Monday, February 16, 2009

U.S. Taxpayers Risk $9.7 Trillion on Bailout Programs

The U.S. government’s commitment to solving the financial crisis comes to about $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.

Forget about the “measily” $787 billion Stimulus package just passed. The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years, and pledged up to $5.7 trillion more.

Only the latest approved stimulus bill, and the $700 billion Troubled Asset Relief Program passed four months ago, and $168 billion in tax cuts and rebates enacted in 2008 have been voted on by lawmakers. The remaining $8 trillion is in lending programs and guarantees, almost all under the Fed and FDIC. Recipients’ names have not been disclosed. The Federal Reserve so far has also refused to disclose loan recipients or reveal the collateral they are taking in return.

$9.7 trillion would be enough to send a $1,430 check to every man, woman and child alive in the world. It is almost enough to pay off every home mortgage loan in the U.S., calculated at $10.5 trillion by the Federal Reserve.


Wednesday, February 11, 2009

Predicted 15 year impact from worst financial downturn in 100 years

In an extraordinary admission about the severity of the economic downturn, the British PM's closest ally predicted that its effects would still be felt 15 years from now. His comments carry added weight because he is a former chief economic adviser to the Treasury.

He added: "The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years, as it will turn out. … These are seismic events that are going to change the political landscape. I think this is a financial crisis more extreme and more serious than that of the 1930s, and we all remember how the politics of that era were shaped by the economy."

He warned that events worldwide were moving at a "speed, pace and ferocity which none of us have seen before" and banks were losing cash on a "scale that nobody believed possible".

The minister stunned his audience at a Labour conference in Yorkshire by forecasting that times could be tougher than in the depression of the 1930s, when male unemployment in some British cities reached 70 per cent.

[The Independent]

Friday, February 06, 2009

New reserve currency and bankrupt U.S. States?

In his speech at the opening of the World Economic Forum in Davos, Vladimir Putin reminded the that “just a year ago, American delegates speaking from this rostrum emphasized the US economy’s fundamental stability and its cloudless prospects. Today, investment banks, the pride of Wall Street, have virtually ceased to exist. In just 12 months, they have posted losses exceeding the profits they made in the last 25 years.”

With another swipe at America’s failed economic leadership, and greeted with a roar of applause, Putin also said it is time to get rid of virtual money, false financial reports, and dubious credit ratings. Putin proposed a new reserve currency system to “replace the obsolete unipolar world concept.”

Meanwhile, in the United States, there are currently 46 states of the 50 U.S. States with high budget deficits, many of which could file for Chapter 9 bankruptcy.

Many States are already scurrying to cut State-funded programs, raise taxes, not issue tax refunds to their citizens, and borrow money just to survive in 2009. And unfortunately, many of the same banks the Fed bailed out are refusing to loan money to the States and their Treasury agencies.

It’s very possible we’re about to experience the end of the United States as we know it.

[Source: CNN and Center on Budget and Policy Priorities]

Wednesday, February 04, 2009

The Billion and Trillion Dollar numbers make us numb-er

Everyone is tossing around the words million, billion and trillion. In that strange intersection of economics and politics, there is a new fashion: Trillion is the new billion.

A billion is a thousand million, and a trillion is a thousand billion.

To provide some perspective on just how big a trillion dollars is, think about it like this: A trillion dollars is the number 1 followed by 12 zeroes. Or you can think of it this way: One trillion $1 bills stacked one on top of the other would reach nearly 68,000 miles (about 109,400 kilometers) into the sky, or about a third of the way from the Earth to the moon.

Americans have become desensitized to just how much money that is. "To put a trillion dollars in context, if you spend a million dollars every day since Jesus was born, you still wouldn't have spent a trillion," McConnell said.

"A million dollars a day for 2,000 years is only three-quarters of a trillion dollars,"adds Temple University math professor and author John Allen Paulos.

Here's another way to look at it.

"A million seconds is about 11½ days. A billion seconds is about 32 years, and a trillion seconds is 32,000 years," Paulos said. "People tend to lump them together, perhaps because they rhyme. But if you think of it in terms of a jail sentence, do you want to go to jail for 11½ days or 32 years or maybe 32,000 years? So, they're vastly different, and people generally don't really have a real visceral grasp of the differences among them."

Perhaps a better way to get a "grasp of the numbers," Paulos said, is to use them to describe the budgets of government programs.

"The [Environmental Protection Agency's], for example, annual budget is about $7.5 billion. So, a trillion dollars would fund the EPA in present dollars for 130 years -- more than a century. Or the National Science Foundation or National Cancer Institute have budgets of $5 or $6 billion. You could fund those for almost 200 years," he said.