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XMFSinchiruna (27.49)

$8.6 Trillion Was a Drop in the Bucket! - The Latest Crisis Tally

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42

February 19, 2009 – Comments (17)

Many of you will recall the two prior versions of this article from October and November 2008, which pegged the crisis tally at the time at $3.9 Trillion and $8.6 Trillion, respectively. Well, with the addition of Obama's stimulus plan and Geithner's expansion of TALF alone to $1 trillion, we have hurdled beyond the $10 trillion mark. Take a look, give the article a rec if you appreciate the research, and of course come back and tell me what you think of the article.

http://www.fool.com/investing/international/2009/02/19/86-trillion-was-a-drop-in-the-bucket.aspx

The scary part is, all we keep hearing is that more is waiting in the wings. We've heard whispers of yet another big stimulus plan sometime later in the year, and just wait until we get details on Geithner's next phase of bailouts. Incredibly... the scope of these measures could surpass the national debt before long! Where will it stop? If you ask me... in a train wreck that once was the U.S. dollar.

Fool on!

17 Comments – Post Your Own

#1) On February 19, 2009 at 11:19 AM, RainierMan (80.81) wrote:

The amount is scary, as is the problem of turning off all this spending. When Japan tried to ratchet down the stimulous, the economy took a plung.

Mish has a blog today about how all the Fed actions are simply going to be lost in the debt that really dwarfs all the spending.

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#2) On February 19, 2009 at 11:39 AM, columbia1 wrote:

What is even more scarier is Obama has yet to release the details and costs of his health care program, also next week he will present his budget for next year. $$$$$

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#3) On February 19, 2009 at 11:54 AM, DemonDoug (82.92) wrote:

just like the japanese yen got trainwrecked eh?

Sinch, here's my question: If we are rhyming with the Japanese economic downturn of the early 1990s, why hasn't the yen gone to hyperinflation and become worthless?  Yeah you can say oh well they didn't cut interest rates or flood the system with cash, but for almost 10 years now they have had a virtually 0% interest rate.  Their debt is 180% of their GDP.  Yet they have the 2nd or 3rd highest amount of US treasury debt of any country in the world, and the yen continues to gain strength and shows no sign of collapsing.

So the question is, if the dollar will collapse, why hasn't the yen collapsed.  There is over 100T (some estimates were as high as 400-500T) in total derivatives, so they'd have to print that much money just to make up for all that is blowing up (to monetize all those securities).

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#4) On February 19, 2009 at 12:04 PM, lquadland10 (< 20) wrote:

Welcome to the North American Union. Obama is in Canada Now. The Mexican Billionaire bought into the NYT? IMF borrows from Japan. 40 million jobs shipped over to India and China. 12 million Ileagle allians working here while we put 12 to 20 million?? people out of work and the gov. pays (us the American citizen) unemployment. B visa being made permanent?? due to the last bail out. Also the SPP was fast tracked. in bail out. Oh yes you also forget the cost of Iraq and Afghanistan. Don't you dare forget my brave men and women fighting overseas and 30 thousand more called to go to Afghanistan. When are we going to get out of both places? Another 18 more month in IRAQ.For now and then they will extend it.Yep this is change I can believe in. Life is grand don't you think? Oh P.S. If we bail out the homeowner then when they sell the house do we get the profit to go back to gov. of will the home owner keep it. Hence if the homeowner gets it how much more fraud will there be. Fraud in the Tarp all ready.

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#5) On February 19, 2009 at 12:23 PM, davey1990 (< 20) wrote:

I have my hand out too!!!!!

I believe I have done everything right.  I have a home that I can afford.  I can pay my credit card off with ease.  I live within my means.  So what did I do wrong?  I have a 401k that is a 200.5k now.  I have 2 IRA’s that have lost 40% in value.  Again what did I do wrong???  It seems that the banks are getting the money to stave off the next great depression.  Bankers are not held accountable.  High risk mortgage takers are getting help. Those borrowers are not held accountable.   Again, what about me???   Should I kick Clinton in the pants for repealing the Glass-Steagall Act?  Clinton said he was not to Blame!!!!  It is Hogwash that he states he is not to blame.  Should he take all the blame?  No way.  All the banks that lent the money should be to blame and the government that eased regulations to let them do it.  Again I have my hand out.  Who is going to fill it up with money?  I am alone again!!!!!

