Goodbye Two-ThousandaireMobiles

Friday, May 29, 2009
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Concerning the latest bankruptcy filings in the auto industry, I have always thought about the auto bubble bust and the social fallout that would result.

The unsustainable boom period brought about unprecedented car buying. An automobile bubble. People were buying cars like I buy toothpaste. Easy credit made car buying a snap decision whereas, once upon a time, a new car was something you planned for, saved for, and treated as a special purchase. Almost everyone had new cars, including teenagers and the working poor. A 20-year-old working at a car wash and owning a $30k SUV was right in line with the times. Time and time again, I was condemned by people – libertarians and those who championed Austrian economics – for “unfairly” criticizing this false prosperity because people took it personally. It was deemed to be too “socially conservative” to criticize the high-time preference cancer that swept a nation held captive by the Federal Reserve and brought us a generation of Two-Thousandaires – people with all the “stuff” and the luxury lifestyle, but with $2k in the bank.

Though I have long been writing about the oncoming auto bust and the unavoidable blowup of the Big 3, I remember a unique turning point. In April 2006, while in Palm Springs, I blogged this about my observations. What I saw in Palm Springs that week was pure spectacle. On a Saturday night the streets were full of lower-class people driving luxury cars and hopped-up semi-luxury cars. Most of those automobiles had tires and wheels and stereo systems that were making Visa and Mastercard very happy. I haven’t seen as many Two-ThousandaireMobiles in one place, on one weekend, as I did that time in Palm Springs. Forget being house poor – those who couldn’t afford to do that were car poor. People can’t afford to buy these cars anymore, but wait until more and more of them lose the cars they do have and never could afford. How many spinner wheels, Hummers, Lexus SUVs, and glitzy car accessories will end up in the repo yards?

Living way beyond one’s means for a house was bad enough, but the obsession with having new cars, on the part of people who cannot financially afford to own them, is truly a sickness. A malady brought on by the Federal Reserve’s monetary policy and government’s insistence that we all live like Kings – buying stuff and leveraged to the gills, because that is the “American Dream.”

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