Tuesday, October 28, 2008

It's never enough

Is anyone else noticing a pattern?

AIG Bailout was originally set at $85 billion, but that wasn't enough, so the government generously added $37.8 billion (of your money), but now that's not going to be enough either. I guess all those spa parties and hunting trips are getting expensive.

The magic $700 billion number for the bailout was picked because "they just wanted a really big number", but it clearly wasn't enough.

While you were struggling to understand how the government could want to spend $700 billion, and despite promises to the contrary, they gave a quick $25 billion to the automakers (ostensibly to help them create more fuel-efficient cars) but guess what? It's not enough, and now they're going to use it for mergers & acquisitions instead.

Today, the Telegraph reports a couple of staggering figures:

  • worldwide, the various national bailouts have cost over $7 trillion, so far!
  • That number is 12% of the entire global"real" economy.
  • The "real" economy is vastly overwhelmed by "the unregulated shadow banking market, where the Bank estimates $14,500bn of "toxic" assets responsible for the financial crisis have proliferated"
The translation is this: if they are estimating $14.5 trillion of "toxic" assets, and we've spent $7 trillion without even making a dent, then what does that say about how much further we have to go? Of course, they are only estimating how much of the shadow banking market is toxic. If they are wrong by even a fraction, we are really in for it. Remember, the global derivatives market was "valued" at $1.14 quadrillion dollars this summer.

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