two economies.How the hell is making goods at Walmart more expensive going to spur job creating? Are underwear factories going to make their glorious return to America where Richard Trumka can try and scoop up the workers? This is unbelievable, China is the one losing out by keeping the yuan undervalued, all they get is dollars and inflation while we get cheap goods. It's not like the U.S. even has to do anything, China is having to hike interest rates to cool down its economy already. Only complete and utter morons would actually believe that making goods more expensive would lead to economic growth, the same goes for those who want higher taxes. It's no surprise though considering we have this guy running things:
China's central bank and the ministries of commerce and foreign affairs accused Washington of "politicising" currency issues and putting the global economy at risk after U.S. senators voted on Monday to start a week of debate on the bill.
This is exactly why we need this Consumer Finance Protection Bureau that we set up that is ready to go. This is exactly why we need somebody who's sole job it is to prevent this kind of stuff from happening. ... You can stop it because if you say to the banks, ‘You don't have some inherent right just to – you know, get a certain amount of profit. If your customers – are being mistreated. That you have to treat them fairly and transparently.Oh, I see, so Obama and the technocrats at the CFPB can decide on what the "right" amount of profit is for banks now. Super. It's a wonder they are even allowed to operate how they want. Clearly we need the government telling BoA execs how to run the business and treat their customers who voluntarily do business with the bank. And we are supposed to trust these guys?
This gave Freddie the option to sell the defective loans back to Bank of America, which then owned Countrywide. But proving that hundreds of thousands of loans were defective was a lot of work. Freddie only reviewed some of them, relying on a poor methodology that dramatically underestimated the number of defective mortgages. This increased losses to Freddie Mac -- losses that will eventually fall to Treasury and taxpayers.
And so you get this picture, from a 2011 report by Freddie's internal auditor. What you're seeing is that Freddie's review process (the black line) looked hardest at the bucket of loans containing 16% of total foreclosures. It mostly ignored the bucket containing 70% of the foreclosures. By comparison, this is a bit like searching for a lost salt shaker and spending more time looking on the roof than in the kitchen.So Obama plays the middle class warrior while simultaneously helping out those who he demonizes in public. Well you know what they say, if it smells like fascism and looks like fascism...
We have reason to think Freddie was being willfully ignorant. An examiner at Freddie's regulator, the Federal Housing Finance Agency, warned that the majority of foreclosures were going uncounted in March 2010. Sure enough, in June 2011, regulators told Freddie that their review process was ignoring "over 93% of the year-to-date foreclosures from the 2005 and 2006."
Bernanke faced the firing squad today at the Congress's Joint Economic Committee. Here is the live update blog from WSJ. The best exchange, which isn't mentioned in the link, came when socialist Sen. Bernie Sanders asked Bernanke why he doesn't make low interest loans directly to small business. Bernanke, knowing full well how inflationary and disastrous this would be, squirmed his way out of it and didn't have to admit that he is a tool for the banks and only makes low interest loans to them. It was incredibly entertaining and showed just how uncomfortable Bernanke can be under pressure.
Speaking of socialism, check out these survey results:
Bulgarians appear to have a hard time letting go of communism. This month, many Bulgarians celebrated the hundredth anniversary of the birth of Todor Zhivkov, the country’s longstanding communist leader,Is it any wonder why the Occupy Wall Street crowd is so clueless when thoughts such as this still permeate? to the Wall Street Journal. Earlier this year, the Journal also , Bulgarians were outraged when vandals spray painted monuments to the country’s socialist past.
While you might think that the country’s nostalgia for the communist era has little to do with its ability to foster entrepreneurship today, it turns out that the two are related. In the Eastern European countries that experienced several decades of communist rule, Karl Marx’s ideas still influence the views of many people about business ownership. According to a 2009 survey of more than 26,000 people in 36 countries conducted by the Gallup Organization, only 31 percent of Americans agree with the statement that “entrepreneurs exploit other people’s work.” By contrast, 70 percent of Bulgarians, 72 percent of Estonians, 54 percent of Latvians, 79 percent of Lithuanians, 70 percent of Poles, 63 percent of Romanians, 73 percent of Slovenians, 73 percent of Slovakians, and 69 percent of Croats agree.
I will end with one bright spot: this has got to be the greatest Ron Paul song ever written:
Update- James Altucher has a fantastic post on one of my favorite authors entitled "6 Things I Learned from Charles Bukowski." I started reading Bukowski in high school; he is a depressed alcoholic who wandered the country during the Depression picking up odd jobs, writing, drinking, and screwing random and disgusting women. He hated himself and the women he was with but wrote like a madman about his depressing and hard life. He was the most anti-establishment guy ever and spoke so straightforward and truthfully that he made Ron Paul look like Mitt Romney. Ironically, I have lost all my Bukowski books to girlfriends who have dumped me over the years. I say ironic because Bukowski treated women like crap while every girl that has dumped me also eventually asked to get back together to which I always say no for personal reasons. So great job on the post James! I really gotta repurchase copies of "Factotum," "Women," "Post Office," and "Ham on Rye."