Tom Rants

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Tom Rants Default Are video games an inferior good? and other questions

Are video games an inferior good? and other questions

In the big flurry of economic news lately I have a lot of questions and, because I’m just that arrogant, a few answers.

Video game sales were up 10% in February. Now this is a big question. Are video games an inferior good? Obviously when times are shaky, people are going to delay big ticket purchases, even for necessities like houses and refrigerators. But it seems like people who feel really insecure about the near term future would not spend hundreds of dollars on a luxury like a Wii or Xbox. To believe the economy is not starting to recover, we have to believe that people will spend more money on video games when they have less money to spend.

Another question on this same front. Depending which headline you trust, sales either rose 10% or “sales growth slow[ed] in February.” Have some people in the media not gotten the memo? Your guy won. You don’t have to keep looking for a negative spin on any good economic news. I guess an eight year habit of sabotage is hard to turn off overnight.

Another reason to ask “Why would we even consider giving more money to the Big Three?” [by way of Newmark’s Door]:

Fifteen Cars Americans Are Buying
…the Saturn Astra, which saw sales increase 30.3% over last year…General Motors recently announced plans to halt production on all Saturn models and phase the brand out of existence by 2011.

Doesn’t that kind of management decision making cry out for a Chapter 7, not Chapter 11, bankruptcy and financial oblivion for the people in charge? Recall that Chrysler is doing the same thing, though only with one of its best selling models and not with a whole division.

Retail sales excluding autos rose two months in a row. A week after the report, the Fed announced a $1.25 trillion plan to buy securities in the open market – to print $1.25 trillion dollar. Why now? After the second rise in retail sales, I was ready to argue that this Fed meeting was time for them to adopt a “neutral” stance and mid-summer was probably the ideal time to consider a small but symbolic rate increase. Such a move would have signaled a commitment to the integrity of the dollar, calmed the fears of the Chinese and other foreign bondholders, made US banks and industry more attractive to private foreign capital and eased commodity prices, a big boon to nonfinancial companies and consumers. Instead, the dollar tanked and oil prices are back above $50/barrel – despite a continuing inventory glut and a decision by OPEC to delay production cuts in the name of helping the world economy. Bernanke and Company undid the kindness of OPEC in one unnecessary move. Today, Bernanke is out trying to undo the damage by promising to “taper off” the printing of money. Perhaps instead of all this jawboning, Bernanke ought to branch out from economics and study the politics of Ronald Reagan, “If it’s not broken don’t fix it,” then you won’t have to fix your fix. Until he does learn that lesson, keep a sharp eye out for the next Fed inflation fueled bubble and maybe you can make a worthless buck.

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