 

To all the good guys out there that are doing it right, I thank you. To all the bad guys out there, SHOW ME THE MONEY!!!!   Cut the good guys taxes in future years and raise all the bad guys’ taxes. That would be a start.  The bad guys can shine my shoes for the next 100 years as well.      

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#6) On February 19, 2009 at 12:34 PM, davey1990 (< 20) wrote:

I have my hand out too!!!!!

I believe I have done everything right.  I have a home that I can afford.  I can pay my credit card off with ease.  I live within my means.  So what did I do wrong?  I have a 401k that is a 200.5k now.  I have 2 IRA’s that have lost 40% in value.  Again what did I do wrong???  It seems that the banks are getting the money to stave off the next great depression.  Bankers are not held accountable.  High risk mortgage takers are getting help. Those borrowers are not held accountable.   Again, what about me???   Should I kick Clinton in the pants for repealing the Glass-Steagall Act?  Clinton said he was not to Blame!!!!  It is Hogwash that he states he is not to blame.  Should he take all the blame?  No way.  All the banks that lent the money should be to blame and the government that eased regulations to let them do it.  Again I have my hand out.  Who is going to fill it up with money?  I am alone again!!!!!

 

To all the good guys out there that are doing it right, I thank you. To all the bad guys out there, SHOW ME THE MONEY!!!!   Cut the good guys taxes in future years and raise all the bad guys’ taxes. That would be a start.  The bad guys can shine my shoes for the next 100 years as well.      

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#7) On February 19, 2009 at 12:45 PM, XMFSinchiruna (27.49) wrote:

DemonDoug

Seriously?? The parallels between the Japanese case and what we face today are few and far between.

To quote a buddy of mine:

http://www.fool.com/investing/dividends-income/2008/12/05/japan-today-zimbabwe-tomorrow.aspx

"The major difference between our current situation and Japan's in the '90s is that Japan didn't rely on the world's willingness to fund its indulgences."

 

Establish a larger set of parallels between the two predicaments, and then I'll be willing to re-examine the Japanese case study in sufficient detail to answer your question. High debt-to-GDP and low interest rates don't even begin to capture the magnitude of what we're facing here. We're facing a potential meltdown of the modern financial system, and a flight from paper assets that could again confirm the one universal truth we can extract about paper currencies from the deep well of history: they ALL eventually fail.

"Paper money is like dram-drinking, it relieves for a moment by deceitful sensation, but gradually diminishes the natural heat, and leaves the body worse than it found it. Were not this the case, and could money be made of paper at pleasure, every sovereign in Europe would be as rich as he pleased. But the truth is, that it is a bubble and the attempt vanity. Nature has provided the proper materials for money: gold and silver, and any attempt of ours to rival her is ridiculous…."

Thomas Paine (1737 - 1809)

"Gold still represents the ultimate form of payment in the world". - Alan Greenspan, 1999

"You have to choose [as a voter] between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold."
- George Bernard Shaw

"We are in danger of being overwhelmed with irredeemable paper, mere paper, representing not gold nor silver; no sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people."
- Daniel Webster

"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money."
- Daniel Webster

"We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it."
- Congressman Louis T. McFadden in 1932

 

And by the way, despite a recent and conveniently quiet re-valuation by the BIS, the previous estimate of the worldwide market for OTC derivatives was $1.1 quadrillion!

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#8) On February 19, 2009 at 1:31 PM, XMFSinchiruna (27.49) wrote:

http://www.cnbc.com/id/15840232?video=1039849853

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#9) On February 19, 2009 at 3:37 PM, DemonDoug (82.92) wrote:

"The major difference between our current situation and Japan's in the '90s is that Japan didn't rely on the world's willingness to fund its indulgences."

I would argue differently.  Japan was and is a huge exporter.  They relied heavily on the rest of the world (and largely the US) to fund it's induglences.

Establish a larger set of parallels between the two predicaments, and then I'll be willing to re-examine the Japanese case study in sufficient detail to answer your question

I was actually thinking about this walking around my work today, and I might just do that.  To a certain extent, I am seeking the truth, not telling it to you; I know a lot of the differences between the US and japan, but the bottom line is that there are a lot of similarities that are hard to ignore.  You'll be the first to know when I post that blog.

the one universal truth we can extract about paper currencies from the deep well of history: they ALL eventually fail.

