Saturday, February 21, 2009

Tyler Cowen: Spend Your Stimulus Money On a Global Banker

The "stimulus" bill that President Obama signed includes $116 billion in tax credits that will come largely through reduced tax withholding from paychecks, over two years. That will put $8 a week into most Americans' paychecks.

WSJ went to
several economists and asked them, "So if you’re getting an extra $8 each week, and as a good citizen you want to do your part to get the economy going, what should you spend the money on, and why?"

Tyler Cowen recommends spending it with a global banker:

In my view, fixing the banking sector is more important than getting the stimulus right. So if you can afford to lose the money, go to a large bank (more likely to be insolvent), find their most overpriced service, and buy as much of it as you can. That way you are doing your part to recapitalize our banking system.

If you’re stuck for ideas, just keep on using ATM machines, owned by other banks, so you can pay large fees to take out small sums of money from your checking account. When you need to, take all of your withdrawals and deposit them back in the account once again and start all over with the process.

All joking aside (I think Cowen's joking), there is no such thing as a "stimulus" package. It's taking money from one person's pocket and putting it in another.

If you are going to get an $8 per week tax credit, the best use you can put it to is to educate yourself about the economy. Save for a few weeks until you have enough to buy The Failure of the "New Economics"; by Henry Hazlitt. It is a page by page devastating critique of Keynes' General Theory


  1. Don't you think "Economics in One Lesson" would be a better choice when it comes to Hazlitt? Because "Failure of the New Economics" sort of presupposes that someone has actually been stupid enough to read the "General Theory", and we don't want to encourage people to get even more stupid by accidentally doing so?

  2. Given all the talk that Keyenesianism is back, there is no better time to understand the defects of The General Theory, and Hazlitt is simply brilliant in destroying Keynes' confused theory.

  3. The Failure of the "New Economics" by Henry Hazlitt also is here in pdf for free (via Mises Institute).