Monday, February 02, 2009

Circular stimulus logic

Here's a piece from Prof. Richard McKenzie of UC Irvine that nails a good deal of the circular logic involved in the "stimulus" plan that I suppose will be passed in one form or another. The housing market experienced a bubble and got out of whack? Pump in more money so it doesn't have to decline to more-or-less affordable levels, and try to make sure that those who overextended themselves never have to pay a price. People spending more than they can afford contributed to the problem so we'll bail them out too. Bankers and heads of financial institutions made huge mistakes, but if they're "too big to fail" we'll bail them out and send the signal that there's no price to pay for stupidity and cupidity. Works for me.

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