Killing the goose by bleeding it dry
Bailout, socialist takeover, nationalization ... whichever label you choose, the sums involved are inconceivable. If you try to grasp just how much of our money Congress will authorize itself this year
alone to parley into a stranglehold on several key free enterprise sectors, your eyes will glaze over and your temples will throb in pain.
Bailout was a bad idea when it involved only brokerage, investment, savings, and lending institutions. Then they included auto manufacturers (translation: UAW payoff). Now we see associated automotive sectors, states, municipalities, textile mills, steel companies, and myriad other tanking businesses standing in the welfare line with their hands out.
But nothing is free -- nothing -- and not one member of Congress has defined the giveaway of our money as loans to be paid back or merely strategic handouts, thuggish bribery, or buy-in money. Perhaps this power-grab madness will result in Congress killing our economy -- the golden egg-laying goose. Perhaps that's their premeditated scheme.
We're talking very large numbers
Barry Ritholtz, author of Bailout Nation (scheduled soon for distribution), explains the nation's financial crisis and subsequent government bailout efforts by using comparative data gleaned from Jim Bianco of Arbor Research and Trading and Bianco Research. Ritholtz presents research findings that compare the government's $7.75 trillion in bailout commitments to costs associated to events with which most of us are familiar ($7.75T conservatively estimated at Bloomberg.com). The congressional bailout scheme will cost more than the combined inflation-adjusted total costs of the:
- 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: $551 billion, Inflation Adjusted Cost: $597 billion;
- Vietnam War - Cost: $111 billion, Inflation Adjusted Cost: $698 billion; and
- NASA Lifetime Budget - Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion.
- Combined Inflation Adjusted Total: $3.92 trillion
Staggering, isn't it?
Ritholtz points out that 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.
Chill, insolvent wind is blowing
In the next 18 months, we as a nation will go deeper into debt to the tune of nearly $8 trillion, without producing anything of value, without lucrative returns on the debt burden. All of this outstanding debt, all of these loans -- if indeed they are loans -- are going to have to be paid back at some point. Who's going to pay, hmm?
And what happens to us as a sovereign nation when all of this debt is bought up by foreign interests? What happens when these countries, in effect acting as loan sharks, suddenly demand payment? Think that can't happen? Think again -- foreign leverage of our debt is a fixture in international finance and is certain to escalate.
If you really want to give yourself an Alka Seltzer moment, try adding to this fetid mess the incoming administration's planned nationalization of our health care and the hefty tax increases that must necessarily follow. Think our economy is going to get an uplifting shot in the arm?
Perhaps you should brush up on your anarchy survival skills.