Comments on: Calculating the Total Bailout Costs

By: Fears of Inflation « Hamilton in NYC: Global Finance

Fears of Inflation « Hamilton in NYC: Global Finance — Sun, 03 May 2009 01:44:15 +0000

[...] other things, but getting to the bottom line, the number adds up to around $8.5 trillion (Source: The Big Picture). Barry has a great spreadsheet with all the recent government actions and the cost for each one of [...]

By: arogersb

arogersb — Thu, 26 Feb 2009 22:32:11 +0000

Hello Barry,
Where did you get the data for this spreadsheet? I’d like to build an updated one. It’s been very hard to find that information.
Best,
Alejandro

By: capriccio

capriccio — Wed, 03 Dec 2008 05:01:33 +0000

Thank you, lawofthebadpremise.

It is highly unlikely that the realized losses stemming from these packages will ever approach that sum of $8.5T. You forget the very privileged position that the government is in. In being able to print money and guarantee what it will, it can:

1. guarantee bad banks’ bad credit derivatives portfolio while at the same time guarantee the credit products from which they’re derived. You can be fairly certain that C or BofA has a few MBSes derived from Fannie loans.
2. forestall the foreclosure process nationwide by pressuring state authorities while it busily goes along handing out cheap loans unconditionally to effectively prohibit insolvency for a key number of companies, presumably those very companies which the USG has hand picked to stay solvent–those very companies which the USG has likely backed in one way or another.

The USG is the ultimate asset manager in that, for the time being, it can maintain infallible hedging strategies.

Things to worry about: money supply expansion, intermediate and long term inflation, our very own USG’s credit rating once this madness has come to pass.

By: gmelli

gmelli — Wed, 03 Dec 2008 02:38:22 +0000

Thanks. It’s great to see someone take a stab at a spreadsheet model.

One question that coma to mind for me is how this number ($8.5B + $5.2B) compares to the overall domestic mortgage debt. The number that I found on the Web is ~$10B [1,2]. Ouch! 8.5B+5.2B is a relatively huge number! Hmmm, too large given that housing mortagages have been directly implicated in the bailouts. … Regardless, the US clearly has to get its house in order… Or else?? :-/

[1] http://mwhodges.home.att.net/nat-debt/debt-nat-a.htm
[2] http://www.epinet.org/Issuebriefs/203/ib203.pdf

By: lawofthebadpremise

lawofthebadpremise — Tue, 02 Dec 2008 21:36:05 +0000

Please, lets not be “innumerate”. You are equating cash and/or notional guarantees with “cost”. I am skeptical of most of these programs but lets at least agree as to their size. The “cost” will be the “losses” the government takes on, net. Or if we want to use modern “mark to market” accounting we can say the current “cost” is the difference between what the market would charge/pay and what the government is charging/paying for these lending and insurance programs. Readers look to “Big Picture” to get an accurate view, not to read bad headlines we can get from Newsweek. You guys are better than this.

By: Tom K

Tom K — Tue, 02 Dec 2008 21:16:30 +0000

@Winston Munn >”I am having trouble finding inflation risks in today’s headlines”

“In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.”

Frédéric Bastiat – What Is Seen and What Is Not Seen – 1848

By: Simon

Simon — Tue, 02 Dec 2008 20:45:09 +0000

Spread Sheets …Old as the hill but still the best there is.

By: R. Timm

R. Timm — Tue, 02 Dec 2008 20:17:52 +0000

I put together a similar spreadsheet and posted with my estimates of losses earlier. I came up with $412B in actual cost to the taxpayer. I could easily be off by 50-100%. Feel free to download the file and play with the loss rates yourself. http://www.uploading.com/files/1M77YY89/bailout.xls.html

By: Winston Munn

Winston Munn — Tue, 02 Dec 2008 19:34:39 +0000

I am having trouble finding inflation risks in today’s headlines:

General Motors November sales down 41 percent- Reuters
Ford, Toyota, Honda US sales drop more than 30 pct-AP
$25B Is ‘Chump Change’: Ford Lifts Sprits But ‘Big 3′ Need $100B Bailout-
Oil retreats below $49 as brief rally fades- Reuters
GE to trim finance arm, plans job cuts- Reuters
Fed extends key credit programs through April 30- AP
Gas price declines for 76th consecutive day- CNNMoney.com
Newspapers Prepare to Make Savage Cost Cuts- Silicon Alley Insider

The fight is to prevent deflation – the weapon of choice is inflation. Didn’t work for Japan. Won’t work here, either.

By: constantnormal

constantnormal — Tue, 02 Dec 2008 18:35:07 +0000

Can everyone taste the irony …

… with the Swedish government — one of the most socialist nations on the planet — saying “We are not an emergency bank where companies can get money when things take a turn for the worse.” (see mhm’s post above), while here in the fortress of free-market capitalism …