Saturday, September 20, 2008

How much is half a trillion dollars?

George Bush has announced a half a trillion dollar support package to prop up the economy.

Exactly how much is half a trillion dollars and who's going to pay it?

The American tax payer, of course.

Half a trillion dollars translates to about $1500 per American.

An average American family of four is on the hook for $6000 if they were to pay off this debt.

This is on top of the $31,000 each American is already on the hook for in order to pay off the $10 trillion dollar debt.

That's $124,000 for a family of four.

But the immunity is the scary part. The message, "You can screw up, lose your shirts, and cost investors billions, and the Federal Government will bail you out."

The numbers are almost too heady to understand, but the problem is quite simple.

It starts with bad debt, and a faulty money lending formula.

Banks are supposed to err on the side of caution and minimize exposure to bad debts. This didn't happen. They screwed up, and American tax payers will be on the hook for years to come.

Here's the catch 22 situation for the government.

Option one, Federal intervention - Middle Class earners, who pay the lions share of US taxes, fork over more or less 10 grand each to bail out the fiscally irresponsible and decrepit banking system. They are paying for the people who couldn't afford mortgage payments, defaulted on their homes, causing a real estate crash, which caused the banks to lose billions, which caused the stock markets to crash, which caused the Federal Government to inject half a trillion dollars, which led to the higher taxes.

Option two - Laissez-faire - In this case the government does nothing, the markets continue to stumble, but eventually find parity. Trillions of investor dollars, mostly middle class owned, is lost by investors. The big banks and insurers go bankrupt, and the decay in the American system is rooted out and replaced by something better.

Neither option is pretty. Americans unfortunately made their bed with a government who turned a blind eye to corporate greed. They just have to sleep in it now.

Don't let the bed bugs bite.

1 comment:

Jillian said...

Americans "made their beds?" What about the rest of us who were actively out there pushing for change and reform the past two elections? I suppose we should just have to lie in it as well?

The problem with this country is the middle section of it.