Academic

CHANGE: Durable goods orders, housing sales plunged in August. It?s like they?re pumping air into ?

By Glenn Reynolds

CHANGE: Durable goods orders, housing sales plunged in August. It’s like they’re pumping air into a leaky tire. Pump hard enough and you can forget about the leak for a little while, but . . . .

UPDATE: Bob Krumm writes:

Regarding the drop in home sales/durable goods in August. One cause I’ve not yet seen presented is Cash for Clunkers. When customers decide to accelerate the purchase of a car that they probably weren’t yet ready to purchase except for the “free” money that the government threw at them, that likely also meant that they delayed another purchase they had originally planned for August. So not only did Cash for Clunkers accelerate auto sales from the future into August, they likely decreased the total purchases of other items.

The lesson of all subsidies is that when government subsidizes one thing it can only do so at the cost of penalizing alternatives.

Indeed.

Full post as published by Instapundit.com on September 27, 2009 (boomark / email).