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"Cash For Clunkers" Program Runs Out of Gas
Ponca City, We love you writes "The Washington Post reports that Transportation Secretary Ray LaHood has called members of Congress to inform them that the 'cash for clunkers' program will be suspended because the program has run out of money, and congressmen say they intend to ask the Obama administration to divert some funding from the existing economic stimulus package to maintain a scheme that they see as genuinely stimulative. 'Clearly, this has been a very stimulative program that's got consumers back into the car market. It's our hope that possibly more funds can be made available,' says Cody Lusk, president of the American International Automobile Dealers Association." If there is more funding, though, a report on CNET says it may come out of money to have been set aside for renewable energy loans by the US government.
This was on NPR national coverage earlier this week.
Within 24 hours of the news getting out that the program was out of money congress rushed a pre-recess bill to the floor to make sure 2 billion they had in reserve for this program was authorized for disbursement.
Hate to put a damper on all the anti-government diatribes, but congress realized this form of stimulus has worked, and have been swift to see it continues.
VLC FOR MAC IS DYING! IF YOU DEVELOP, PLEASE SAVE IT!!
The problem with statements such as this is that they betray a fundamental lack of understanding of what "money" is. So, let's start at the beginning, in the hope that we can clearly understand what the true problem is.
We start from first principles. Let's assume for a moment that you are a farmer and I am a hunter. I want some of the bread that you make from the grain that you grow and you, in turn, want some of the meat that I have. We agree to a mutually-acceptable exchange: In return for your bread, I will give you meat, at an agreed-upon ratio.
This works for we two, and we're both happy with the arrangement, deeming it fair and equitable.
The problem, of course, is that such a system doesn't scale well. As the population increases, and other goods and services enter into the equation, simple barter becomes awkward and cumbersome. If I have the pelts from the animals that I kill, but no meat to spare, and you don't want them, lacking the skill, means or desire to turn them into clothing, for example, I cannot use them to obtain bread from you as they are not of value to you for such an exchange.
So enters into the equation the idea of using a common medium of exchange, which we'll call "money". In the beginning, it's something of universal value - coins, perhaps, made from metals that are sufficiently difficult to obtain in their own right so as to forestall just anyone from doing so, and thereby insuring that they will retain their value as such for awhile. Everyone agrees (for the most part), that this is a superior solution to barter, all things being equal (which they seldom are, but, we're just spinning a tale here, so it doesn't matter if our view of this fictional world is through rose-tinted glasses).
Now, instead of seeking to exchange my pelts for your bread, I've coins to do so: I sold my pelts to a tailor in exchange for them and so can obtain the bread that I want from you at a mutually-agreed upon rate.
You, in turn, take those coins and use them to purchase what the tailor has fashioned from them, a warm coat and some boots, perhaps.
Fast forward a bit: Time passes, the population grows more and more, and supply of goods and services outstrips the availability of money with which to exchange such. Trade suffers, people can't buy what they want, nor sell what they have, nor provide services: Money is scarce (By lack of the source materials, or perhaps by hoarding and manipulation - greed raises its ugly head).
Someone realizes that one way to correct this, is to change from using relatively rare metals for coins, to something that is easily created, script money - or, paper that, while having no inherent value unto itself, can nonetheless be used in place of them, so long as everyone agrees to it.
So, by the power of law, everyone does, and things get better, prosperity ensues. Until, of course, a few people get greedy. They realize that the key to riches isn't in the goods and services, but rather in the medium of exchange for such. Since everyone has agreed to use money to exchange them, and since there's next to no cost to create it now, why, all they have to do is get complete control over it.
That's where the Federal Reserve in the US, and other such institutions around the world enter into the equation, and also where ideas such as "fractional reserve banking" come into play: It's all about control over money now, because money is power.
And over time, money became not a simple medium for the exchange of goods/property and services, but something of value in its own right, while having no equivalent cost. That's also where things such as stock exchanges come from - just another fiction that everyone agrees to, which are useful, but another venue that the greedy can manipulate.
So, over time, there's a reversal - the economy is no longer fundamentally