The 3D economy

From the Star Tribune: Analysts estimate that 30 to 40 percent of U.S. vehicle owners are upside down at trade-in. With credit-card debt and bankruptcies already running at record highs, auto loans are one more way for consumers to land themselves in financial trouble…. About 75 percent of Americans take out loans to buy new vehicles, said Bob Kurilko, vice president of marketing for, an auto research Web site. Fifteen percent lease. About 10 percent pay cash. In the past five years, according to the Federal Reserve Bank, the size of the average vehicle loan has gone from $19,880 to $27,240 — an increase of 37 percent. Yet many consumers say they want to hold the line on their monthly payments. The solution: extend the term of the loan. The average length of vehicle loans has increased from four years to five since 1999, according to the Federal Reserve, and many automakers are offering longer terms than ever…. “It’s absolutely insane,” Kurilko said. The average deficit of owners who are upside down at trade-in is $3,700, he said.

It’s easy to think that the American economy is humming along when you drive around and see all the new cars and the big new houses being constructed in placed like Oakdale and Woodbury. But then you read something like this and realize that it’s all being funded on a tide of easy credit, which indicates a classic Austrian bust is going to be coming along soon enough. Even the Keynesians should be a bit concerned, since if I=S, there isn’t going to be much growth-generating Investment by entrepeneurs when the Savings rate is below one percent.

Truly, the $13 trillion in derivatives would tend to indicate that I=D, as in Debt. And of course, the article mentioned above indicates a large part of C=D as well. And we already know that quite a bit of G=D too, since the Government is borrowing $64 billion a month just to pay its bills. So, apparently, GDP = D+D+D. Who’s got a model for that?

I’m beginning to wonder if perhaps The Lord of the Rings wasn’t intended to be a critique of central banking.

UPDATE: Speaking of the humming economy: And here’s another twist: last week’s miraculous and widely applauded jobs report shows a preliminary, seasonally-unadjusted increase in government payrolls of more than half the 308,000 reported. We can see the wonks at work all around the beltway: “Heck, if we can’t make the jobs appear, well…we can just hire the workers ourselves!” The U.S. Government already employs nearly 22 million people. What’s another 159,000?