Financial Crisis Tab Already In The Trillions; More Than What Was Spent on World War 2, If Adjusted for Inflation
November 18th, 2008* muttering, sputtering sounds *
Via: CNBC:
Given the speed at which the federal government is throwing money at the financial crisis, the average taxpayer, never mind member of Congress, might not be faulted for losing track.
CNBC, however, has been paying very close attention and keeping a running tally of actual spending as well as the commitments involved.
Try $4.28 trillion dollars. That’s $4,284,500,000,000 and more than what was spent on WW II, if adjusted for inflation, based on our computations from a variety of estimates and sources*.
Not only is it a astronomical amount of money, its’ a complicated cocktail of budgeted dollars, actual spending, guarantees, loans, swaps and other market mechanisms by the Federal Reserve, the Treasury and other offices of government taken over roughly the last year, based on government data and new releases. Strictly speaking, not every cent is directed a result of what’s called the financial crisis, but it arguably related to it.
Some 68-percent of the sum falls under the Federal Reserve’s umbrella, while another 16 percent is the under the Treasury Asset Relief Program, TARP, as defined under the Emergency Economic Stabilization Act, signed into law in early October. (The TARP alone is bigger than virtually any other US government endeavor dating back to the Louisiana Purchase.)
I was thinking the other day about how people who see symptoms of serious systemic problems in modern society from studying trends such as this, are accused of being “Kool-Aid” drinkers. Obviously such quips are really just denial Kool-Aid, because anything that costs more than what we spent on World War II that could have been prevented is something to regard very seriously. That’s why I think information such as this is better referred to as “prune juice”: It may make you shit your pants, but that doesn’t mean that taking it in isn’t good for you!
The only question at this point is: when to buy calls on UDN and at what expiration horizon?
@pdugan
I’m sorry if its sounds like I’m criticizing you but I guess I am.
I you are investing in this market and you are looking for the way out- I don’t think you are being responsible if YOU the investor doesn’t have a clue as to how and when to buy calls on your investments.
At this point in time I’ve had it up to the eyeballs with the unintended consequences of people who invest in buy calls.Not to mention the Federal Reserve, Goldman Sachs, and the rest of this club of those who take on more risk than they can even comprehend in their investment decisions. Not to mention that their adolescent risk taking meanderings have crashed the world economy.
Get a life already. Who hah.
Eileen, my question was rhetorical. I think I have a pretty good idea as to the answer of that question: one day before China announces they’re diversifying into gold and commodities. Since I can’t know that, I’m probably going to saddle up and buy a few hundred dollars worth of calls next month, with a strike price of 25 and an April expiration. I may buy some strike 30s with a July expiration, as well. UDN is an ETF that holds short futures contracts on the USDX, which basically means that it’s a good way to hedge against the inflationary tidal wave heading our way.
I live on about 10k a year, and I like options more than leveraged currency positions because you can put your chips down on a trading idea and go live your life without being consumed by managing the trade. If I’m wrong and we see continued dollar strength, somehow, despite the radical spending, then I’m out a few hundred bucks (I’ll be picking up a few silver coins as well, since those don’t expire). If I’m right then I see 5-10x returns, which for me could mean buying two or three acres of land down in Patagonia, which means I might be able to escape this wifi cancer bath.
I can’t legally recommend anyone else do this, but my thesis derives from three simple positions:
– the current dollar rally is artificial (first with the Nippon/ECB/Fed collusion, then hedge fund positions switching, then the CDS unwind, then the carry trade – when the CDS unwind begins to shut down the carry trade will become unprotifable and collapse, then the hedge funders ride the new trend, then US trading partners have to make a serious decision).
– you can’t double the money supply without seeing massive inflation sooner or later
– US trading partners are likely to begin diversifying, and probably already are at subtle paces
Ergo, the USDX will very likely get back in the 70s next year, and maybe even hit new lows. If you’re a dollar holder or living in a country that pegs the dollar, this is a good move to protect yourself, much less speculate.
@pdugan – I apologize for my criticism. I tend to read Cryptogon way past my bedtime when I’ve already read more BS than my often times dehydrated pea brain can grasp. So I tend to lash out without knowing who the people are who post on this website. Thank the goddess that I’ve been caught at it twice this week. I will stop being a critic of posts here. HONEST TO GOSH.
Sorry to be such a douche bag. Please forgive me.
I’m a sorry lot really. But I agree with you on the dollar. Patagonia looks pretty in pictures but so cold!