Tuesday, September 23, 2008

How much is $700 billion?

You may have heard something about a $700 billion bailout of the financial industry by the US Government.

A recent post by Wendy got me thinking about how much $700 billion is.

Let me write it out first, just for effect:


Looks big.

Almost a trillion. Might as well call it a kazillion because our brains are not really wired to comprehend such numbers.

There are just over 300 million people in the US. So if we each do our patriotic duty and chip in our share (no slacking, you babies and children, unemployed, disabled, retired, impoverished...), it'll cost us a mere $2,300 per person. In my house, with a wife and 3 kids, that's $11,500. Then we'll be the proud owners of, um...

Okay, let's let the market fix it instead. I keep hearing how efficient markets are. I guess this must be the exception that proves the rule. But let's just say that this bail out is just what the market wanted, and it can earn back that $700 billion for us.

Let's say the value of those assets we just bought with our tax dollars were to increase at $1000 per second. Markets are global, so we can gain that $1000 a second around the clock. That's $86 million a day. We should have it paid off in no time, right?

Yeah, we'll be all set in 22 1/2 years. Then we can start working on paying for Fannie and Freddie and AIG and all those other cash infusions. After that we can start paying off the national debt. Then we'll be golden. Or, our grandchildren will be anyway.

So all we need is $1000 a second for a couple decades. What could go wrong?


Side note - I'm glad to see some in Congress standing up to this proposal rather than seeing it sledgehammered through without much thought. I honestly don't know what the answer is, but let's remember that the people proposing the solution are really the same people who got us into the mess in the first place. You don't entrust the designated driver's keys to the town drunk.


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At 9/24/2008 2:30 PM, Anonymous Anonymous said...

I assume the picture illustrating other means of payment is supposed to show someone paying with a goat or pig or sheep.

But it looked, to me, a lot like what's happening to all of us right now.


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