Bernanke warned that a recession might come if the bailout plan did not pass. And as much as I like the idea of the government bailout of Wall Street -- I hate government interference in the free markets, and bailouts can encourage more bad behaviour. It is hard to get a good understanding of the cost of this Wall Street bailout plan. But I ran some numbers that I thought were interesting.
- $700 billion cost of proposed plan
- 305 million estimated number of Americans
- $2,295 estimated cost per American
- 151 million estimated workforce (excludes retirees, kids, etc.)
- $4,635 per working American
- $13.8 trillion estimated US gross domestic product
- 5.1% cost of bailout plan in one year's domestic product
- 13 days each American has to work to pay off bailout plan (5% of a year)
Considering we could be looking at a recession, and the economy normally grows 3% a year, this does not look so bad. A $700 billion dollar bailout would be equivalent to a one-year recession with a negative 2% growth rate. These calculations are a rough estimate of the impact of such a plan and gives one food for thought as to which is worse. So which would you prefer, a recession or a bailout?
Kevin Kersten is an Stock and Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and/or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.