Cash for Clunkers Follows Stronger Economic Figures

by The Investment U Research Team

Wall Street seems to be leaning towards the positive this morning after revised figures on the true depths of our recession were released by the Commerce Department. The updated numbers show the economy shrank by 1.9% compare to an earlier estimate of .08%.

We also found out that the economy contracted less than expected last quarter. So not only were things worse that we thought they were, they’re also getting better. Good news to be sure.

In this midst of this quasi-celebratory news environment, we’ve also heard reports that the infamous “cash for clunkers” program has been so successful that it may be out of money by today.

It will be interesting to see if Congress adds to this program. Something with such widespread and popular appeal would make for good election fodder that many politicians would love to get their hands on.

We see this program being extended and the clear beneficiaries being the auto dealers and carmakers. But while it may have altruistic eco-minded priorities, at its heart programs like this are clear economic principles in action.

By decreasing the supply, you increase the demand. And for struggling automakers, that’s good news.

• U.S. Consumers Come Out for CARS
• Congress Plays Goldilocks as UAW Concedes
• How Did Millions Of Investors Get It So Wrong?

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