When those who control the reins of power hand out goodies, a savvy
statesman named Machiavelli once advised, they would be well advised to do
so in small increments - so the good news can keep coming. That way, people
will have reason to be grateful again and again, not just once.
Confidence in the economy should be built the same way: slowly and steadily.
So it'll last.
Maybe somebody should send "Helicopter Ben" a copy of Machiavelli's "The
Prince." The still new chairman of the Fed, Ben Bernanke, acquired his
nickname when he cited an observation from his friend and mentor, the late
great Milton Friedman. It was the now-sainted Dr. Friedman who noted that a
government able to print money could attack deflation simply by dropping the
stuff by helicopter. But, goodness, he didn't it should be dropped all at
once.
A quarter-point rate cut would have been a nice appetizer for an economy
starved for cash. But a half-point drop makes it sound as if the Fed is
getting ready to serve every dish on the menu in one course. Indigestion may
result.
The same herd now rushing to buy will soon enough be running to sell when
this stimulus abates and the inevitable downturn recurs, maybe bigger and
worse. It's all enough to make one suspect that economics is but a branch of
mass psychology. And the patient - in this case the fickle,
buying-and-selling public - needs to be treated with care and consistency,
not rushed from treatment to counter-treatment.