The Automobile Bust Is Upon Us
The last decade saw robust automobile sales. This was driven by a concerted effort to get cars on the road.
First, there was the cash for clunkers program under President Obama. Then, we saw the record low interest rates out of the Fed which provided Americans with cheap financing and leasing.
As the quality of buyers degraded, the loans put out were riskier. This created a bubble similar to others we are watching. Cheap credit pushed asset prices up.
The average price of a car is $36,000 resulting in an average payment over $500.
The last couple years saw an increase in interest rates. This has an impact on the numbers of cars sold. Even still, the amount of debt tied to this sector is nearing what it was a decade ago.
President Trump mistakenly cited a bubble as organic economic growth. This is being reflected in the fact that automobile makers are laying off people are a rate not seen in the last decade.
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