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The Great Financial Squeeze and Unintended Consequences of Government Meddling in Free Markets

Australia Bank’s recent pronouncement that, as of 2025, it will no longer issue loans for new gas-powered vehicles may be the harbinger of strong-arm, financial tactics we’ll soon encounter in America for automobile purchases and, possibly, for homes.  After hearing about Australia Bank’s position on new car lending (not used car lending), I can foresee a future in which mortgage loans will not be available, except for homes with solar panels and electric heating, cooking, water heating, and clothes drying appliances.

Furthermore, if a buyer wants a mortgage for a home that has an electric dryer, for example, but not these other features, the lender could make the loan available only if it also covers the cost of installing solar panels, electric heating, cooking, and water heating appliances. 

This, of course, would add $30,000 to $40,000 plus to the cost of financing (and building) a home, and would further fuel the housing market pullback we are now experiencing due to the recent increases in interest rates.  It adversely affects the affordability of housing construction. Of course, the Nanny Bank would need documentation of the features added and their completion within, say, six months of closing the purchase on the home.  Also, an inspection would be warranted to verify all this. Would these inspectors be employed by the banks, or by the EPA?

Until 2022, with the exception of Tesla, car companies have been dabbling in the American electric vehicle market.  At this point, as of my conversation today with a Honda employee, Honda has hybrid options, but not any pure EVs. Many consumers don’t want to purchase an electric vehicle because the true cost of them is unknown.  The batteries that need replacement every so many years are very costly.  And electricity prices have been rising steeply.  A recent article showed the estimate for one electric car owner at $29,000 for the new battery.  True, this person had been an early adopter, so his vehicle was considered obsolete and replacement batteries were difficult to come by, but $29,000 for a battery seems a bit steep.  

Another article showed five men pushing an EV that had run out of juice (Or is it fizzle?). The article indicated that the vehicle could not be towed due to the composition of it’s undercarriage which could not withstand the force of towing(What does this indicate for the tow truck manufacturing industry and independent tow truck owner/operators?). Governor Newsome asked California EV owners to not charge their EV’s during our recent nearly two-week-long heat wave, demonstrating that if you own an EV, you still also need to own a gas-powered vehicle. 

I also read an article about someone that purchased an electric motorcycle that had run into the aforementioned, very expensive battery replacement problem.  For him, the cost of replacing the battery made his electric motorcycle worthless.

Some auto manufacturers have announced their conversions to electric vehicle manufacturing.  This is so expensive for these companies, that some must sell off parts of themselves in order to finance the transition.  What will this trend in financing for vehicles do to the value of these companies?  How many years off are the large-scale purchases of EVs?  Will these automobile manufacturers calculate their Return On Investment using a five year horizon, a ten year horizon, or a 50 year horizon?  Whatever time frame they pick, will they be wrong?  What will this do to their share prices?

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What are the tangential consequences of this movement away from fossil fuels?  What will happen to our airline industry?  What will fuel prices be for air travel when EVs rule the roads in the US and Western Europe?  In theory, US and Western European oil demand will go way down.  However, England’s new Prime Minister has reversed some of the previously implemented restrictive policies on oil.

Without new exploration, our domestic oil reserves could be depleted. Domestic exploration has been largely curtailed by Biden’s actions. He first promised that NO MORE LEASES ON FEDERAL LANDS would be allowed, but recently, and quietly, he announced that leases on Federal Lands would be allowed again, but that the royalty paid to the U.S. government would go up by 50%. This is a measure that adds more fuel to the fire of gasoline prices (pun intended).

Will OPEC increase supply on world markets to keep jet fuel affordable and so keep the travel industry afloat? Perhaps this is why Facebook is now Meta.  When nobody can afford to travel, we’ll all just wear headsets to visit London and Paris, and even the moon. Will we use the same headsets to go deep sea diving, fishing, and hiking?  What effect will this have on obesity?

In 1994, I gave a presentation to the publishing equipment industry.  I began with a rendition of Let’s Get Physical by Olivia Newton John, but instead of Physical, I substituted the word “digital.”  At that time, I was an attractive blonde in my 30’s. Everybody laughed in the 95% male audience.  

The Germans laughed at Trump when he warned of the dangers of dependence on Russia for oil and Liquified Natural Gas. Russia recently announced it was shutting off LNG flow in a pipeline due to the need for maintenance, or until sanctions were lifted. 

What other things we used to do for real will we be doing digitally?  Is the Metaverse one in which you want to live?

Jennifer Mitchell Towner worked in the computer industry from 1979 to 1998. Under a program called Encorps, she became a high school math, French, and Consumer Finance teacher in 2009, retiring in 2019. She holds two BAs from U.C. Berkeley in Math and French and an MBA from Stanford University. The books she published in 2021, Good Boots and Kipper the Nipper are on Amazon.

Featured image: JAn Dudík, CC BY 3.0 <https://creativecommons.org/licenses/by/3.0>, via Wikimedia Commons