Short Term Memory Could Be Long Term Destruction

Okay, so I know posts have been few and far between in the last month, but I promise I cannot become that busy ever again; it is not humanly possible.

In today’s Wall St. Journal I found some very interesting support for the premise America has a short term memory with gas prices: General Manager of a Honda Dealership in Florida comments in reference to July sales on fuel efficient models, “When one would come in it would be out the door same day, practically.” About 8 months later the General Manager cannot even get customers near the row of cars as they browse.

This example illustrates the problems all car companies are having: overstock of fuel efficient sedans in lots across the country. The problem is no longer with GM, and Chrysler, it has hit Toyota and Honda. These companies have stockpiles of sedans sitting on lots because they overestimated last summer’s effects on the consumers mind. This once again illustrates the need for the United States to free themselves from OPEC’s chains. We are currently falling into the pattern we have for the last 40 years.

Once again American consumers will forget the problems that we are trying to get out of and once again the stronghold of the oil leaders will push us down. Had the US government let GM, Chrysler, and Ford fail, Honda and Toyota would be prevalent in the United States and the invisible hand would have pushed the market toward the small cars they make with no option to buy big. Clearly, that has not happened.

However, like Professor Ken Smetters of the Wharton School discussed in his Economic Crisis Panel in October, the government must either be lax or aggressive; they cannot play the middle. Because they chose to be aggressive and help the big 3 because it would have hurt the economy too much to let them fail, they also need to create more subsidies for green technology. They now bear more responsibility for freeing the country from the cycle they prevented pure capitalism from breaking.

I hope this yields a little more insight into the debate about our country increasingly socialist. This doesn’t mean it is a problem that we are edging closer and closer, but we must realize the ramifications if we cannot pick a side.

Matt

P.S. Keep an eye out for discussions about Geithner’s plans for troubled assets.