We're $14 Trillion In the Hole, And I Feel Like A Hundred Bucks

Tim Cavanaugh | June 16, 2009

The Federal Deposit Insurance Corporation says total government financial assistance came to nearly $14 trillion as of the end of the the first quarter. In its Summer 2009 Supervisory Insights [pdf], the FDIC practically swoons in describing the largesse:

One indicator of the gravity of recent developments is this: in 2008, U.S. financial regulatory agencies extended $6.8 trillion in temporary loans, liability guarantees and asset guarantees in support of financial services. By the end of the first quarter of 2009, the maximum capacity of new government financial support programs in place, or announced, exceeded $13 trillion (see Table 1). The need for emergency government assistance of such magnitude has triggered wide-ranging reassessments of financial sector regulation. 

The FDIC is being too modest in that description. The maximum capacity of support programs announced through March (in billions) comes to $13,903. (That's an outlay, so debt service on that figure means the actual cost to our post-human descendants will be much higher, right? Anybody? Buehler?) Go to page 4 of the document, or check out the handy charts here and here, to see where it's all going -- and that "all" includes $700 billion in Troubled Asset Relief Program funds that are supposedly no longer needed. Note that there is no plan in the works to put repaid TARP funding back in the treasury or give it back to the people. Mild-mannered Mish Shedlock goes ape:

I have a request for Geithner and Bernanke: Tell the truth or shut up.

Both Geithner and Bernanke maintain that banks are well capitalized. Indeed many banks are returning TARP funds. However, if banks are well capitalized then why not cancel the remaining $7 Trillion of this taxpayer ripoff right now? Pray tell, what's the need to go ahead with the PPIP?

Ben and Tim, please stop saying that taxpayers will not lose money on these schemes. You know, I know and the whole world knows that is a preposterous lie. Please come out and say you really do not give a damn about taxpayers because we all know that you don't. This is a taxpayer sponsored bank bailout, no more no less.

If you cannot give an honest assessment (and the whole world knows you can't), then please stop your disgusting, phony charades and fake transparency efforts.

It's important to keep track of individual misappropriations like that, but given the size of the figure itself, my question is this: Is there any economic scenario optimistic enough to admit the possibility that this money will be paid off during the remaining life of the United States of America?

Comments

|6.16.09 @ 8:56PM|#

Is there any economic scenario optimistic enough to admit the possibility that this money will be paid off during the remaining life of the United States of America?

Sure, Tim. It's called "empire". America could go Imperial (for realz) all over everybody's ass and just take it.

"I'm gonna rise up. / Gonna kick a little ass. / Gonna kick some ass in the USA. / Gonna climb a mountain. / Gonna sew a flag. / Gonna fly on an eagle. / I'm gonna kick some butt. / I'm gonna drive a big truck. / I'm gonna rule this world. / I'm gonna kick some ass. / I'm gonna rise up. / I'm gonna kick a little ass. / Rock, flag, and eagle!"

|6.16.09 @ 9:38PM|#

Is there any economic scenario optimistic enough to admit the possibility that this money will be paid off during the remaining life of the United States of America?

Depends what you mean by "paid."

While outright repudiation of the debt is no longer an impossibility by an stretch, I think it is the least likely, because it would take a strange kind of courage.

No, we are looking at either (a) "resetting" the Dollar's value (pretty much taking all our hyper-inflation in one bitter bill), or (b) much, much inflation, either of which will devalue the debt to the point where it can be serviced.

There is no other option. None. The course is set.

Tim Cavanaugh|6.16.09 @ 9:47PM|#

Well, there's still the fact that only a small portion of this money has actually been issued and has to be raised from an unwilling debt market, so it's always possible there will be a slip twixt cup and lip.

attempted reader|6.16.09 @ 9:52PM|#

a slip twixt cup and lip.

English please!

Tim Cavanaugh|6.16.09 @ 9:55PM|#

English please!