There is only one argument I have against this, and that is there are many people that say democracies all eventually fail.  And my argument there is that since 1200, England has been more or less a democratically run government.  Sure, it's not "pure" democracy, and of course there were kings and queens "ruling," but modern democracy was born out of the Magna Carta, and the system that has developed and stayed in place over the past 800 years has been some form of representational government.

Also, as best I can tell, printed banknotes of the GBP have been printed since 1694.  While the pound has had massive devaluation at times and of course the obligatory inflation over time, it's still in use today, and hasn't collapsed after 300 years.  Not to say that it won't, just that it hasn't, so a to say that "all" eventually fail might be an eventuality, such as the universe coming to an end as all the stars burn out, but what are the chances the GPB or the dollar with collapse to zero in our lifetime?

So while you technically may be correct, your argument falls flat at least to these eyes because it's a theoretical as opposed to realistic eventuality.

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#10) On February 19, 2009 at 4:51 PM, XMFSinchiruna (27.49) wrote:

DemonDoug

Keep doing your homework... The Pound Sterling is called sterling for a reason. ;P

Also, there is no way you can reasonably assert that Britain has been a democracy since the Magna Carta, and even if you could, that still would say nothing about my statement regarding paper (fiat) cirrencies. Besides, since the principle achievement of the document was establishing the writ of habeus corpus, if that's your definition of democracy than both British and U.S. democracy both disappeared into the annals of history with the adoption of the PATRIOT Act and its British counterpart.

The U.S. is a massive net importer which produces practically no tangible goods for export, so that again just highlights another difference between the 2 cases. Another oddity of the post-industrial 'information' economy envisioned by the kinds of economists who brought you the OTC derivatives. :)

I appreciate the debate, since I do think Japan is a fascinating case study, but I'll keep the burden of proof with you as far as establishing that it makes a similar-enough situation to become somehow predictive of imminent developments here and now. I'll look forward to your blog post.

As always, I appreciate the difference of opinion... it' what makes Fools thrive! :)

 

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#11) On February 19, 2009 at 5:03 PM, StatsGeek (29.26) wrote:

You guys keep quibbling while I buy more precious metals.

 ;-)

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#12) On February 19, 2009 at 11:26 PM, dcstrade (80.14) wrote:

"Japan was and is a huge exporter."

Production, no? 

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#13) On February 19, 2009 at 11:35 PM, SharpSEO (70.50) wrote:

Our commercial Banks are the one who elect Fed officials (primarily). That ensures we'll pump as much money into them as needed, no matter the consequences. Jefferson was right about these damned federal reserve scam artists. It's truly a shame.

Are there any countries with a high-quality of life and NO central bank? Doubt I'd move anyways... Don't want to learn another language fluently. Oh well.

I'm with StatsGeek, back to metal collecting.

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#14) On February 20, 2009 at 10:37 AM, kaskoosek (70.45) wrote:

Demondoug

I agree with sinch on this one. Our senario is very different than Japan. They have a current account surplus which enabled them to service their debt.

Anyway I will concede to you that deflationary forces now are much stronger than the inflationary ones, but if the government becomes very desperate things can change pretty fast.

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#15) On February 21, 2009 at 2:12 PM, imobillc (< 20) wrote:

Great article!

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#16) On February 23, 2009 at 8:41 AM, GoodVibe4Ever (< 20) wrote:

Sinch - I enjoy your blogs and will appreciate if you can find the time to share your thoughts about my latest blog. Thanks!

GoodVibe

 

 

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#17) On February 25, 2009 at 12:31 AM, financegooglecom (60.96) wrote:

If you want tangible American exports I can only really mention the big three automotive companies (who did turn a profit on the international market in 2007 if I remember correctly), which is really not much of an example at all today.  However the real American exports of the last generation have been rather intangable.  These include ideas (which have been worth billions, see Facebook at $1.9B), and college graduates.

I don't have any hard evidence to prove my point unfortunately but I'm not sure it exactly needs proving; it's common knowledge that an American education means something almost everywhere in the world.  It really says something about a country when even the terrorists plotting against it attend it's universities.  (And in case you've been out of school for a while, today private education is a multibillion dollar business).

But this is my point, its the information age. I'm not exactly an economist so I can't really give a tremendous amount of credit to my opinions, but I think it's possible that tangible exports are holding less value in a world where an information website can generate a 6-digit income or a company will pay millions to licence a patent.

Yes there are huge flaws in our currency and credit sysems, but still, I take a grain of salt with any opinion.  Especially one that's over a century old.  Thank you Mr. Paine for your input.

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