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A trillion here, a trillion there...

By Owen Paine on Friday November 28, 2008 10:38 PM

Here's an article that goes to Homeric lengths to itemize the near $8 trillion -- yes, that's not a typo, trillion not billion -- of balance-sheet dice-tosses so far rolled across the hi-finace game board by various wings, arms, and feet of Uncle Sawbuck, in the form of "pledges" and "guarantees".

They're like so many anti-Salvation Army Santas, these minion agencies of der Alte hizseff, and they're are doling up -- ever so generously -- paper gold.

Not to us jobbled masses, mind you, not to allow mortgage write downs. But to allow our challenged elite financial institutions to protect their worldwide legions of innocent counter-parties.

These massive backup obligations made on Uncle's behalf, if not themselves actual means of payment, are at least a rock-solid foolproof riskless private creditors' recourse to our dear rich uncle's famously limitless dollar credit line.

When the final tally tolls, how much of the $8 trillion -- trillion, mind you! -- in pledges now outstanding will go down the gopher hole?

Among friends and comrades: I'm thinkking a measly one trillion. Heh. Chump change.

But even so, this ain't exactly S&L II, no more than Minya's dad is just another Minya:

* * * * *

I hear y'all out there, yelpin' at the indecency of this: "By God and Ralph Nader, compare and contrast here, citzens! On the one hand -- 25 billion for the friends of the UAW, and a paltry 15 billion for Obie's green stables project. Trickles, trickles, and no more, for our fracurted manufacturing base -- while Wall Street gets trillions upon trillions!"

So what's really up here?

It's not quite as grotesque as it looks, nor as aggressive as it pretends to be, for that matter. Keep in mind two very different sets of numbers are circling around each other here; and they always follow old Bill Petty's rule: "never compareth the wrong stocks to the right flows".

We'll pass on the bottom-line point that these two types of action have very different impacts on what matters to us iron jawed prole-o-philes: i.e. job dynamics ... wage rates ... paid hours, etc. The bail actions are just the first step in a series of balance-sheet shifts that leads mostly to no where but around and around the speculative categories of fictitious assetry; while the other -- the money spent on opening factory doors, or keeping them open -- though way smaller, immediately induces actual purchases.

Let's take the numbers for any Gub purchase of real stuff. What do we compare 'em to? Well, of course, the output value of our nation's gross annual domestic product: 15 trillion dollars.

To keep these numbers in persepctive, let's find a real standard unit: something tangible and obvious. I suggest Uncle Spreadeagle's excellent GWOT adventures, which now run us, what, $150 billion a year? That's conveniently around 1% of our 15 trillion dollar GDP.

Using this unit -- let's call it the GWOTbuck -- to measure, consider Paul Krugman's proposed trillion dollar budget deficit. That's 7 GWOTbucks. As long as we stick to real expenditures for actual real useful stuff, like armed predators and bulletproof vests, on this basis Obama's green Michigan initiative is 1/10 of a GWOTbuck -- spread over 3 years!

When we move up above the mundane product system to the Scheinwert realm, where the $8 trillion will someday roam -- how big is it, comparatively? I mean, is it really too big? Is Uncle Sucker's latest "on the hook fer" number really a horror among horrors?

To be absolutely fair-minded, clear-conscienced, and even-handed about it:

Yes and no.

Yes, it is a horror among horrors, because it's a handout to thieves frauds and assembled dungheads. But is it too horribly huge a giant choker of an 8-ball?

Well, no. Not when properly compared to the economy's totalischer scheinwert zyztem -- ie the plausible total value of our vast superstructure of digital IOU/UOMe obligations-- and that, in turn, to the value of our true string of pearls of great price that collateralize these solemn contractual promises: namely, our real production system and our national structures from infra- to ultra- to residential to strictly-for-business.

Clear so far? I hope not, as Hegel would say.

What's it all worth, this pile of money bonds, mortgages and other obligations and entitlements, titles, deeds, certificates, licenses, share equities, insurance policies, annuities, pension funds, and so on-- What's it really worth?

It's worth what it's latched onto that's real -- land lots, for instance (and what are they really worth?) -- and then structures and then equipment and then...? Number, please?

Lets guess $40-50 trillion.

Against that number, what's the $8 trillion Uncle's vouched for -- so far? It's only three big annual criminal-class clawbacks away from paid in full: three 5% wealth levies, and it's gone, pinned back onto the private ledgers.

Beware, high hats. If Uncle turns old-Hickory on ya, and sets his mind to gettin' the republic's purse unstuck, then you might have something to worry about.

To make a clean breast of it: Uncle prolly oughta vouch for all of it, anyway. Yup, the whole stinkin' Scheinwert mountain range. And at book value. Just to create ongoing optimal capital market conditions. Like Ike always said, "knock out any uncetainty you can, as soon and as completely as you can."

I hasten to add: of course Uncle would need to charge the issuers of all these obligations -- sacred or profane as they may be -- an annual risk of default premium of, oh, maybe... $500 billion. Cheap, considering Uncle's one-of-a-kind, nickel-plated, wall-to-wall face-value assured blanket coverage.

Among the results would be risk free investment for us toiling plebian minnows.

Caveat: given this final full socialization of all financial losses, we gotta bind the CEOs in adamantine chains, ironclad and foolproof against wild and fraudulent pyramids. Ninja IRS units, a zillion escrows, 3 million clawbacks... and... and ... gibbets. Lots of gibbets.

Comments (2)

Mike Hunt:

I've read that the derivatives totaled run around $516 trillion

Coming Soon: The $600 Trillion Derivatives Emergency Meeting

Derivatives now up to $684 Trillion

Your estimate is tiny compared with the real problem.

Re: Gibbets.


And bring back the tumbrels, too.

And the Pillory.

NO "FIRE" Corp shall receive a DIME of federal aid unless both the CEO and the CFO of said enterprise subject themselves to 24 hours in a pillory on the National Mall.

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