<p>It’s indeed very easy and casual for those sitting in the ivory tower to comment on the defects of the current bail out plan or any action taken by the government. From Paulson’s perspective, it’s a completely different picture. Paulson’s had years of experience working in wall street firms, and he innately understands the importance of market confidence in a time of serious recession or potential depression. The solution to that is a large scale bail out package. </p>
<p>Somehow, the ivory tower academics (as usual) simply haven’t felt the urgency of the situation (of course, all of them have life tenures…who cares?). Even Miron admits that there would be a period of severe shortage of capital and credit conditions may worsen. And how long would that little “period” last? 3 months? 12 months? 2 years? 5 years? And how does Miron expect an economy without sufficient capital to function during this time of depression when capital is urgently needed to boost new investments to keep unemployment low and consumption stable? Many today praise FDR because he saved capitalism during the Great Depression. FDR’s New Deal gave hope and relief to millions of people, even though it did not have a tremendous economic impact. If the ivory tower academics were in the shoes of a decision maker, would they want to be labeled as the next Hoover?</p>