Bailouts, rescues, cash injections in U.S. economy total $8.5 trillion!

[competentone]

This is really getting crazy. As I have said before, hyper-inflation is coming.

http://pacific.bizjournals.com/pacific/stories/2008/11/24/daily38.html?ana=yfcpc

Federal bailouts, equity buys into banks and investment houses, liquidity infusions by the U.S. Federal Reserve Bank, loan guarantees and economic stimulus checks now total $8.5 trillion, according to various estimates.

That equates to about 60 percent of U.S. gross domestic product, which will come in around $14 trillion, according to economists.

The $8.5 trillion total in bailouts is nearly twice the size of annual GDP in Japan and accounts for more than the annual GDP of every national economy except the U.S., European Union and China, according to federal data.

The $8.5 trillion includes the $700 billion bank and Wall Street bailout; federal takeovers of Fannie Mae and Freddie Mac; individualized bailouts for Citigroup and American International Group; and various cash infusions into financial and lending markets by the Fed. The $700 billion includes federal equity buys into Bank of America Corp., JP Morgan Chase & Co., Goldman Sachs Group Inc. and other financial institutions.

The total was determined by various economic analysts as well as the San Francisco Chronicle.

[widgeon13]

Posted in PARF on 11/26 from the NYTimes. I didn't post here since I thought it might get political! It is an unbelievable $$$$ amount. I think most people in the street think it's just 4700 Bil, big surprise. This should be posted everywhere!

http://forums.pelicanparts.com/showthread.php?t=443385

[Aurel]

As long as I can keep my Porsche and my half million dollar house, I am fine with any bailout amount...

Aurel

[widebody911]

[Zef]

It's incredible.......

The estimated population of the United States is 305,188,760
so each citizen's share of this debt is $34,935.95.
The National Debt has continued to increase an average of
$3.86 billion per day since September 28, 2007!

[BGCarrera32]

Holy crap

[RoninLB]

Originally Posted by competentone

This is really getting crazy. As I have said before, hyper-inflation is coming.
]

i read one article that said the huge $ injection with current low $ velocity and deflation will eventually cause inflation when the economy eventually gets back to a somewhat normal operation.

now inflation is below the radar screen, but not later.

[cl8ton]

A trillion here, a trillion there, before you know it your talking serious money!

[Porsche-O-Phile]

One more reason I'm looking at buying big-ticket items (like houses) now.

If/when I can pay off my mortgage and my student loan with dollars that are worth $.20, I'll be feeling pretty good about myself.

Of course in order for inflation to be an effective hedge in this way, you have to realize the benefits of higher prices in your wages too, which is always a lagging element. Prices go up first, wages don't follow until much later usually. But I'm also thinking long-term, 15-20 years.

[HardDrive]

I wonder how long its going to take people to figure out that Wall Street just bought an equity stake in the US government, and its 100% voting stock.

Seems to be a popular myth going around that its the government who is buying a stake in Wall Street.

[pwd72s]

How can this not result in hyperinflation? More dollars chasing the same amount of goods...

[competentone]

Originally Posted by HardDrive

I wonder how long its going to take people to figure out that Wall Street just bought an equity stake in the US government, and its 100% voting stock.

Seems to be a popular myth going around that its the government who is buying a stake in Wall Street.

I don't follow your reasoning.

The U.S. government has no "equity"; it exists, ultimately, on taxes it collects from the citizens. Any assets the government "owns" are effectively property "owned" by the taxpayers.

The bailouts, represent certain private people (mostly in the financial sector, thus the use of the term "Wall Street") obtaining money from the government in exchange for "promises" to repay and "equity positions" in the (bankrupt) businesses these people are running.

Imagine, if you owned a business which you mismanaged and bankrupted, but rather than closing down your business, and having whatever assets it had left go to your private creditors, you instead received a "loan" from the government.

How could you conclude that such a situation put you in a position where you owned an "equity stake" in the U.S. government?

Such a situation would mean that the U.S. taxpayer (through the government) owned a piece of your bankrupt business, not the other way around.

The bailouts represent U.S. taxpayers being forced into positions of "ownership" in the bankrupt businesses receiving the bailout money and government-backed guaranteed loans.

The taxpayers are being royally screwed; we won't see any return on our "investment"!

Plain and simple, these bailouts represent theft.

[einreb]

Originally Posted by pwd72s

How can this not result in hyperinflation? More dollars chasing the same amount of goods...

Deleveraging. Things purchased with actual dollars rather than credit.

