Car bubble

Yet another failed attempt to pass the rescue package for US automakers. How long before they try again? February? (Aside: Will GM's, Ford's, Chrysler's CEOs now bring their private jets to fly back home to spite the Senate?)

Here's one I haven't heard before (though maybe that's because I haven't been able to follow the blogosphere that much lately):

1. Over the years, we had been hearing that US automakers were not making a good return (to say the least) on their auto-making side, but were making some profit on the financial side. This is taken today to mean that consumers didn't really want the cars they made if it wasn't for their very convenient, easily obtained financing. (Remember all those "0% financing" ads?)
2. Now we are all painfully aware that credit was so preposterously cheap in the last many years thanks to (lay-the-blame-where-you-will) set of circumstances which led to the non-pricing of risk.
3. So was the strategy US automakers used to survive this far just another side-show in the (market-failure induced) Cheap Credit main attraction?

(Keep in mind that "US cars" are, controlling for characteristics, already cheaper than "foreign" ones; and that more-expensive labor, for all it's blamed, has but a small effect on the final price of a car; see here, for example.)

In other words, now that the credit bubble popped, is there really a place left under the wintry sun for all three of GM, Chrysler, and Ford?

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More on the US's Productivity-Growth Slowdown.

I had been looking at some education data, when just by chance, Clive Crook led me to new study, The Accelerating Decline in America's High-Skilled Workforce: Implications for Immigration Policy, by Jacob Kirkegaard of the Peterson Institute for International Economics. Pretty graph, which I re-reproduce here.

Source [pdf]

Loose thoughts:

1. Since the quality of (tertiary) education varies from country to country, static comparisons across countries might not be altogether that revealing.


2. And this graph does not reveal by itself when differences are statistically significant, so perhaps some within-country comparisons are not what they seem to be.


3. But having said that, within-country, unless you get (from top to bottom) a triangle, followed by a little black square, a black dot, and then a big, gray square, that country is likely headed for a productivity growth slowdown, conditional on education quality within that country and a level of impact of human capital on productivity. (34 years old is old enough to rule out the "they just take longer to get a college degree there" argument.) Germany seems particularly troublesome, although their restricted university/ widespread on-the-job training system of higher education might explain some of this inversion in a more optimistic way.


4. Within-country and given that desirable order of symbols, a greater spread suggests good prospects of human-capital driven growth. Korea, in particular, might be a happening place to watch.


5. Is the US headed for productivity-growth stagnation? (See here and here.) So let those H1B visas flow like rivers of honey! (And I'm being selfless here: having one already, restrictions are what's in my narrow, myopic self-interest.)


6. Peruvians have reasons to feel within-country hopeful.

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