Taxpayer Welfare to the "System" $3 Trillion Down, $9 Trillion to Go

A quite awesome infographic courtesy of nicholasrapp.com. It is very easy to get lost in the massive amount of numbers and soon you become numb. We have $12 Trillion Spent or Promised (Backstops in place)... effectively the Federal Reserve has become the "shadow banking system". And is now turning into the world's biggest, baddest hedge fund.

• The shadow banking system consists of non-bank financial institutions that, like banks, borrow short, and in liquid forms, and lend or invest long in less liquid assets. The system includes SIVs, conduits, money funds, monolines, investment banks, hedge funds and other non-bank financial institutions. (and now the Federal Reserve) These institutions are subject to market risk, credit risk and especially liquidity risk, since their liabilities are short-term while their assets are more long term and illiquid.

Just to put it into perspective the ENTIRE U.S. economy is $13-14 Trillion. Our federal deficit is now $11 Trillion (and we're now on pace to add $2 Trillion a Year with all the new spending/plans). The entire market capitalization of the Wilshire 5000 (the broadest measure of the stock market) was roughly $8 Trillion last I checked.... call it $9 Trillion if you wish. (which is why I am saying of late, sure if we throw enough worthless paper dollars at the stock market, yes stocks will rise - at a major long term cost)

Enjoy!

(click to enlarge... if you dare)


This is all on your grandkids dime - either we will be increasing our taxes to impossible levels, we monetize the debt (Treasury prints it, central bank buys it) like a proper Banana Republic (which the Federal Reserve has begun last week) or we default. I've assumed we're heading to default eventually but if we are happy to destroy our currency I suppose it will be Banana Republic time for a decade or so. These numbers "mean something" - they are not just arbitrary bottomless pits. Just remember we're still *cough* AAA rated. [Apr 15, 2008: Could the US Lost its AAA Rating?] [Nov 12, 2008: CNBC Europe - USA May Lose its AAA Rating] So was AIG about 18 months ago.

p.s. we have a rare Paul Volcker sighting per Wall Street Journal; Larry Summers is doing an magnificent job of freezing him out. [Mar 6, 2009: Where is Paul Volcker?] More pearls of wisdom that apparently are falling on deaf ears

• Volcker, who as head of the White House’s Economic Recovery Advisory Board is a key adviser to President Obama, expressed concerns about inflation as a way of dealing with mounting debt. “One historic way of getting yourself out of this situation — or trying to — is to inflate. Either you do it deliberately or you allow it to happen,” he said. “And if we permit that to happen then I think all these dollars will come tumbling down on us.” He said the U.S.’s greatest strength is its history and reputation, and suggested that shouldn’t be put at risk.
• He also critiqued the Fed. “I get a little nervous when I see the Federal Reserve announcements that they want have the amount of inflation that’s conducive to recovery,” Volcker said. “I don’t know what ‘the amount of inflation that’s conducive to recovery’ would be appropriate. I’d much rather they say that they want to maintain stability in the currency, which is conducive to confidence and recovery.”
• The 81-year-old elder statesman commented on the current state of the U.S. economy: “We’re in a government-dependent financial system; I never thought I would live to see the day… We’ve got to fight to get away from that.”