The Lemon Aid Repair Program: A Comprehensive Solution to the Auto Crisis
Posted on March 31, 2009
It’s difficult not to feel pity for auto executives. If only they had hired a bunch of creative writers to invent sophisticated sounding acronyms, it’s likely that instead of getting the cold shoulder from the Obama administration, they may have joined their banking brethren in looting the US taxpayer.
DMV and Treasury to Team Up to Buy Unsold US Autos
So my brief suggestion to the auto industry is simply to rename the auto bailout, to the Lemon Aid Repair Program, or LARP for short. The LARP would essentially be a joint venture between the Department of Motor Vehicles and the Treasury. The aim of the program would be to break the negative economic cycle caused by the “lemon legacy” problem.
As a result of the current economic downturn, unsold vehicles have been piling up at auto manufacturers and dealers. These autos, despite being best of breed, are wrongly perceived by consumers to be lemons. As a result, nobody is buying cars, and the inventory of cars is increasing dramatically. However, these “lemons” create uncertainty around the auto industry, compromising their ability to raise capital and the willingness of auto executives to increase manufacturing of more lemons, and pay themselves outrageous salaries.
Hedge Funds Will Help Price Lemon Cars and Government Will Pay for Fuel as Funds Test Drive Lemons
Under the LARP, the DMV and Treasury would team up with private capital to purchase a $1 trillion of unsold vehicles from auto manufacturers and dealers. The Treasury and DMV will supply 95% of the capital to buy these cars, while private investors would put up 5%. Private investors will have the right to drive the cars they buy via the partnership for as long as they please, and the government will pay for all fuel and insurance expenses. Should they wish, private investors can sell back the cars to dealers, the government, or directly to consumers and keep 50% of all profits. In the worst case, the Federal Reserve has already agreed to provide another $1 trillion dollars to buy vehicles back from the DMV and private investors, in the case any of the cars truly are lemons.
The partnership with private investors is vital to reduce the likelihood that the government will overpay for these lemons. With private sector investors competing with one another, a fair price will be established for these legacy lemons.
This approach is superior to the alternatives of either hoping for auto manufacturers to gradually sell these lemon cars over time, or of the government purchasing the autos directly. Simply hoping for auto companies to work legacy lemons off over time risks further prolonging the lemon problem, and if the government acts alone in directly purchasing lemon cars, taxpayers will take on all the risk of such purchases – along with the additional risk that taxpayers will overpay if government employees are setting the price for these cars. Have you seen the types of cars we drive in the government?
Economic Recovery Guaranteed as Fake Sales Boost Consumer Buying and Government Increases Buying of All Useless Products
It is hoped that by purchasing unsold vehicles from auto manufacturers and dealers, the LARP, will create the impression that cars are flying off the shelve at auto dealers, convincing consumers to quickly max out their credit to buy that new car they’ve always wanted and don’t need. As consumers are tricked into buying cars because of the sales churning of the LARP, prices of cars will rise fueling an economic recovery.
In addition, by creating a bunch of phony sales for auto manufacturers and paying them for cars that nobody wants, it is certain that auto companies will return to profitability and the need for additional capital at the auto manufacturers will be greatly diminished. Auto executives also will be encouraged to pay their employees millions of dollars in bonuses for their helping to unload these lemons to the government at inflated prices. It’s a tough job selling lemons to the government, and we need to do everything we can to retain the brilliant employees who make this essential economic work possible.
It should be noted, that it appears that the LARP is already working, as it has been reported that several auto manufacturers and dealers have already started buying their own cars in anticipation of selling these cars back to the government.
Once the LARP is firmly established, it is the intent of the Treasury and Federal Reserve to form additional partnerships with private investors for the purchase of unsold HDTV’s, iPod’s, Crocs, diamond rings, and any other product that is deemed to be completely useless for the social and economic well-being of US citizens. It is believed that the work needed to build the warehouses that will store the trillions of products purchased by the government will create millions of new jobs, fueling economic growth in the US.
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Hilarious.
[…] Back in March 2009, I suggested that the Treasury consider launching a Lemon Aid Repair Program (LARP), as a way to alleviate the auto crisis. Incredibly, what was at the time simply a joke, has now to my amazement, been basically implemented, with a few twists, in the government’s Cash for Clunkers program. Admittingly, Cash for Clunkers has a nicer ring to it, supporting my contention that the top employees of the Treasury are linguists rather than economists. To the extent that hyperbole, i.e. a “good story”, is the recipe for financial success, this linguistic talent at the Treasury will assuredly be quite beneficial for the US economy in the years ahead. […]