The bailout money totals are hyperinflated.

As for why aren’t people investing, they aren’t because there’s obviously very few productive investments available in a deflation where, if you simply wait, everything’s going to get cheaper. Right now the only productive investments available, and needed, are infrastructure ones and they are traditionally the domain of government, not private markets.

Obama’s fiscal stimulus will help, but it’s only at $150 billion. After 30 years of neglect, it will take much more than that to return our infrastructure(s) to health.

Bush has checked out, as he should. Why spend all the $700 billion if there’s going to be a new sheriff in town in a month? Obama is already our President. And he appears to be our President. Congress, and the current President, are both following his lead.

As for our underlying problem, it’s summed up in that we have a consumer economy. Sorry folks, that’s an oxymoron.

I know, it’s a really big number!!! and it sounds really scary!!! And we can all cluck to ourselves that the real situation is so much worse than the government claims! Aren’t we special!!!

For one thing, you’re counting trillions that haven’t been spent, swapped, lent or invested. Those are theoretical bailouts. I’d like to tell you that I made love to 357 beautiful women today, because that’s how many I fantasized about as I passed them on the street today. Wow! I am some kind of lover — theoretically…

Out of the trillions that have been actually spent or committed, some of it is pure swaps: Yen for dollars. Some is swapped cash for Treasuries, or Treasuries for agencies. Or guarantees against commercial paper. Almost all of it is either loans or direct investments. The Fed has lent out $2 trillion, and it has collateral that it has valued at $2.2 trillion or so. Maybe some of the collateral is worthless, but all of it?? 100%??

And since this money is being pumped directly into the financial system, it’s hard to claim that it’s completely crowding out private-sector borrowing or investment. If the banks ever do lend it out, the economy will get $10 for every $1 provided by the Fed.

Anyway, you don’t have the right number anyway. According to the FDIC, banks and thrifts had deposits of $7.025 trillion as of June 30. Clearly, you need to assume that all 8,441 banks will fail and that the government will be on the hook for 100% of the losses. You’ve only got down $1.8 trillion for FDIC. So now we are at $13 or $14 trillion ($8.5 trillion plus $5.2 trillion extra for FDIC). And you should assume that all $5 trillion in Fannie and Freddie bonds will turn into fairy dust, because you should assume that every mortgage in the United States will default with 100% losses. So now we are at $19 trillion. Dig around some more and I’m sure you can make it an even $20 trillion. I’ve got it!!!! If we just assume that all 30,000 defined pension plans fail, then the PGBC will be on the hook for a few trillion or so….

$20 trillion is a much better number!! If you put $20 trillion on your book cover, you’ll get all of Lyndon LaRouche’s readers, plus all of Paul Farrell’s!!

Your logic (which would be basically sound under normal conditions) is akin to the accounting practices at banks that started this whole mess. How do you account for an asset class hopelessly entwined with complex/poorly understood risk on your balance sheet?

In the case of a bailout response to catastrophic global financial turmoil of unprecedented complexity, I can see the argument for equating exposure with expenditure. Too many unknowns, the money has been earmarked.

100,000 soldiers are about to hit the beaches to fight an enemy whose strength we can only estimate. Our soldiers are untested. Better to assume that 50,000 of our troops will survive unscathed or more prudent to assume the whole army is going to be tied up for a while?

Looking at gross amounts is the same fallacy that surrounded dot-coms revenue sharing agreements. You advertise on my site and I’ll advertise on yours and we’ll both book a billion in advertising revenue and amortize the expense over the many years we expect to derive a benefit from the expenditure.

Neither situation is steeped in the real economics of what is happening.

The best reason to buy American, (from an avid former free-trader who woke up one morning and saw the light) why a national onslaught of a ” Buy American” campaign would be in everyone’s best interests is a simple reflection on our past behavior of buying from China and other third world countries:

Every cent we have saved in doing so, every sneaker we bought for $49.99, every TV, that would sell here for 2 or three times as much is now going to cost us 10X what we thought we saved in lost GDP, wages, pensions, and every other asset, including now, our homes and economic stagnation.

Absolutely buy American where you can but much more is needed to wean the American consumer off of the myth of low prices. To get them for once to look at the damage this has done to our country’s balance sheet, our personal wealth, and growth opportunities for the young and now ten million unemployed. In consuming at Wal-mart, et al at the lowest prices , we inadvertently have been eating and swallowing our own tails.

Based on this logic it would be better to convince surplus countries such as China that they should run a large scale Keynesian style stimulus to increase their domestic demand while the US and other deficit countries cure themselves of the over-consumption and debt habit; my problem is I don’t believe either would happen so I wind up a square one again, the need to generate jobs while repairing/improving infrastructure matches the economic need (if only we hadn’t already spent so much money!).

There’s a world of difference between SPENDING money on a war versus INVESTING in preferred securities.