I had wondered about this idea a couple years ago -- but that's all I did, wondered about it. The idea is that when banks need bailing out -- and sadly, we seem stuck with that problem for the moment -- we shouldn't bail them out directly, but indirectly. For example, just give every single person in the US $1,000. Or maybe a voucher for $1,000 that they have to spend somewhere, or put in a bank. This quickly amounts to $300 billion infused into the economy, a large portion of which would end up in banks. So cash would be pumped into the banks too, but only through people first.
You can imagine all kinds of ways to play around with such a scheme. Paying off some of peoples' mortgages. The amount injected could be much larger. Perhaps similar funds would be injected directly into banks and other businesses as well. Mark Thoma has thought through some of the details. But I'm quite surprised this is the first I've heard about any idea even remotely like this. It seems like a much better idea than just giving money to the bankers who created the problem in the first place. Why don't we hear more about such possibilities?
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