There was a story in today's paper that caught my eye. It was a relative comparison of various G8 countries and how much they have spent so far on the economic crisis.
Canada - $0 (0% of GDP)
United States - $1,500 Billion (10%)
Britain - $419 Billion (19%)
Germany - $213 Billion (10%)
France - $75 Billion (3%)
Japan - $275 Billion (4%)
First of all, those numbers alone are staggering on a per capita basis. On $1.5 trillion for 300 million citizens, the United States has spent $5,000 PER PERSON so far on this crisis and the various bail outs. But that might not be an accurate average, as it counts babies, teenagers, and the elderly who don't work. There are only 138 million taxpayers in the United States who will have to pay this money back some day, so that's $10,850 per taxpayer. And since the average taxpayer only pays $11,000 a year in taxes, the U.S. has spent ONE YEAR OF INDIVIDUAL INCOME TAX REVENUE on this so far. Think about that. Imagine if you spent one year of your salary in the span of a couple of months.
But wait! The same article alludes to a $7.7 TRILLION total cost of this crisis so far. I wonder how they came up with that figure... The answer is here. The costs obviously include government guarantees on bad debt, which don't actually cost anything today but will if the loan goes into collections and they can't collect. The costs of those cash and non-cash obligations come up to $7.7 t-t-trillion. Or $55,800 per taxpayer. Or ONE YEAR OF INDIVIDUAL INCOME, not just the taxes on that.
And we're not done apparently.
The other big question on this is "where is this money coming from?" No one knows. But seriously, how do you magically create $7.7 trillion? And what are the long term effects of that?
$7 trillion seems like a lot of money. But like anything it's all relative.
How much total paper money is there in the United States? $756 billion.
How much total paper money plus liquid bank deposits in the U.S.? $1.3 trillion
How much total paper money, bank deposits, plus money market funds and other cash equivalent assets? $7.2 trillion
So the total cost of the economic bailout is greater than all the money and money-equivalents in the entire United States? Holy crap. That's a lot of money.
So where are they getting it? Still no answers to that. Start up the printing presses. Create more government bonds. Who's going to lend them that much? No single country could possibly. Print up some paper bills. Still, covering $7.7 trillion with bonds and paper bills is STILL impossible. Hang on to your hats folks, this will get even more interesting over the next couple of months.