The recent economic downturn has created the environment for a new round of bailouts by the government and the Fed.
In what follows, I review the history of bailouts in the US and argue that we must consider bringing an end to bailouts if we want to have the real and sustainable economic growth we desperately need.
The concerned reader may ask, Aren't the bailouts the price we have to pay to save jobs? The problem is that these companies never really fixed their problems.
Our history of bailouts shows that we have created tremendous moral hazard.
The bailouts have led to bad use of resources, which can explain, at least in part, the slow economic growth we have experienced post-Great Recession.
The issue with bailouts is that the tradeoffs we face are higher unemployment now followed by higher and sustainable economic growth later, or lower unemployment now followed by lower economic growth later.
The story of bailouts and low interest rates continues.
In what follows, I review the history of bailouts in the US and argue that we must consider bringing an end to bailouts if we want to have the real and sustainable economic growth we desperately need.
The concerned reader may ask, Aren't the bailouts the price we have to pay to save jobs? The problem is that these companies never really fixed their problems.
Our history of bailouts shows that we have created tremendous moral hazard.
The bailouts have led to bad use of resources, which can explain, at least in part, the slow economic growth we have experienced post-Great Recession.
The issue with bailouts is that the tradeoffs we face are higher unemployment now followed by higher and sustainable economic growth later, or lower unemployment now followed by lower economic growth later.
The story of bailouts and low interest rates continues.
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