Well we just gave Citigroup $325 billion. Sure $300 billion is only to cover “potential” losses, but if you believe that the vast majority of that hasn’t already been lost, I have a billion dollars of great sub-prime securities for sale — the opportunity of a lifetime!
Joe posted a link to a shouting match between Cavuto and Ben Stein, and it was claimed that the idea we’ve committed $2 trillion to the present crisis was wrong. Well it is, because it’s now up to $7.4 trillion. There are a couple of points I want to make.
First, we haven’t “spent” $7.4 trillion. TARP is spending money, the Citi bailout is spending money, etc. The article mentions $3.8 trillion used to buy and secure short term commercial debt and interbank lending. I couldn’t find it, but another trillion is for money markets. That $4.8 trillion should never really have any losses. Note I said “should.” They even claim that TARP is an “investment.”
Second, the entire idea of TARP and all the guarantees is that eventually things will get better. They won’t. Period. I’ve stated the reasons many times, and have this whole series that explains why the only option is to reduce consumption and increase efficiency. What they are trying to do is unsustainable from both an economic and natural resources point of view.
Injecting $7.4 trillion into the world isn’t helping because they don’t understand the basics of the problem. It is still unclear whether the financial system will continue to fail and lead to depression, or whether the money will eventually kick start it. If it does kick start it, we are going to have hyperinflation. This summarizes what we can expect if the interventions do start to “work.”
I hate to say it, but from my perch I am desperately hoping that everything fails so quickly that we can’t keep trying to save it. At least then we will be faced with reality in a way where we can work towards something positive, instead of spending the next 30 years merely trying to pay off the excess of the last 30 and not moving forward at all.