An article by Devilstower at DailyKos provides a history of the current US financial meltdown, and includes this piece of information:
The value of the entire U.S. Treasuries market: $4.5 trillion.
The value of the entire mortgage market: $7 trillion.
The size of the U.S. stock market: $22 trillion.
The size of the credit default swap market last year: $45 trillion.
As in three times the whole US gross domestic product … The unregulated and poorly reported credit default swaps may have actually passed $70 trillion last year, or about $5 trillion more than the GDP of the entire world.
Treasury Secretary Paulson is asking for $700 billion from the US taxpayer to try and cover the losses, without any review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
And as b asks at Moon of Alabama:
Who will finance this?
Paulson also wants to lift the US national debt ceiling to $11,315,000,000,000.00. (When Bush took office, the U.S. federal debt was some $5.6 trillion and on a downtrend.) The U.S. GDP is roughly 13.5 trillion so the US government debt at that ceiling will be some 83% of US GDP. In international ranking that puts the U.S. debt to GDP ratio somewhere between Cote d’Ivoire and Sri Lanka.
Now Paulson wants $700 billion in emergency finance from where?
Who in this world can and will lend $700 billion for an emergency plan when the total lending to the U.S. in one year is only about $500 billion?
Did Paulson talk with China, Russia and the Saudis about this?
With this new debt and debt to GDP ratio the U.S. does no longer deserve an AAA rating. That will have to be cut down two or three notches.
Mike Whitney writes at CounterPunch:
The problems cannot be resolved by shifting the debts of the banks onto the taxpayer. That’s an illusion. By adding another $1 or $2 trillion dollars to the National Debt, Paulson is just ensuring that interest rates will go up, real estate will crash, unemployment will soar, and foreign central banks will abandon the dollar. In truth, there is no fix for a deleveraging market anymore than there is a fix for gravity. The belief that massive debts and insolvency can be erased by increasing liquidity just shows a fundamental misunderstanding of economics. That’s why Henry Paulson is the worst possible person to be orchestrating the so called rescue project. Paulson comes from a business culture which rewards deception, personal acquisitiveness, and extreme risk-taking. Paulson is to finance capitalism what Rumsfeld is to military strategy. His leadership, and the congress’ pathetic abdication of responsibility, assures disaster. …
No one has any idea of the magnitude of the deleveraging ahead or the size of the debts that will have to be written down. That’s because 30 years of deregulation has allowed a parallel financial system to arise in which over $500 trillion dollars in derivatives are traded without any government supervision or accounting. These counterparty transactions are interwoven throughout the entire “regulated” system in a way that poses a clear and present danger to the broader economy.
… deregulation in a nutshell; a system that allows Wall Street banksters to create credit out of thin air and then run weeping to Congress when their swindles backfire.
… The debts are enormous and the pain will be substantial, but the problem cannot be resolved by crushing the middle class or destroying the currency.
Obama came out against the Paulson plan today, although his intentions are still not entirely clear. He said a number of important things in regard to the financial meltdown, including: No blank checks. This should help put some spine in the Congressional Democrats. Also from Obama’s statement:
We cannot underwrite continued irresponsibility, where CEOs cash in and our regulators look the other way. We cannot abet and reward the unconscionable practices that triggered this crisis. We have to end them.
• Taxpayers should be protected.
• Build a regulatory structure for the 21st Century.
In the US as in Ghana: country broke or no broke, we all dey inside. It is important to remember it is we, and policies need to be for the benefit of all of we, not the borrow and borrow and spend and spend policies that make the rich richer and all the rest of we poorer.