Thursday, January 15, 2009

Bailouts and Stimulus Plans


Eugen Fama has an interesting discussion of the Bailout and Stimulus package over on his blog,
Fama/French Forum
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The Bottom Line

The general message bears repeating. Even when there are lots of idle workers, government bailouts and stimulus plans are not likely to add to employment. The reason is that bailouts and stimulus plans must be financed. The additional government debt means that existing current resources just move from one use to another, from private investment to government investment or from investment to consumption, with no effect on total current resources in the system or on total employment. And stimulus plans only enhance future incomes when they move current resources from less productive private uses to more productive government uses - a daunting challenge, to say the least. —EFF

Bailouts and Stimulus Plans