Reality Check "The Bail Out"

[Enjoying life]

For those people that don't quit know what a billion or a trillion dollars really is, just wrap your mind around this. If you were to spend one dollar a second for 32 years, that would be one billion dollars. If you were to spend one dollar a second for 32,000 years that would be one trillion dollars. So think about that when you hear how much money these banks are getting in bailout money. Just FYI.

[Naturist Mark]

Now imagine that you are a Wall Street finance banker. If you get bailed out with one dollar from the taxpayers today, and then get bailed out with two tomorrow, and double that the next day and so on ... you will have been bailed out by one and one third billion dollars in just 27 days, and will be over one and one third trillion dollars just 10 days later.

Of course we aren't going to double the bailout each day ... but we are dealing with something akin to doubling. The insane unregulated derivatives market that was unleashed when all the depression era regulations preventing different types of financial institutions from combining or going uncontrolled are taking small (relatively speaking) losses in financial instruments like bundled sub-prime mortgage securities, and then double, tripled, quadrupled, and even increased by 10 or 20 times by allowing hedge "insurance" not only on the original security, but also side bets by others who do not hold those securities, but wish to collect a payout if they fail. Thus a one dollar loss could turn into 20 dollars owed on these bets laid by people who didn't lose a thing to begin with.

Now instead of using bailout money to prevent the securities from failing, we are using that money to pay off the side bets. Making sure the bettors who didn't have anything at risk have a huge payday, but still leaving some poor schmuck out on the street after a foreclosure that could have been avoided for a fraction of the price.

In truth calling it betting is unfair to gamblers. Even the mafia's numbers are financially sound compared to these derivatives.

It's not a bailout. It is a means of hollowing out the GNP and transferring it to the vampires who are collecting their bets against our future.

[richo]

For those people that don't quit know what a billion or a trillion dollars really is, just wrap your mind around this. If you were to spend one dollar a second for 32 years, that would be one billion dollars. If you were to spend one dollar a second for 32,000 years that would be one trillion dollars. So think about that when you hear how much money these banks are getting in bailout money. Just FYI.

Let's put it in further scale:

The GDP of the United States last year was $14 trillion; $1 trillion is produced in under a month.

The cost of the US war in Iraq has been almost $700 billion, and will likely top $1 trillion by the end of 2010.

If every citizen of the US donated $4, it'd be more than a billion dollars. Raise it to $40 a week, and we could pay off $1 trillion in two years.

The US spent $146 billion on fast food last year; 7 years of that would be $1 trillion.

... these numbers are large, but they're useless without comparison. Yes, it's a lot of money - no one's arguing that. But put it in perspective. When you're talking about stabilizing the world economy (which is over $50 trillion annually), $1 trillion is significant but not mind-boggling. Even $5 trillion would only be 10% of the world's annual GDP. Again, it's a significant, but it's not outlandish.

Also, remember that the money going to "the banks" doesn't stay there (at least ideally).

[missouriboy]

For a graphic depiction of $1 trillion, click here (http://www.pagetutor.com:80/trillion/index.html).

[Nude in the North]

The more I learn about the "Why and How" of the financial melt down, The more I believe we should have let the Banks and AIG FAIL.
They are suffering from self inflicted wounds, caused by greed and coruption. They deserve nothing but a jail cell next to Bernie Madof.

[Naturist Mark]

The more I learn about the "Why and How" of the financial melt down, The more I believe we should have let the Banks and AIG FAIL.
They are suffering from self inflicted wounds, caused by greed and coruption. They deserve nothing but a jail cell next to Bernie Madof.

You know, there is a well established legal arrangement to do just that - it is how the FDIC shuts down failed banks while protecting the account holders and preserving assets, it is what the Resolution Trust Company did to wind down the failed Savings and Loans and put that industry back on its feet. The problem is that since Gramm Leach Bliley most of these institutions aren't strictly banks, even though the operate as banks and threaten the economy with their failure just like banks. It has been suggested that this approach be applied to today's monster financial institutions - but it isn't being taken seriously because all of a sudden this is being called "nationalization" - which is too "socialist" to be acceptable - even though in the alternative we have infused public money into those failing institutions in exchange for equity stakes - which unlike bank resolution actually IS socialism.

Gee that makes sense, because we irrationally fear the word "socialist" we avoid using the tried and true resolution process (improperly labeled 'nationalization') and instead have the government prop up failing corporations by "buying in" - which is precisely the definition of socialism.

[Buff Man in MI]

For those people that don't quit know what a billion or a trillion dollars really is, just wrap your mind around this. If you were to spend one dollar a second for 32 years, that would be one billion dollars. If you were to spend one dollar a second for 32,000 years that would be one trillion dollars. So think about that when you hear how much money these banks are getting in bailout money. Just FYI.

Sorry, but the math is off. There are 1,009,843,200,000 seconds in 32000 years, give or take a few hundred leap seconds, likewise for the 32 year example. That would make the example 9.8 billion dollars more, which I guess could prove a point about how the need for a bailout has come about.