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How $8 a week can best boost the economy
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.
Posted by Tyler Cowen on February 18, 2009 at 11:25 AM in Economics | Permalink
Comments
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.
Posted by: Gabe at Feb 18, 2009 11:28:26 AM
Yes, this HAS to be a joke or... cute but amazingly ridiculous nonsense, or... [wow, can't even write it].
Posted by: Brug92 at Feb 18, 2009 11:42:35 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.
Posted by: sociologicalimagination at Feb 18, 2009 11:51:55 AM
A really bad joke.
Or maybe not so. Maybe it´s just a cynic description on how things will be manage.
Posted by: Lisardo Bolaños at Feb 18, 2009 11:52:22 AM
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.
Posted by: capitalistboy4712 at Feb 18, 2009 12:14:11 PM
lolz @ the sarcasm
Posted by: stickrouse at Feb 18, 2009 12:21:44 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.
Posted by: T. Shaw at Feb 18, 2009 12:34:00 PM
Better yet, get a credit union. Better rates, less restrictions and they smile.
Remember when ATM's were going to be everywhere and free?
Sort of like the 1950's when utilities were selling the idea that nuclear power would be
so abundant that there'd be no need for metered usage due to insigficant marginal costs.
Posted by: Superheater at Feb 18, 2009 12:53:35 PM
Greg Mankiw funny? Maybe there is hope, after all.
Posted by: Jim at Feb 18, 2009 12:53:42 PM
Paul Kasriel, Northern Trust: I would use the extra cash to start a hedge fund, which would purchase newly-issued asset-backed securities. I would finance my position through the Fed’s TALF program.
That one is the best one of all.
Posted by: Joen at Feb 18, 2009 1:21:09 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).
Posted by: MS at Feb 18, 2009 1:28:16 PM
It will only work if you go to the ATMs in the morning, and deposit the money back in the afternoon, so that there are no changes in overnight lending between banks. But I think you were trying for some Keynesian humor :)
Posted by: kurt at Feb 18, 2009 1:36:18 PM
I see that "Martin Feldstein, Harvard University" missed the lesson at school where you are taught to answer the bloody question.
Posted by: dearieme at Feb 18, 2009 1:42:16 PM
On President's Day, when the bank is normally closed, they opened up and had a woman outside in the ATM area with cookies, who then tried to lure you inside to enter a contest. A salesperson would enter you in the contest, then try to get you to enroll in every last program they have, and also tried to convince you that it was a good idea to move as much money from checking as you can spare into savings.
So, part of Chase's recapitalization strategy will succeed or fail depending on how guilty people felt for taking a free cookie.
Posted by: Jonas Cord at Feb 18, 2009 2:02:24 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?
Posted by: Don F at Feb 18, 2009 2:15:37 PM
I'm going with Tyler's prescription. After all, I have about $20K in GMAC bonds that are worth double what they were before the fed helped out. Nothing wrong with giving back a little.
Posted by: oops at Feb 18, 2009 3:37:51 PM
Did Tyrone get loose again?
Posted by: ZBicyclist at Feb 18, 2009 3:40:03 PM
Shouldn't you be making counterfeit money and spending that, to prop up the economy and avoid deflation at the same time? Why should only government be allowed to debase the currency?
Posted by: MichaelG at Feb 18, 2009 3:47:28 PM
Therein lies an important problem: GDP as a proxy for surplus.
Posted by: ben at Feb 18, 2009 4:00:19 PM
how about if us heavy internet users turn our internet cash-free wheelings into commerce that has to be paid for and therefore can be measured and taxed? this will immediately add to the GDP (because it will be counted as GDP), decrease deflation, and decrease deployment.
SERIOUSLY though -- how much economic activity are we denying ourselves via the fact that there is no internet micropayment system? how much would having one aid the inevitable shifts toward work facilitated by internet technology?
Posted by: babar at Feb 18, 2009 4:26:37 PM
Stick the eight bucks on Fizzy Lady in the 3:30 at Kempton Park.
Posted by: dearieme at Feb 18, 2009 5:03:50 PM
This isn't a joke, guys; it's unorthodox altruism.
Posted by: Daniel Reeves at Feb 18, 2009 10:38:37 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.
Posted by: Mary at Feb 19, 2009 1:18:22 PM
At this point, if I have to waste those 8 bucks, I'd rather waste them on nationalisation.
The financial system does not produce consumable goods. It is a transaction cost to the rest of the economy. It's share of the GDP should be reduced to a minimum.
Posted by: Oskar Shapley at Feb 21, 2009 11:47:38 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.
http://www.youtube.com/watch?v=uyPcRGvtu18
Posted by: Matt at Feb 22, 2009 12:20:05 AM
