Wednesday, November 26, 2008

Barry Ritholtz Figures Out What the Bailouts Cost More Than

This is quite a list. He utilizes a respectable inflation gauge, so this isn't completely silly. For a sense of perspective, NASA, The Louisana Purchase, The New Deal, and the Vietnam War make the list. Oh right, I forgot to mention, this is a sum total list. NASA, The Louisiana Purchase, The New Deal, the Vietnam War, the Marshall Plan, and others, COMBINED cost less than the bailout. Yay? I hope we're getting something really good for all of this.


  1. Interesting comparison. Q: What was the percentage of contemporary US GDP of each expenditure (Louisiana Purchase, Vietnam, Bailout)? I suspect the Bailout percentage is lower than the others, which in turn makes these comparisons less apt.

    If anyone doubts the importance of these stimulus efforts, I have a story to tell:
    The price of recycled copper has fallen several fold over the last two months. I know this because my brother, an elevator mechanic, was complaining that he did not get much money from his retrofitting scrap.
    Imagine a man who, for several years, had been making a living by breaking into old warehouses and stealing copper. With copper prices down, this man turns to more violent crimes.
    The next Congress and Executive might get jobs for construction workers and laid-off bank secretaries, but this man will not be helped. The irony of a command economy is that cannot help the poor, only the middle class. Gardeners, day laborers, car mechanics and waiters make money only when individuals are willing to pay them for services. The government can command Detroit not to lay-off workers but it cannot command anyone to spend money on services or dictate the price of copper.
    The government needs to stimulate the economy and yet a government led economy is traditionally stagnant. If correct, this is a paradox for which I do not know a solution. I do know that when I am robbed by this retired copper-recycler, I will long for the days of inflation and expensive gas.

  2. At $4.6 Trillion the bailout is now at roughly 33% of last year's GDP. For comparison the inflation adjusted $3.6 Trillion for 1944 defense spending (including war on two fronts, Manhattan Project, etc.) was 38% of GDP.

  3. 2 things ....

    I was listnening to NPR and they were pushing the bloomber number (neatly rounded) of 8 trillion.

    "Bloomberg calculates the total amount the taxpayer is on the hook for is $7.76 trillion, or $24,000 for every man woman and child in the country. (Data breakdown is here)"

    Secondly, as Ritholtz points out they are using CPI as the measure of inflation. Do you really find Hedonic price calculations to be fair tools in the calculation of CPI? Not that the inadequacy of CPI numbers being understated make the situation any less worse, it just further shows how as a whole we're being jerked around (not off) by the the captains at the helm.


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