How $8 a week can best boost the economy

by on February 18, 2009 at 11:25 am in Economics | Permalink

Here are answers from many economists, here was mine:

In my view, fixing the banking sector is more important than getting
the stimulus right. So if you can afford to lose the money, go to a
large bank (more likely to be insolvent), find their most overpriced
service, and buy as much of it as you can. That way you are doing your
part to recapitalize our banking system.

If you’re stuck for ideas, just keep on using ATM machines, owned by
other banks, so you can pay large fees to take out small sums of money
from your checking account. When you need to, take all of your
withdrawals and deposit them back in the account once again and start
all over with the process.

1 Gabe February 18, 2009 at 11:28 am

I think this is a joke, I certainly thought it was funny, but it was so similar to the paulson plan that you supported I am not sure.

2 sociologicalimagination February 18, 2009 at 11:51 am

Bailout the economists!

viva le modèle de l’acteur rationnel!

mid-term question: how many NBER papers on the efficient market hypothesis could I print out every week (with my stimulus money) that have been proven utterly false in the past 6 months? Please assume indefinite housing market appreciation and the omnipotence of the maestro in your answer.

3 capitalistboy4712 February 18, 2009 at 12:14 pm

I agree with Mr. Cowen’s assessment. This recession started with the collapse of the banking and housing markets. We need to “stimulate” them over any other market, but Pres. Obama’s stimulus package is not the way to do it. In a true capitalist economy, business cycles occur and there’s really not a lot to be done except to NOT PANIC. This stimulus package might work for a little while, but in the long run, the real fix has to come from Mr. and Mrs. John Doe. We just need to keep spending at a normal rate and wait for the recession to end.

4 T. Shaw February 18, 2009 at 12:34 pm

There are still 8,384 FDIC-insured depository institutions in the country.

Here’s what we do. (I mean . . . after we kill all the economists.)

Get a list of the “banks” that took TRAP money.

Is your bank on it? If no, STOP. If yes, find a community bank (higher marginal propensity to lend money in your community) that did not take TRAP money. Take your $8, and your banking business, there. Starve the beast.

The nifty-fifty (concentration of outlandish risks) screwed the pooch big time. Find a community bank.

5 Jim February 18, 2009 at 12:53 pm

Greg Mankiw funny? Maybe there is hope, after all.

6 MS February 18, 2009 at 1:28 pm

This might have actually worked in Japan were individuals were sitting on tons of cash. In the US, most people are just as leveraged and in debt as the banks are. By walking away from their debts, people are actually doing the opposite of what Tyler is suggesting (yes I realize it is a joke).

7 dearieme February 18, 2009 at 1:42 pm

I see that “Martin Feldstein, Harvard University” missed the lesson at school where you are taught to answer the bloody question.

8 Don F February 18, 2009 at 2:15 pm

I think your view is right to fix the banking sector but how do we want to buy goods as much as we can? In the mean time, we are in recession. Our income do not have power to buy more goods. The gas price is still rising eventhough the oil price market is lower than last summer and I don’t know why.

The CEO’s of banking sector are still making and spending money a lot. Don’t they realize that our country in recession?

9 ZBicyclist February 18, 2009 at 3:40 pm

Did Tyrone get loose again?

10 ben February 18, 2009 at 4:00 pm

Therein lies an important problem: GDP as a proxy for surplus.

11 dearieme February 18, 2009 at 5:03 pm

Stick the eight bucks on Fizzy Lady in the 3:30 at Kempton Park.

12 Mary February 19, 2009 at 1:18 pm

Why would we choose to throw away our money into a system that is failing? It would take a heck of a lot of people to agree to this scheme for it to make any kind of difference. Yes I agree that we do need to do something, but I think this is a little outrageous. We need to stimulate the economy and get people to keep buying. Everyone is scared and thinks that we are in a crisis. Yes, we are in a recession but it has happened before, we will make it out. The economic cycle will go back up again, we just have to give it time.

13 Matt February 22, 2009 at 12:20 am

Tyler –

According to this video, the drop in fuel prices has had nearly 5 times the weekly impact this $8 a week will have. It has not done much to boost spending above trend (although it could have been worse without it).

It suggests that this step will not be some sort of magical tipping point for consumer confidence.

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