Uncle Sam has plenty of cash for your shiny new car

February 2nd, 2009 at 10:55am Annette LaCross

Published Jan. 4:

I could be in the market for a new car right about now.

The car I have is nearly 10 years old and sports more than 100,000 miles — rather jauntily, if I do say so. I love my car, but it’s probably about time to be looking for a replacement.

I’m not.

I could also be in the market for a house, now that I think about it. I’m an apartment dweller, so I don’t have a house to unload first, with a decent credit rating. I might be a favorable candidate.

I’m not really pursuing that, either, even though I hear this economic climate has created a marvelous environment for negotiation.

As it turns out, I — like many of you — have fallen victim to the economy’s long-running con game.

Or should I say its ex-con game.

For thousands of years, as long as one guy had something another guy thought was valuable, the confidence game — so called because it relies on the mark’s certainty that he’ll get his money back and the grifter’s certainty that he won’t — has been a profitable profession. Usually for the bad guy because there seems to be no end to the number of scams grifters can dream up and the number of people who can be convinced that the MetroCentre is for sale. Cheap.

Sadly, that inflated confidence, plus a prolonged absence of reason and a healthy dose of arrogance — that we are smarter and more wily than the grifter — has been the driving force behind the financial climate in which we find ourselves.

Ladies and gentlemen, I give you the economy, the most expensive con game ever created.

Consider the humble Beanie Baby.

People I formerly considered reasoned, rational human beings used to ask me — with a straight face — how much I thought they could get for a chicken or bulldog.

I could only shrug because I never really saw the value in a stuffed chicken.

“Whatever somebody thinks it’s worth,” I’d say, utterly nonplussed.

It’s Wall Street 101. The value of every company on the market is determined using variables including revenues, earnings, investments, debt, return on equity, return on invested capital and so on. But in the end, it all boils down to our confidence in the company — what we believe that company is worth.

Two years ago, everybody was confident. Banks and mortgage brokerages played fast and loose with lending rules, global financial markets gorged on those questionable loans, governments didn’t examine the practices of those markets, consumers racked up more debt than income, and corporations leveraged themselves to the hilt.

Today, we’re reeling from the consequences of those actions. And the circuitous nature of the U.S. economy is what will keep us in this cycle for a couple more years.

Consumer spending makes up about 70 percent of the economy. But we have no confidence in the future right now. So we’re not spending.

That’s enough to bring the economy to a near-standstill.

Still, the economy is driven by more than just consumers. About 20 percent comes from corporate spending. Except consumers aren’t spending, which means there’s no demand for the company’s products. So they hunker down, slashing production, cutting jobs and creating even more uncertainty among consumers.

The good news is that the government, which contributes about 10 percent to the gross domestic product, is chugging merrily along.

The $1 trillion it has spent, plus the estimated $1 trillion the new administration pledges, mean the government will be in business for quite a while yet.

I take little comfort from that. It doesn’t really help as I consider my vehicle options.

Even if the government was kind enough to buy us a couple of car companies.

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