Inflation gimmicks… (auto sales and incentives)

The old trick of giving money away is a solution that, like inflation, conforms to the law of diminishing returns. The “diminishing” part of the equation is not truly visible when inflation is still on a positive trajectory. But it becomes gradually clearer as other inflationary effects wane.

It is a foregone conclusion that free money will always find takers. What is less clear is whether free money can be put to productive use. In my opinion, the outset of the inflationary dynamic is a time when free money could be put to the most productive use because there is a genuine need for capital formation and investment in industry and commerce. But as the inflationary dynamic progresses and debt burdens expand and as industrial capacity reaches higher highs your ability to induce ever greater degrees of inflation is necessarily constrained by your ability to induce a rise in income either in the form of wages or in the form of earnings or both.

Offering subsidies to anyone or to any industry is a strategy that is inherently self defeating in the long run because the effects are gradually less… well, effective.

Just like inflation, every subsidy ensures excess capacity thus pulling forward in time the demand dynamic thus encouraging to consume today more of what would otherwise be consumed over a longer period of time. Subsidies are nothing but gimmicks to induce inflation… as are the world bank, the IMF, the United Nations and most regulation that is enacted… consider Climate Change for example… these are nothing but strategies to induce more layers of payments thus forcing more disbursements in the hope to induce the spreading of the reserve currency far and wide in an attempt to maintain a positive degree of velocity…

http://www.guardian.co.uk/business/2010/jan/06/us-cars-sales-record-low

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