[competentone]

Originally Posted by pwd72s

How can this not result in hyperinflation? More dollars chasing the same amount of goods...

Actually, with the slowing economy, we have a situation where "more dollars" are chasing "fewer goods."

The slowing economy has created a (temporary) deflationary pressure situation in certain markets (like the housing market), but the new trillions of dollars will bring about general price inflation throughout the economy.

The price inflation could happen literally "overnight" due to the situation of the trillions of U.S. dollars held internationally. Any significant flight out of dollars will bring about skyrocketing prices for commodities/goods in this country.

You could wake up one morning and find that suddenly the price of gasoline, steel, bread, milk, sugar, etc have doubled or tripled in price.

The government will likely respond to such price spikes (the prices spiking in response to the dollar crashing) with "emergency price controls" which will create instantaneous shortages -- which will likely lead to things like food riots and martial law in many areas of the country.

It is going to get messy. And when it happens, you can thank people like Greenspan, Bernanke, Paulson, etc. -- along with all those people who wanted to live consuming more than they have produced -- for the mess.

[RoninLB]

afai know the government has only taken preferred stock as collateral

[Aurel]

It is like a big plan for financial enslavement which is closing on all of us. We are caught in a net, where Wall Street owns the government for taxing us and printing more money. When inflation starts happening, we will be totally prisoners. I have $10k worth of gold, real gold coins, that I will use to escape with my familly when the **** hits the fan. But where to go? This is a global net which is closing on all the countries of the planet.

Aurel

[Porsche-O-Phile]

If the economy collapses - as in REALLY collapses, I'm a firm believer that gold will be worthless.

Food? Ammo? Gasoline? Medicine? Clean water? These things will be valuable. Gold is not a very practical metal and other than some historical convention is really not of much use from a practical standpoint in a real serious post-Armageddon kind of scenario...

[Gogar]

Originally Posted by Porsche-O-Phile

If the economy collapses - as in REALLY collapses, I'm a firm believer that gold will be worthless.

Food? Ammo? Gasoline? Medicine? Clean water? These things will be valuable. Gold is not a very practical metal and other than some historical convention is really not of much use from a practical standpoint in a real serious post-Armageddon kind of scenario...

[Porsche-O-Phile]

Yea kinda...

Could it happen? Sure. Likely? No. But certainly possible...

Think of any seriously broken/war-torn country that suffers from inherent poverty problems. Places like various countries in central Africa, Afghanistan, Bosnia, etc. Heck, even Iraq to some extent... How valuable is gold in those places? Now how valuable is gold as opposed to medicine, food, electricity, running water, safe passage for one's family from X to Y, etc.?

Gold isn't a BAD thing to have some of, but I doubt having lots of it will ever really insure one's survival if the S.H.T.F.

[competentone]

Originally Posted by Porsche-O-Phile

Yea kinda...

Could it happen? Sure. Likely? No. But certainly possible...

Think of any seriously broken/war-torn country that suffers from inherent poverty problems. Places like various countries in central Africa, Afghanistan, Bosnia, etc. Heck, even Iraq to some extent... How valuable is gold in those places? Now how valuable is gold as opposed to medicine, food, electricity, running water, safe passage for one's family from X to Y, etc.?

Gold isn't a BAD thing to have some of, but I doubt having lots of it will ever really insure one's survival if the S.H.T.F.

I've explained this before, but will explain it again since it is so important.

The "collapse" we are witnessing -- and will continue to see -- is the collapse of fiat money.

Money is a tool in the economy which people use to indirectly barter what they have produced. In a technologically advanced society like ours, direct barter for most of the population is a virtual impossibility. The tool of money is needed so that people can exchange the goods and services they produce.

The people and capital investments (infrastructure) will still exist in this economic collapse when it reaches its climax, but the critical tool that makes it all work -- money -- will be broken.

The economy will "repair itself" when the fiat money breaks with people choosing new forms of money. History has demonstrated that when fiat money collapses, the metals of gold and silver provide effective substitutes.

Of course, the risks are high that additional government action will further damage the economy (besides the damage the government is doing to money) -- such as the government implementing "price controls" as the dollar collapses.

These additional government actions will create massive problems in the economy so that even those with gold and silver as a replacement for the collapsed fiat currency will still have difficulties obtaining goods needed to live.

Owning some gold and silver is no guarantee of "protection" against the economic turmoil we are entering, but understanding that the root of the problem is a collapse of fiat money, should help people understand that owning gold and silver is a practical measure to take in preparing for the hardships we will be facing in the future.