This big money hole Bush dug- can some smart person here put into context the size of the problem?

[mahina]

I'm not that swift at economics, I just know how to work, and the millions/billions/trillions spent by our govt I just don't really grasp.

Anybody know a way to help us non-econ people get a sense of the scale of the problem we are about to confront?

Mahalo~

[gravity]

1. Try converting the number into tons of $100 bills

A dollar is one gram, so do the math assuming $10T in debt...

I calculated 100,000 metric tons of $100 dollar bills

[mahina]

7. okeydokey.

I'll need a bigger wheelbarrow, that is if I ever see any of it.

[GoesTo11]

2. He spent 10 years worth of money in 8 years

Just as some back of the envelope calculations, that is, an extra 5 trillion of debt. The plan was to reduce the debt instead. Now each year in the future, about 20% of the national budget will have to go for debt payments (interest). Future presidents will either raise have to taxes by a fifth on everyone to balance the budgets, or cut all non-defense \non-entitlement expenditures to zero forever (or, cut the military budget close to 0) just to keep the debt from growing bigger.

[OffWithTheirHeads]

3. Read "The Shock Doctrine" and you will see what we are really up against

It will all become clear in less than the first hundred pages.

[Festivito]

4. Are you sure you want to know?

First the numbers to use: When looking at our nation, limit yourself to Billions with the B. When looking at what it means to you, see it as three to four dollars.

Again, think with me. There are 303-million Americans. Roughly. If each of us, every man, woman, and child puts in $3.30, that would be 1B$(one-billion dollars).

One billion dollars is $3.30. Say a McDonald's Quarter Pounder with cheese.

Family of four: $13.20. Say a trip to an ice cream shop and four cones, dad gets a double scoop.

That's what a billion dollars on our national scale should mean to you. A billion-dollar program to feed kids in the federal budget taxed to a family of four means one less trip to the ice cream shop each year. How's that sound? Okay I hope.

NOW FOR THE SAD NEWS BEFORE THE REALLY BAD NEWS:

Our national debt is $10.6T$. Oops Trillion. Multiply it by a thousand to get billions. 10,598-billions. Call it 10,600B$.

TO YOU: That is $35,000 per American. TO A FAMILY OF FOUR: That is $140,000. Imagine a family of four, mom and dad buy a house worth $350,000, put down $50,000, owe $300,000. They look good, until you realize that they have an asset of $350,000 and owe $440,000. Net worth: NEGATIVE $90,000.

That's sad enough. Good news is that the national debt already includes debt from bailing out the banking/insurance problem. Bad news is that they still want to borrow the other half of the $700B, another $350B.

NOW FOR THE REALLY SAD PART:

How bad is the banking problem? I don't think we know. Could it be fixed with 700B$? Some say there is 7,000B$ of trouble out there. Some say there is 70,000B$ of trouble out there. You may confuse these B$ numbers with the numbers that relate to your life. Uh uh.

An additional 7T$(7,000B$) is an additional $23,100 to you, and for the family of four: $92,400. For 70T$(70,000B$) use those same two figures and multiply by ten. $231,000 per American, $924,000 for a family of four. Nearly a million dollars of debt for that family. Let's just call that indentured servitude.

NEEDLESSLY DEEPER:
Banks can lend ten times what they have in the bank vault. No more, that's law.

SO, some bright banking/finance guys said, hey, those real estate loans are good as gold, how about we call them gold, almost literally, get the insurance company to insure it as good as gold and we'll call it MONEY IN THE VAULT! Then we can loan, say it with me, TEN TIMES THE AMOUNT IN THE VAULT!

Same as above with numbers: Bank has ten-million in the vault. Lends 100M$. Calls 100M$ as in the vault. Lends $1,000M$(1B$).

But, the little secret: They only have one-hundredth of that in the vault. By law it's supposed to be one-tenth, no less.

Bright banker boys did not stop there. They said the new amount lent, the 1B$ was now, say it with me again, GOOD AS GOLD. And, then they had even more money to lend, but still had the same old 10M$ in the vault.

They bundled the real-estate good-as-gold holdings and sold it to retirement accounts and hungry countries with whom we had a trade deficit desperately looking for some place to store the huge amounts of dollars they were collecting. Maddeningly, some of the value caused the price of housing to rise. NOT THE VALUE OF HOUSING, only the price.

ONE MORE STEP DEEPER:
The bankers collected their usual fee of one, two, three percent(I don't know the figure). Those LARGE amounts made them rich rich rich, and it made them believe what they were doing was and is real. It's not real. They need to give it back. But, that's just me.

BACK TO SOME REALITY:

When jobs dropped and prices fell, the house of cards fell. And, all that was in the vault? The same 10M$. Nowhere near the Billions now needed to sustain the PRICES.

Since you read this far, Hey, I think we should review each and every loan for appropriateness to each and every associated borrower and make the banks eat the difference.

Hope this helps a little and is not wildly errant.

[marketcrazy1]

5. Festivito: that was good

somebody on this board has a clue!!! I`m impressed!! thanks for the post!

[mahina]

6. That is great to know. I hope you make that an original post, because it is really

helpful to me.

I understand, pretty much, about the credit default swaps; This American Life did a couple of weeks of stories on the economic troubles. But the scale of it, and what it converts to from our family, was what I needed, and just what you gave. Thanks a really lot.

Please post it, I hope you do.

Much aloha.

[FedUpWithIt All]

9. Very nice. Thank you for taking the time to write this out. You explained it so clearly.

It is all a bit overwhelming sometimes.

:hi:

[Danascot]

8. The bailout is bigger than all wars and major projects in US history

combined.

It took the statisticians of the National Bureau of Economic Research almost a year to confirm what the rest of us already knew, that the US registered a significant decline in economic activity, thus officially entering a period of recession. While I am pleased that the members of NBER take their duties seriously, thereby ensuring that they don’t leap to any hasty conclusions, I only wish that similar moderation could be displayed by their colleagues at the Fed and the Treasury.

Unfortunately, the facts prove otherwise. Three months before the recession was officially declared, Paulson and Bernanke have embarked on the largest bailout program ever conceived with the blessing of a lame-duck president and a complicit Congress - a program which so far will cost taxpayers $8.5 trillion. This staggering sum encompasses: loans backed by worthless assets ($2.3T), equity investments in bankrupt companies with negative net worth ($3.0T), and guarantees on crumbling derivatives and other hollow collateral ($3.2T).



http://www.financialsense.com/editorials/casey/2008/1210.html