There's a possibility that the whole $13.9 trillion will not actually be paid.

|6.16.09 @ 10:52PM|#

misapproppriations

Trying to spell "Mississippi" and missing?

alan p|6.17.09 @ 12:34AM|#

Agree 100% with R C. It will be "paid" all right, by anyone who holds or uses US Dollars. I heard all this bullshit described as "the insiders raiding the till while there's still anything left" and a more apt turn of phrase I've yet to hear. There is almost no limit to the amount of abuse US citizens will mindlessly accept from their government, but I have a feeling when this all hits the fan and our currency is utterly shattered we might find it. Or not.

TallDave|6.17.09 @ 1:13AM|#

I hate to say this, but things may get a LOT worse.

It's true we've tightened some lending standards, but the bigger problem was that we allowed investment banks to become too big to fail. When some players have an implicit guarantee of bailout, it's not a free market anymore.

Sadly I see no one trying to put the shattered pieces of Glass-Steagal back together. Instead, we've established a dangerous precedent involving ever more taxpayer money and governmental control.

Brett Stevens|6.17.09 @ 1:17AM|#

Since WWII, our government has radically increased its spending on citizens.

This has resulted in subsidizing the delusional and irresponsible.

Now we extend this to other political programs, and politicians are happy for the votes.

No one is actually thinking about a future, because irresponsible people don't believe in the future.

They believe in right now, and it being someone else's fault when that goes wrong.

|6.17.09 @ 1:26AM|#

Wait the "National Debt" is money we owe to ourselves, right?

So, 14trillion divided by 300million, right?

So I'm one rich motherfucker, right?

Gottabee with so many motherfuckers owing me so much motherfucking money, right?

Ebeneezer Scrooge|6.17.09 @ 2:42AM|#

RC Dean pretty nailed the most probable outcome.

Of course we once paid off the debt for WWII, but I believe that involved a little inflation as well.

Paul|6.17.09 @ 3:38AM|#

I see a currency board which will start pegging the dollar's value (by fiat of course) to some other slightly less lame currency. Periodic resets as things truly go into the shitter, then a total reissue of a new currency, pegged to some new lame currency. Rinse, repeat. I truly hurt for my daughter's future in this nuthouse we call these here United States.

BakedPenguin|6.17.09 @ 7:04AM|#

...the bigger problem was that we allowed investment banks to become too big to fail for politicians to accept the banks failing.

|6.17.09 @ 8:13AM|#

Of course we once paid off the debt for WWII...

Actually, no. It just keeps getting rolled over. And along with all the other debt keeps accruing interest and growing through the magic of compound interest.

In none of the years that the country ran a surplus was that surplus big enough to make a significant dent in the balance. And there weren't enough of them anyway. I'm sure there's been some monetizing of the debt through money creation but mostly it's "paid back" with more borrowing.

Compound interest is a wonderful thing for savers, for borrowers not so much.

robc|6.17.09 @ 8:39AM|#

On June 28, 1946 the US was 269 billion in debt. That was a local, end of fiscal year, maxima.

By 1951 it was down to 255 billion. We paid off 14 billion in WW2 debt. On June 30, 1941 it was 48 billion, btw. So, during the war, we borrowed a bit over 200 billion. Which, along with the LA purchase, may have been the best use of borrowing in US history.

1955-1957 were the last surplus years. It went from 274 to 272 to 270 billion in those years.

It has been all debt growth since then.

Also interesting, from 1919 to 1930, we ran a surplus every year, paying the debt down from 27 billion to 16 billion. Wilson's warmongering thirteentupled the debt from 2 billion.

Alex Chilton|6.17.09 @ 8:53AM|#

"I Feel Like A Hundred Bucks"

Great Replacements reference.

|6.17.09 @ 6:41PM|#

Thanks for the numbers, robc. I didn't realize that they had made such a dent in the WWII debt.

But my larger point still stands. The broader trend since the 1930s has been to increase the debt in every year. Some programs, like Social Security are specifically designed to do so.

But to me the most disturbing trend has been a debt growth since 1980 that is almost entirely dues to the size of the debt itself. It is almost impossible now to get spending anywhere near under control enough to make any reduction in debt.

This becomes even more apparent when one considers that in 1999 and 2000 when the government's revenues were higher than its outlays, the debt still increased.