That's A Big Deficit!

One trillion, eight hundred billion dollars: 1,800,000,000,000. From the Post:

Deteriorating economic conditions will cause the federal deficit to soar past $1.8 trillion this year and leave the nation wallowing in a sea of red ink far deeper than the White House had previously estimated, congressional budget analysts said today.

In a new report that provides the first independent analysis of President Obama's budget request, the nonpartisan Congressional Budget Office predicted that the administration's agenda would generate deficits averaging nearly $1 trillion a year over the next decade -- $2.3 trillion more than the president predicted when he unveiled his spending plan just one month ago.

What'll that do to the dollar?

Sean Paul Kelley March 20, 2009 - 2:35pm

Sean Paul Kelley's diary | printer friendly version |

( categories: Global Financial Crisis )

This is only the beginning

Roubini and others are estimating that cleaning up the financial system may require four to ten trillion. There is some obscurity here owing to lack of transparency and disinformation. Moreover, the situation is complicated by the global extent of the crisis. Being the world leader and chief financial player, the US is likely going to have to contribute significantly to the rescue of other countries also. The exposure is potentially huge.

Unless the powers that be are willing to permit market-based price discovery and the resulting debt destruction, the presses are going to be running full steam, and taxpayers are going to be on the hook for continuing bailouts of zombies and unlimited guarantees of all exposure, including the mountain of toxic waste. On the other hand, permitting the market to take its course will likely result in the bankruptcy of many core institutions and their political constituencies. This would in turn result in global capital impairment, seriously constraining recovery.

Can the dollar take it? I think that they are betting that the alternative is to horrible to contemplate, so the world will suck deep and swallow the bitter pill. If not, ????

tjfxh March 20, 2009 - 3:34pm

Inflation, deflation, or stagflation?

What do you think that implies for inflation, deflation, or stagflation? Any ideas? I don't have the time to track all the variables on this to be able to make even a calculated guess.

Thepanzer March 20, 2009 - 5:08pm

All indications are..

that Fed and Treasury are fighting deflation full-on.

tjfxh March 20, 2009 - 7:33pm

Hahaha

If Roubini thinks the American public that spent the last 30 years yelling and wailing over new taxes is going to fork over $10 trillion for foreign obligations, he is living in fantasy land. The alternative might be grim, but for middle-America the situation is already grim, bordering on desperate. They look at it this way: pay through the nose and sell out our children's future to keep the current financial situation afloat, or let it crash, take the incredible pain, and let everyone share in the increased suffering. Heck, if enough banks fail that just means less houses getting foreclosed upon.

Don't know about you, but the folks I know that's barely a choice at all.

zot23 March 20, 2009 - 7:20pm

Well, the choice may well be losing civilization as we know it

eom

tjfxh March 20, 2009 - 7:35pm

Is that bad?

And it depends on what's on the other side of the loss.

GWB took much away from this civilization.

Synoia March 20, 2009 - 8:25pm

I became worried

I became worried when I saw the picture in which Michelle Obama was planning a potato field or something. That's the plan B.

Have you and Barack already bought a rifle?

_{--Sell Alaska to China!}

Singular March 20, 2009 - 8:50pm

I don't think that losing civilization as we know it is so bad..

if we can come up with something better. While that shouldn't be too hard in principle, there's a huge uncertainty involved. There are a lot of other ways things could turn out that aren't so good, and some are downright nasty. There are no guarantees once the system gives way, and it's "every man for himself."

tjfxh March 20, 2009 - 11:17pm

We'll get the worst of both

First they print money
The financial industry will go bankrupt (crash)

Beacuse the US can't print enought money (It will try).

Then the US will renage on its debts (aka County goes Bankrupt).

Then we very painfully start over.

Synoia March 20, 2009 - 8:18pm

Something interesting

EURUSD graph here:
http://finance.yahoo.com/echarts?s=EURUSD=X#symbol=EURUSD=X;range=1y

I remember that peeps were whining on the budget deficit during the days of GWB.

In the EU there is a wish that the budget deficit should not exceed 3% of GDP. The planned budget deficit of the USA is 13.1%. In China the budget deficit is less than 3% and government debt amounts to 20% of GDP.

My suggestion:
_{--Sell Alaska to China!}

Singular March 20, 2009 - 9:00pm

Who cares about the amount

How many times will that much money stacked end to end circle the globe? I like my money measured in distance or weight, not something silly like value.

Easy answer is to slash DOD budget. It's $500 Billion+ base this year alone. Guns or butter indeed. The "one time" bailouts are chump change to the decades of money dumped into the Pentagon.

That said, if the stimulus infusion works, then the real work can be started on getting the deficit under control. At the moment, the deficit is just another number floating around. Doesn't mean much until someone starts calling it in. The "good" part of all this is that the entire globe is taking a dive. If it was only the U.S., then we'd be in even more trouble.

Silent Autumn March 20, 2009 - 9:41pm

pictures

what does a trillion dollars look like?

graham March 21, 2009 - 6:24am

I need to correct my numbers

Are those pallets like the ones the Bush Administration was shipping over to Iraq to simply transfer over into the hands of private contractors? If I remember rightly, they were pallets of $100 bills.

One trillion dollars divided by three hundred million Americans amounts to $3333 per American, or divided by 100 million mortgages, that's 10,000 per mortgage, or 50 million mortgages that's $20,000 per mortgage.

I'm not sure what this means, other than it indicates that if you took all the stimulus money (which is also a one-trillion dollar figure now), and divided it up equally among all the mortgages being paid in America, it wouldn't keep anyone from defaulting.

If you gave everybody in the country an equal share, it amounts to about 1 month of middle class wages (i.e. - someone working fulltime at about $20 an hour).

Not that they're actually planning on giving you and I any of that money...

yogi-one March 21, 2009 - 8:52am

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That's A Big Deficit!

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