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.
Facebook's IPO Debacle, Day 3: Un-Friended and Dis-Liked on Wall…
Former Olympic Rower Turned to Minimalism to Pay Down $82,000 in Debt


Reader Comments (Page 59 of 59)
9-27-2008 @ 12:02AM
Joe said...
I think it is really funny that every time there is an election there is always a major crisis that comes around but to be honest this 700 billion dollar deficit could have been almost paid off with what the US has paid in the Iraq war (600 billion dollars
9-28-2008 @ 1:48AM
V8 said...
It is probably too late to stop the Republ-ocrats and the banksters from going forth with this "bailout" but ALL of us seriously need to start voting all of these self serving crooks out of government. From local to national elections, let us vote for "third party" candidates who have been marginalized for speaking the truth. Don't waste your vote on those who have forsaken us. Slowly, we can change USA for the better. Vote for Ralph Nader or other but PLEASE do it! Do some research because you won't hear their message on TV.
Oh, and let's live within our means people!
9-28-2008 @ 4:18PM
Peggy McGilligan said...
The above calculations only works if the average American makes 120K per year. In which case, it's a mere pinprick. But most don't make that kind of money. The recipients of that money are however, Trilateral Commission and or Bilderberg Group members. Imagine, a $1-trillion dollar bailout without ever any admission of wrongdoing, or even malfeasance, no consequences whatsoever. When someone takes your money and steals your car, it makes an impression. When you find out they're committed globalists, it leaves an everlasting impression. When Bill Clinton eased banking restrictions, he dished out $8-billion dollars for community reinvestment loans. The money evaporated. When the financing schemes fell through, as is their wont whenever 30-million Mexican nationals buy inflated properties and default, it left banks in the lurch. Hillary Clinton counted on the loan giveaways to buy votes. Interestingly enough, had Hillary secured the nomination; she, instead of Barack Obama would preside over the bailout. So, where is that $8-bilion plus dollars? The Global Initiative people took my money; they even stole my car; now they’re coming for you. Let the bubble burst. Gentlemen, I want my money back: http://theseedsof9-11.com
9-29-2008 @ 11:41AM
David Grubbs said...
We Live in a system devoid of any rational foundation, how can we believe anything comes from our government. Big Business and puppets have far to much sway in our system right now, and it truely appears everything is just a scam for more money from those that dont have it...
9-29-2008 @ 4:49PM
Gary said...
well the republicans shot it down
not the democrates... like they got accused, just like a republican
WE WILL HEAD INTO A DEPRESSION
9-30-2008 @ 8:38AM
The Trade Detective said...
my only problem with this article is that anybody believes this is a free market economy.
With the (now reinstated) abolishing of the uptick rule, as well as other deregulation, Wall Street being thoroughly manipulated by hedge funds. The very fact that following "institutional money" is a profitable investment model proves this point.
10-01-2008 @ 11:29AM
bailbond said...
The bail out program is 700 billion dollars. That is supposed to stabilize the credit system so that banks and businesses can continue to operate. The massive injection of cash may wind up weakening the value of the dollar and we, the people, may NOT get it all back.
I recently read an idea from a retired Army officer that made some sense. He was talking about healthcare and in his arguments said:
"There are 305 million americans. What would happen if we gave each of them 1 million dollars?"
I think there'd be some partying but think of the other benefits:
- americans are in debt. 1MM would pay off most american's debt
- americans need education. 1MM would buy a lot of schooling
- americans need financial security. 1MM would buy a lot of stocks/bonds
- the housing market is faltering. 1MM would spark a lot of home improvements
or purchases and building
- auto makers are collapsing. 1MM would buy an automobile.
- 1MM would pay for healthcare.
Instead of paying 700 BB for institutions committing gross errors in judgement to make a buck, think about how much 305 million dollars would do for the economy in terms of zeroing credit, mortgage and loan debts. Think about how many goods would be purchased with that money. Think about how many educations, operations, small business job creations and innovations that would create.
You'd need to be a citizen. You'd need to have an address, identity and bank account. The less responsible would continue to irresponsible. But the bulk of americans would be much better off.
And it would cost 305,000,000 dollars instead of 700,000,000,000 dollars. That's pennies on the dollar for a bail out plan.
Instead of bailing out the institutions who made this mess, let's bail ourselves out.
10-06-2008 @ 10:05AM
jim said...
BAILOUT really means CORRUPT POLITICIANS STEALING TRILLIONS FROM TAXPAYERS AND GIVING IT TO THEIR FRIENDS
10-07-2008 @ 8:51AM
Greg Gau said...
The problem is the freeloaders in our society.
If they were refused or denied free services or allowed tax free living,they would adapt to pay or leave. All the politicians do it seems is to help themselves or the guys who financed the posts that they now hold. Higher import taxes means more difficulty for big business to leave this country.Why should other countries benefit from
the leaders of this one.
10-13-2008 @ 8:47AM
Frank G. said...
In post #1166, bailbond stated...
"There are 305 million americans. What would happen if we gave each of them 1 million dollars?... And it would cost 305,000,000 dollars instead of 700,000,000,000 dollars. That's pennies on the dollar for a bail out plan."
You may want to check your math...
1 million (dollars) times 305 million (americans) = 305 TRILLION dollars, NOT 305 million as your post suggests.
That is more along the lines of "four hundred thirty five dollars" on the "dollar" for a bail out plan.