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Economist: Why The Bailout Money Should Have Gone To Real People, Not Banks

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Author Topic: Economist: Why The Bailout Money Should Have Gone To Real People, Not Banks  (Read 323 times)
Major Weatherly
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« on: September 20, 2009, 05:20:40 pm »

    The model shows that you get far more “bang for your buck” by giving the money to firms, rather than banks. Unemployment falls in both case below the level that would have applied in the absence of the stimulus, but the reduction in unemployment is far greater when the firms get the stimulus, not the banks: unemployment peaks at over 18 percent without the stimulus, just over 13 percent with the stimulus going to the banks, but under 11 percent with the stimulus being given to the firms.

    The time path of the recession is also greatly altered. The recession is shorter with the stimulus, but there’s actually a mini-boom in the middle of it with the firm-directed stimulus, versus a simply lower peak to unemployment with the bank-directed stimulus.

Keen concludes simply:
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