Tuesday, December 18, 2007

Al Greenspan’s version of “helicopters”

Suggesting to “drop money from helicopters” to prevent a financial crisis was what initially earned current Fed Chairman Ben Bernanke his nickname “helicopters”. However, his predecessor Alan Greenspan has just suggested and equally radical idea. He said the government should provide “direct financial assistance” to strapped homeowners, essentially depositing free money into their bank accounts. Another solution Mr. Greenspan suggested was temporarily lowering taxes. In his opinion, although this would create a “short-term fiscal problem”, it would save the economy. Hm… this sounds pretty risky, and did anyone mention moral hazard? Or have we retired the term already? And finally, the ex-Fed chairman doesn’t even know “if it would work”, but he firmly believes it will be good for the people. So much for common sense.

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