Tuesday, January 10, 2012

Confused Keynesians Don't Understand the Boom in Luxury Cars

Art Wieczorek sends along a link to a story from WSJ showing confusion about the boom in luxury car sales:
Demand for luxury sport-utility vehicles is booming world-wide, defying concerns that rising fuel prices and environmental concerns would inevitably crimp demand in a lucrative segment for top manufacturers.

However, rapid growth is attracting new entrants to a once-niche market, suggesting high profit margins might not hold up indefinitely. For now, Germany's luxury-car specialists can't quite believe their own good fortune as strong SUV demand helped them notch record sales in 2011.
But with the Fed printing and and a war economy going on, this shouldn't come as a surprise.

Art also sends along a quote from The Theory of Money and Credit by Ludwig von Mises, who understand this phenomena decades ago. He wrote in Money and Credit in 1912:
When the increase of money proceeds by way of issue of currency notes or inconvertible banknotes, at first only certain economic agents benefit and the additional quantity of money only spreads gradually through the whole community. If, for example, there is an issue of paper money in time of war, the new notes will first go into the pockets of the war contractors. As a result, these persons’ demands for certain articles will increase and so also the price and the sale of these articles, but especially in so far as they are luxury articles.

5 comments:

  1. Please forward this video.

    What, exactly, did these "protesters" do to deserve arrest?

    When will this happen to me or to you?

    http://www.youtube.com/watch?v=Cg6ayc-w3bE&feature=player_embedded

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  2. Unintended consequences. These Keynesians and their silly theories!

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  3. Quit talking about that fascist radical, know-nothing shill blowhard. Mises was clearly a hack who had no idea what he was talking about. Luxury items are in demand because the growth of the 1% at the expense of the 99%. We need to cap earnings so everyone has a fair chance. Only a massive centralized governmental movement can achieve this. Duh. Oh yeah, and solidarity.

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  4. "the" Phantom CapitalistJanuary 10, 2012 at 3:39 PM

    I haven't read as much Von Mises as some but from what I have he gets my vote for one of if not the greatest economist ever.

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  5. Robert,

    Do you have a favorite book or essay that best describes the Austrian Business Cycle Theory?

    Thanks

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