Thursday, November 27, 2008

Depiction of 2008 Gvt Bailout figures vs Other Large Gvt Expenditures

I stumbled across this pie chart yesterday - a real eye-opener

Note: click pictures for better view

Though massive in size, the Bailout figures used in the chart above were severely understated - or were tallied w/older data.

Currently, based on data extracted from The Motley Fool: $3.9 Trillion Was a Drop in the Bucket we're now looking at a bailout total of ~ $8.6T - with no end in sight.


l0g05 said...

So, this is the max risk - but can anyone put a probabilistic "real" risk on this stuff? e.g., I'd model AIG at an 80% loss (80% chance that $112Bn is down the drain never to return or 100% chance that $87Bn is down the drain . . .)

But I have no idea what the risk of the big ticket items like Commercial Paper Funding Facility, Temporary Liquidity Guarantee, etc. are.

Moreover - what, if any, is the inflationary impact of these line items? A "Guarantee" isn't inflationary - it only adds money to the money supply if it gets called (and then, arguably, it isn't inflationary because it replaces money that is existing the money supply).

Anonymous said...

The value of an asset doesn't represent real money in the money supply. It only represents the amount of money you could exchange for that asset in a normal market exchange. Values are always in flux. Asset values increased with easy credit, ie. someone gets an easy loan and pays a million dollars for a house that should be $500K. Instantly every house on the street is worth a million. But that doesn't mean there is that much money in the money supply. Those assets "bubbled".

However, when we start bailing out companies by buying deflated assets with newly printed money, that converts those assets valuations into real new money supply. There will be a lag in consumer prices, but this is very inflationary. Especially when you consider that shortages in real goods are in the pipeline. All this new money replacing bad assets (which were never real money) will be bidding up the price of less and less real goods since the factories that produce those goods are shutting down and the people that make those goods are unemployed.

This is hyperinflationary depression. It is coming.

Randy said...

As I've stated in several other posts: The fed is fighting DEFLATION with new INFLATION and their actions will take some time to work their way into the system.

10G05 - while true a guarantee isn't inflationary, these guarantees are only "part of the equation"...

Dollar value is another.

The recent short-term dollar rally (due to global deleveraging) will likely be followed by ZIRP policy in the US and a massive monetization program - to take up the slack of flat Treasury sales - as foreigners decide to stop funding our MASSIVE Debt loads - this will take place in 2009. When the monetization presses ramp up, the dollar will fall quickly and inflation will gain traction once again.

I have to concur with Anon 7:30 - a hyperinflationary depression is coming.

Geos said...

Martin Weiss has been on the money about this for a while. He says:
More evidence of deflation:
1. U.S. consumer prices falling at an annual rate of 12%!
2. U.S. producer prices falling at an annual rate of 26.4%!
3. Commodity prices slammed by as much as 70% from their peak!
My friend, these are not numbers that denote less inflation. They are hard evidence of deflation!

You don't agree?

Randy said...

Yes, Hard evidence for deflation (Today), but the Fed and PPT are and will continue to do everything in their powers to prevent this from spiraling out of control and future INFLATION (from ZIRP, monetization and a cratering dollar) will create a double edged sword for the average American - A Hyperinflationary Depression

ZIRP: Our Future?

Zimbabwe inflation rate hits 11.2 million %

Bloomberg: Hyperinflationary Depression


Theirs a bailout to your right a bailout to your left.