The Car Industry in the 1990s Essay Example | Topics and Well Written Essays - 2750 words

The Car Industry in the 1990s - Essay Example The political factors that affect cars and car manufacturers have become one of the major impacts on the industry. Government laws and regulations had been continuously set in place as compelled by increasing concerns for the safety of the consumers and users as well as for the protection of the environment. Because of consumers’ clamor, almost every concern that cropped up over the years that relates to the car, there is a corresponding bill that is passed or a regulation that is being enforced. This includes not just safety issues but also economic concerns such as the rising cost of petroleum or environmental alarm like gas emissions. Taxes, duties and subsidies also play a major part in the factors that exert themselves on the car manufacturers and the industry in general (Highfill et al, 2004). The huge impact of the auto industry to the country’s economy cannot be ignored. A study revealed that the industry supports other jobs in other industries (Gale, 2004 as cited by Highfill et al, 2004). However, the industry itself is faced with so many economic challenges. At present, even if the European market could increase or decrease depending on the specific economic climate, the scenario of over capacity if the market demand is low is always a real threat. The entry also of imports is a concern to the European based car manufacturers. This is especially so because of price competition which is the prevailing competitive advantage of imports (Trends and drivers of change). The economic downturn had been one of the greatest influences in the economic aspect of this industry. A research from Uswitch.com, an independent price comparison and switching service reported in 2008 than 77% of the motorists put a halt to their plans of acquiring a new car (Ganly, 2008). The economic aspect of the automobile industry is largely affected by oil prices also. Thus, it is a  very important factor in the demand for cars.   An increase in prices might put a brake on their sales potential while the reverse could boost the demand for the product.   (Sector futures, 2004, p2).

Should the Fed intervene in Asset Bubbles Thesis

Should the Fed intervene in Asset Bubbles - Thesis Example Since hindsight offers perfect or a 20/20 vision, many people opined the US central bank failed in its task to promote healthy and sustainable economic growth for the country, and by extension of being a multi-trillion dollar economy, for the entire world. The advent of a global economy has made potential economic disruptions like bursting of asset bubbles a serious matter to contend with. Economists, politicians and policy makers now pay more attention to the formation of asset bubbles, how these start, how these bubbles could be prevented from growing bigger and what actions can be considered as appropriate if a bubble is clearly identified. It must be admitted that despite the experience of several prior asset bubbles, policy options are still woefully limited. Economists and academic theorists are conflicted on what responses are considered to be the most appropriate in such situations. The experience with asset bubbles is not fairly recent since the phenomena had existed since t he middle Renaissance period. A frequently-used example was the so-called â€Å"tulip-mania† in 1634 up to 1637 in which a few special black tulips fetched the same price as a mansion! Although there are many types of asset bubbles, there is some agreement that bubbles are formed by two causes: the first cause is when financial intermediaries like banks, brokers, brokerage houses and even the central bank (by failing to act and is guilty by default) â€Å"pump† up the price of an asset or a particular asset class; the second cause is when a nation's financial institutions lend to people or groups who are politically connected. The US housing market is a good example of the first cause cited above in creating a bubble. Banks, mortgage lenders and mortgage brokers fed the frenzy by making obtaining a housing loan very easy, even to an extent of giving out mortgages to people who were imminently not qualified for a loan for the reason of not having adequate incomes to pay the monthly amortizations or even approving a loan to non-existent borrowers (bordering on outright fraud). The practice of American banks to originate and distribute (in contrast to other countries in which banks originate and hold) is seen as further hastening the expansion of the housing bubble. Some experts blame complex financial instruments known as derivatives as the prick that finally caused the bursting of the housing bubble; in particular, they liked to cite collateralised debt obligations (CDOs) as the culprit. CDOs were and still are risky investment instruments; these represented an ill-defined asset class, namely derivatives similar to options (puts and calls) and credit default swaps. The second cause is when large sums of monies are lent to people who are politically well connected in a form of financial cronyism. Although not very prevalent in the US and in other Western economies, such practice is contributory to asset bubbles because it results in the misallocati on of scarce financial resources better invested elsewhere. Good examples are the Korean chaebols and the Japanese zaibatsu which are the equivalents of classic American business conglomerates. The bottom line is that cheap funds channelled to the conglomerates cause them to drive up the prices of their