Trillion with a “T”

Bloomberg article stating that the US has spent or committed $9.7 trillion in the last 24 months in order to bail out the nation from its economic malaise. (FYI- the link is here but I cannot vouch for the Bloomberg site. http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aGq2B3XeGKok)

$9.7 trillion. Wow. That is a lot of money. To give some perspective, this amount is equal to:

  • 90% of the TOTAL mortgages outstanding in the US (the article cites the $10.5 trillion in mortgages as coming from the Federal Reserve)
  • $1,430 for every person in the world.
  • $31,721.57 for each person in the US.
  • A sample of 158 financial services firms over the period from March 2004 through December 2008 yielded Revenue net of interest expense of $3.5 trillion and net profits of $636.7 billion USD. (data courtesy of Gridstone Research.)

It really is stunning how much it has cost us thus far to clean up the mess. Frankly, I think it is tragic, especially when you consider the opportunity cost embedded in this. What could we have accomplished with $9.7 trillion in capital expenditures? It boggles the mind to think of it.

Remember, there is no metric or gauge to tell us that we have contained the financial contagion. Far better economic minds than mine suggest that we have far more significant problems ahead of us as we turn over the rocks on the balance sheets of banks. How many additional trillions of dollars are lost and yet undeclared as the assets are held in off balance sheet special purpose entities? Could it be $2 trillion? or $5 trillion, or $10 trillion?

The fact is that we simply do not have the exact figures. And apparently, obtaining exact figures on where the money has gone is not permitted even though we are financing this bailout. The same article states that the Federal Reserve is refusing to disclose what banks received money, how much these banks have individually got and what type of collateral we the taxpayer have got for our children’s children’s children’s futures.

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