Before we go to the main event, please ponder this quote of the day from The King Report (subscription only):
Paul Volcker’s chief purpose {in the Obama Administration} is to give the appearance that he will persuade Obama to remove the excess credit at the appropriate time. … Resurrecting Volcker during the most wanton monetary policy in US history in order to inveigle global investors into believing that Volcker will convince Obama and US solons to halt their debauchery at the precise time is like Caligula enlisting Saul of Tarsus to advise him on the precise time to go celibate.
With that in mind, how big is the “bailout” — the flood of acronyms and money attempting to solve this financial crisis? The New York Times shows the totals: “Tracking the bailout: the government’s commitments” (26 November 2008), and the grand sum.
That gives just dry numbers. Barry Ritholtz shows us what this really means in “Big Bailouts, Bigger Bucks“, posted at his website The Big Picture, 25 November 2008:
Whenever I discussed the current bailout situation with people, I find they have a hard time comprehending the actual numbers involved. That became a problem while doing the research for the Bailout Nation book. I needed some way to put this into proper historical perspective.
If we add in the Citi bailout, the total cost now exceeds $4.6165 trillion dollars. People have a hard time conceptualizing very large numbers, so let’s give this some context. The current Credit Crisis bailout is now the largest outlay In American history.
Jim Bianco of Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures – combined:
- Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
- Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
- Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
- S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
- Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
- The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
- Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
- Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
- NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion
TOTAL: $3.92 trillion (data courtesy of Bianco Research)
That is $686 billion less than the cost of the credit crisis thus far.
The only single American event in history that even comes close to matching the cost of the credit crisis is World War II: Original Cost: $288 billion, Inflation Adjusted Cost: $3.6 trillion
The $4.6165 trillion dollars committed so far is about a trillion dollars ($979 billion dollars) greater than the entire cost of World War II borne by the United States: $3.6 trillion, adjusted for inflation (original cost was $288 billion).
Go figure: WWII was a relative bargain.
I estimate that by the time we get through 2010, the final bill may scale up to as much as $10 trillion dollars…
This is somewhat misleading (as is my title; a tradition at the FM site). The bailout was not an expenditure of dollars, like all of the above (except for the Louisiana Purchase). Most of the bailout expenditures were purchases of financial assets. Many of these probably will be repaid; many of these earn interest (some at a higher rate than the government borrowed the funds).
But these purchases have damaged the US government’s solvency, and generated benefits for our plutocrats far greater than anything gained by the taxpayers or the nation.
Let us hope that we get more from the next few trillion that will be spent in 2009 — and the trillions more probably necessary to spend in 2010 and 2011.
Afterword
If you are new to this site, please glance at the archives below. You may find answers to your questions in these.
Please share your comments by posting below. Per the FM site’s Comment Policy, please make them brief (250 words max), civil, and relevant to this post. Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
For more information from the FM site
To read other articles about these things, see the FM reference page on the right side menu bar. Of esp relevance to this topic:
- about the Financial crisis – what’s happening? how will this end?
- about the End of the post-WWII geopolitical regime
- some Good News about America!
Situation Reports aboutthe crisis on the FM site;
- The US economy at Defcon 2, 11 March 2008 — Where are we in the downcycle? What might the world look like when it ends?
- The most important story in this week’s newspapers, 22 May 2008 — How solvent is the US government?
- Another warning from our leaders, which we will ignore, 4 June 2008 — An extraordinarily clear warning from a senior officer of the Federal Reserve.
- High priority report: a geopolitical sitrep on the financial crisis, 15 September 2008
- A new sitrep, as we move into phase 3 of the financial crisis, 19 September 2008
- A sitrep on the financial crisis: why has the treatment been so slow, so small?, 8 October 2008
- Status report on the financial crisis: we’re at a critical point in time, 10 October 2008
