Official Pre Reading Period

By Syed Husain - August 5th, 2009

Category: CCMBA 2010D| Pre-reading: London

The official pre-reading period of the first term will start on the 8th of August and end on the 14th when most of us, hopefully, leave to attend the residency in London. In 7 short days we are expected to complete all of the reading materials assigned to us by our professors for the term. All of this is well and good except for the fact that I don’t think the reading material was designed to be fit into 1 week. If I would just count the number of pages we are expected to read I would say it would be some where near a 1000 pages easily. I don’t believe it is possible for me to do this while working full time, so I’m glad that we shall always be receiving our pre-reading packets a little early.

The cash for clunkers scheme seems to be a huge success, Germany’s exceptional performance during this economic period has to be commended. Amongst the developed nations, Germany has probably had the most effective stimulus plans, Which leads me to the state the obvious fact that all stimulus plans are not created equal. I feel every economic downturn has two Keynesian components to it. The government provides financial support to the economy and then produces policy changes to help the economy or prevent another downturn from happening for the same reasons. The next step for Germany will be very important, we have to wait and see what policy changes will be implemented by the German government and what effect they will have on the economy. I’m not sure what kind of an effect the improving economy will have on the government, will politicians be tempted to leave things be? or will they want to show their effectiveness in pushing through reforms? Somehow I believe that it will be the latter.

Syed Husain

I agree with you, but I have to say that this is how I see government deficit spending working in general. They borrow from the future to spend today. It might give a boost to the economy right now, but the government has to repay the money in the future, either through raising taxes, or cutting its expenses. No different, in my opinion, from shifting purchasing forward. The difference I see is that it brings jobs to the manufacturing industry right now rather than the future. I'm just an amateur, and you have a masters degree in the economics, so my ideas are probably horribly wrong :D

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Randy Zwitch

When thinking about the U.S. program, it's hard for me to not see the broken window fallacy being played out in real-time. The C4C program, at best, is shifting purchasing forward, not creating any new aggregate demand. It is, however, increasing expectations of future taxes and/or currency deflation (inflation), which will be detrimental to AD.

And I've got to believe the external costs of producing a new car and destroying the old, functional car outweigh the environment benefits.

Nah, don't make an appeal to authority, especially not *this* authority! hahaha

We're talking about the same thing. Whether you shift the demand forward now, or wait for it later, all we're really doing with C4C is moving along the demand curve based on a price change, rather than shifting the curve upwards. With that, yes we might move some cars in the short-term, shoring up some auto balance sheets, but without creating a demand shift, there shouldn't be a long-term job increase.

C4C is like U.S. domestic cash rebates. It has created the expectation that you're going to get $x thousand off to buy a car, and without it, you're not interested. I also have to wonder that of the people who qualify for C4C, how many are spending beyond their means, creating another consumer crisis. People who currently have a paid-for beater, but haven't upgraded if they could, seems should be a smaller number relative to those who drive junky cars because that's what they can afford.

But that's just me, there are as many ways to analyze this as there are words in the dictionary!

The Fuqua Experience

Official Pre Reading Period

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