A:

Fool in the shower is a term that was coined by Milton Freidman, an American Nobel Prize-winning economist, who advocated a marketplace with minimal government intervention. His policy prescriptions maintained that any stimulus to the economy should be done slowly, rather than all at once because it takes time to determine the effects of the changes. For example, a change in the federal funds rate takes about six months to fully integrate into the economy.

He compared the situation to taking a shower. A fool gets into a cold shower before the water has had time to warm up. Rather than waiting for the temperature to adjust, the fool turns the hot water all the way up and eventually scalds himself.

For more on this read, The Whens and Whys of Fed Intervention.

This question was answered by Katie Adams.

RELATED FAQS
  1. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  2. Where are the Social Security administration headquarters?

    The U.S. Social Security Administration, or SSA, is headquartered in Woodlawn, Maryland, a suburb just outside of Baltimore. ... Read Full Answer >>
  3. Is the Social Security administration a government corporation?

    The U.S. Social Security Administration (SSA) is a government agency, not a government corporation. President Franklin Roosevelt ... Read Full Answer >>
  4. How does the role of Medicare/Medicaid affect the drugs sector in the U.S.? (UNH, ...

    Medicare and Medicaid have enormous influence on the pharmaceutical, or drugs, sector in the United States. For instance, ... Read Full Answer >>
  5. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>
  6. What do I do if I think an accountant is in violation of the Generally Accepted Accounting ...

    The Financial Accounting Standards Board (FASB) promulgates generally accepted accounting principles (GAAP) in the United ... Read Full Answer >>
Related Articles
  1. Economics

    How Bernie Sanders Has Avoided Big Money (Mostly)

    Bernie Sanders hasn't entirely avoided PACs with his fundraising, but he has gotten a lot of bang for the buck
  2. Investing News

    Obama Wants to Double Wall Street Regulation

    President Obama wants to double the budgets of the SEC and the CFTC over the next five years.
  3. Economics

    Does Big Money Hurt or Help Clinton and Rubio?

    Marco Rubio and Hillary Clinton lead their parties in raising money from Wall Street. Is that a help or a hindrance?
  4. Fundamental Analysis

    The Evolution of Obamacare Since Its Inception

    Find out whether the Patient Protection and Affordable Care Act, also known as Obamacare, has lived up to its lofty projections from 2010.
  5. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  6. Stock Analysis

    China Mobile: Just How Big is It? (CHL, CHU, CHA)

    The story behind China Mobile, the biggest company you might never have heard of.
  7. Markets

    The (Expected) Market Impact of the 2016 Election

    With primary season upon us, investor attention is beginning to turn to the upcoming U.S. presidential election.
  8. Economics

    Trump vs. Bloomberg: How They Compare

    If Bloomberg enters the presidential race how will he compare to billionaire brethren Trump?
  9. Fundamental Analysis

    5 Economic Changes to Expect if a Republican Wins in 2016

    Discover the five most likely economic changes the United States can expect if a Republican wins the presidential election in 2016.
  10. Term

    What Is Section 1231 Property?

    Section 1231 property is depreciable business property that’s held for a year or longer.
RELATED TERMS
  1. Fiscal Policy

    Government spending policies that influence macroeconomic conditions. ...
  2. Political Economy

    The study and use of how economic theory and methods influences ...
  3. Federal Budget

    The federal budget is an itemized plan for the annual public ...
  4. High-Deductible Health Plan - HDHP

    A health insurance plan with a high minimum deductible that that ...
  5. Sales Tax

    A consumption tax imposed by the government on the sale of goods ...
  6. Crowding Out Effect

    An economic theory stipulating that rises in public sector spending ...
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center