Last updated on 2008-06-25.
Half-Truths:
One of the main reasons the economic collapse of the United States is catching many people by surprise is because our ‘elected leaders’ and the mainstream media continue to tell half-truths.
For example, in early June 2008, the biggest news in Canada was that General Motors was going to halt production at “the Oshawa plant, which produces the Chevrolet Silverado and the GMC Sierra, sometime in 2009, axing around 2,600 jobs in the process.”
Mainstream news sources tell us that “the market for pickup trucks and SUVs has deteriorated rapidly” while our corporate representatives in government such as Canada’s Finance Minister Jim Flaherty state, “everyone in the auto sector was surprised with how precipitous the fall in North American demand for large SUVs and pickups had been.”
I’m not exactly sure how Mr. Flaherty can claim to be a Finance Minister and not understand what the impact of the rise in oil prices really means to consumers and to the economy as a whole. My guess is he knows exactly what the impact of oil rising from $30 a barrel to $130 really means, he just likes telling half-truths. However, if he is telling the truth about being caught by surprise, then he should resign immediately, because it would mean that he is clueless about how our economic system really operates.
The half-truth that is being regurgitated ad nauseam by almost every news source is that the ‘demand’ for GM trucks has deteriorated. This is where the problem lies. While it is true that the demand for larger vehicles has deteriorated, it is not the cause of what is happening, it is the effect.
The Truth:
The truth is not that the demand for these vehicles has deteriorated per se, it is that most people can no longer afford such vehicles.
There is a big difference between not wanting something and not being able to afford something. If the talking heads on our television sets and the paid lackeys at mainstream news outlets actually began to state the truth about this global economic crisis, then maybe the next few waves from the economic demise of the United States will not surprise people like Jim Flaherty.
The Real Picture:
Realizing that most Americans can no longer afford to operate a large vehicle I decided to do some number crunching and find out what the breaking point of the American consumer was.
Using the Total Ownership Costs Guide available from the The Auto Channel I compared the costs for operating four vehicles: GMC Sierra 1500, Chevrolet Silverado 1500, Volkswagen Jetta, and the Honda Accord. The table, which gives the total cost of owning and operating a vehicle over a 5-year period, is presented below (click image to enlarge).
click to enlarge
Excluding fixed expenses, the fuel, maintenance and repair costs for each vehicle over a 5-year period is as follows.
GMC Sierra 1500 - $23,784
Chevrolet Silverado 1500 - $23,784
Volkswagen Jetta - $17,032
Honda Accord - $16,382
The difference between operating costs of a GMC Sierra or Chevrolet Silverado, made at the Oshawa plant which GM will be closing, and that of a Honda Accord is $7,402 over a 5-year period. This means that an extra $1,480 for operating a large struck as compared to a mid size sedan has reduced the ‘demand’ for large GM trucks to a level where four plants are scheduled to be closed in the next few months.
click to enlarge - source
These numbers are of course a very rough estimate of the real costs associated with operating a vehicle, however they do paint a very disturbing picture of what the implications of the credit crisis in the United States really are.
The Implications:
Keep in mind that this is just one aspect of the economy which is squeezing the American consumer beyond the breaking point. This along with inflation, education costs, health care, mortgages and the like, and everyday expenses are taking their toll. The citizens of the United States are in serious trouble, and all indications are that this is just the beginning.
The US consumes 25% of the worlds energy (30% of the worlds resources). If they can not afford an extra $1,480 to operate large trucks that they love so much then they are most likely completely tapped out. This will have dire consequences for every country that depends on feeding the American consumption machine, especially Canada, which in 2005 exported more than 80% of its total global exports to the United States.
This is the first major wave from the economic collapse of the United States to hit Canada. We should expect and be prepared for many more.
Some Related Posts
| 
| 
| 
| 
| 
| 
| 
| 
| 
| 
