(picture courtesy of businessweek.com)For anybody wanting to never look at the bailout plan the same way again, I suggest the Wikipedia entry for Liquidity trap.
In the paragraph summarizing Milton Friedman's view, we learn that:
"A monetary authority can escape a liquidity trap by bypassing financial intermediaries to give money directly to consumers or businesses. This is referred to as a money gift or as helicopter money. The term helicopter money is meant to portray the image of a central banker dropping money on people from a helicopter. Political considerations make it difficult for a monetary authority to grant the money gift, because individuals and firms not receiving free money will exert political pressure. The monetary authority must act covertly to give gift money to specific individuals or firms without appearing to give money away." (Emphasis mine)
There you have it, the bailout plan as the ultimate covert financial operation. When one knows Helicopter Ben Bernanke's devotion to all things Miltonian, one is excused for thinking that at least part of the reasoning behind the plan is to overpay for bad assets (giving money away to banks) and hope it somehow shocks the system back into action. Which is not to say that it's a bad plan and that it won't work (the odds are kind of long though), just that the covert part might be what some people are rebelling against, if only subconsciously.
Interestingly enough, this is one situation where Friedman advocates government intervention in and interference with the market. The Austrian school on the other hand would embrace the current bust as the only effective cure for the excesses of the boom and would strongly advise against any kind of government intervention as that would only make the bust last longer and delay any type of recovery (see Japan).
In the paragraph summarizing Milton Friedman's view, we learn that:
"A monetary authority can escape a liquidity trap by bypassing financial intermediaries to give money directly to consumers or businesses. This is referred to as a money gift or as helicopter money. The term helicopter money is meant to portray the image of a central banker dropping money on people from a helicopter. Political considerations make it difficult for a monetary authority to grant the money gift, because individuals and firms not receiving free money will exert political pressure. The monetary authority must act covertly to give gift money to specific individuals or firms without appearing to give money away." (Emphasis mine)
There you have it, the bailout plan as the ultimate covert financial operation. When one knows Helicopter Ben Bernanke's devotion to all things Miltonian, one is excused for thinking that at least part of the reasoning behind the plan is to overpay for bad assets (giving money away to banks) and hope it somehow shocks the system back into action. Which is not to say that it's a bad plan and that it won't work (the odds are kind of long though), just that the covert part might be what some people are rebelling against, if only subconsciously.
Interestingly enough, this is one situation where Friedman advocates government intervention in and interference with the market. The Austrian school on the other hand would embrace the current bust as the only effective cure for the excesses of the boom and would strongly advise against any kind of government intervention as that would only make the bust last longer and delay any type of recovery (see Japan).
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