Bailout costs more than Marshall Plan, Louisiana Purchase, moonshot, S&L bailout, Korean War, New Deal, Iraq war, Vietnam war, and NASA's lifetime budget -- *combined*!

Barry Ritholtz sez,
In doing the research for the "Bailout Nation" book, I needed a way to put the dollar amounts into proper historical perspective.

If we add in the Citi bailout, the total cost now exceeds $4.6165 trillion dollars.

People have a hard time conceptualizing very large numbers, so let’s give this some context. The current Credit Crisis bailout is now the largest outlay In American history.

Crunching the inflation adjusted numbers, we find the bailout has cost more than all of these big budget government expenditures – combined:

• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion


  1. It’s always important, I think, for people to quantify exactly what they mean when they say “inflation adjustment”. There’re any number of methods you could use, all of which are flawed in one way or another.

    Trying to assess the exact inflation of a good as strange as Louisiana would be, I think, extremely difficult, for example, and so I suspect that some kind of aggregate inflation index, like the CPI, which itself is fraught with problems.

    I guess my point is that you need to be careful (or at least explicitly clear) when you start trying to convert old numbers into new. Doesn’t mean that that the conclusion’s any different – the bailout will be extremely expensive no matter how you spin it – but it’s important that we understand exactly how you reached that conclusion.

  2. As a non-economist, but as someone interested in mathematics, I have often wondered how to adjust for inflation. Is there a formula?

  3. @ #4 Cupcake Faerie: Not while we’re staring into the maul of an Economic Singularity. It’ll still take a while for us to grok just how f**ked we are.
    Money is a meme. It consists of the belief in it. That does not mean it does not exist, just that it consists of the belief in it. We just may witness the collapse of that belief. That would be interesting to watch from a safe distance, if a safe distance were a luxury any of us had.
    So, here’s a pretty picture of a unicorn.

  4. I’m annoyed at how much I’ve been seeing about the cost of the bailouts. Don’t get me wrong, it’s a lot of money and I’m not too pleased about it, but these sorts of articles just hear numbers and start adding things up. Case in point: the Citigroup bailout comes with an 8% annual dividend for the gov’t and they own the shares so presumably they’ll be able to sell their preferred shares at some point and make a good chunk of change bank.

    Same thing with absorbing a lot of these toxic loans. Are they going to lose a lot of money? Certainly!! Are they going to lose every penny the loan is worth? Not even close. When the gov’t throws 50 billion towards these loans, they might get back somewhere between 30-35 billion of that. My point is, I’m not pleased about the situation and heavy gov’t intervention into these markets, but the actual cost of the bailouts is nowhere near the numbers that get tossed about. Uncle Sam will get a lot of that back from their equity stakes in the banks, dividends, and loans that they’re collecting.


  5. Interesting, though I think you should also account for population. These numbers would be more comparable per capita. The bailout might not exceed the others per captia – but it is still huge!

  6. Cupcake Faerie, google has a lot on this. Wikipedia explains it as well. The traditional approach is to tie it back to goods: How much would you pay for typical consumer goods in a given year? That would describe the “value” of money.

    Tying it to wages (“how long do you have to work to earn the money for a loaf of bread”) or GDP yields interesting results, but brings in other factors which you usually would like to isolate when musing on “the value of money”, like (overall) productivity or cost of labor (which of course varies over time as well).

  7. @#4 Cupcake Faerie: I have also wondered this. I think you just have to multiply by the mean rate of inflation since the date in question. There must be a table of annual inflation figures that you can put in a spreadsheet and calc. the mean.

  8. Inexact inflation calculations aside, this estimate of the bailout cost includes money that hasn’t even been spent yet. Sure the $4 trillion has been authorized but the bulk of it remains idle.

  9. You probably can’t count the Moonshot and NASA’s lifetime budget separately.

    Wouldn’t the Moonshot be contained in NASA’s budget?

  10. Is there a link to a more complete article or this quote it? I’d like to know where the figure of +$4 trillion comes from…

  11. Should also be pointed out that unlike many of the things on the list, like the Marshall Plan, the Vietnam War or the Space Race, not all of the money will simply disappear. A whole lot of it is in loans and stock-buys, and it’s not unreasonable to think that over time, much of that will be repaid.

    Sure, a whole lot of the money will disappear, but most of it probably wont. It’s an important distinction to make.

  12. #1 – the point is, if we still had regulations in place to keep bankers from getting completely stupid to the point where the entire US economy is danger of collapse, we wouldn’t be spending the equivalent of six months’ GDP bailing them out.

    The Interstate Highway System was $425B (2006 dollars) according to Wikipedia. For ten times that, we could conceivably put a four-lane highway in front of everybody’s house – or we could have already built 200+ MPH rail lines alongside every last inch of the existing system. Think about that – the entire domestic airline industry made obsolete with high-speed rail.

    If you could just get on a train to wherever you want to go, we would be far more comfortable with 40-60 mile range electric cars for our commuting pleasure. Poof! Our need for mideast oil and the requirement to kiss the asses of people who don’t like us – gone!

    This is just one example of what we could have done with four trillion dollars if we didn’t have to spend it fixing somebody’s enormous fuckups. Want another example? For four trillion dollars, we could probably buy every last seat in every university on the planet several times over. Hell, we could found more universities, community colleges, and technical schools than currently exist, and give away every last seat for free for the next several decades.

    Or we can clean up a big mess made by a bunch of bankers. That, sir, is the point.

  13. Another good way of conceptualizing how much money we’re talking about is to look at in in terms of money over time….

    If you actually had 4 trillion dollars in the bank, you could wake up and *blow* 100 million dollars *every single day* for the rest of your life and even if you lived to be 100 you would not have spent all of it.

    It would be like winning the lottery two or three times EVERY DAY for 100 years.

    Of course, nobody has 4 trillion dollars in the bank, but even to put it in the perspective of Warren Buffet, who is worth 62 billion as of last report, he would still be able to blow one million dollars a day, EVERY DAY for the rest of his life and his kids’ lives and still have only spent about half of it (assuming of course for the purposes of illustration that the 62 billion is in the form of liquid assets :) )

  14. don’t lose the little foothold we have made.
    let’s etch it out into a platform.
    a place where future generations can camp.
    (we are going to have to fight, fight, fight…)

    accountancy will live forever.

    let’s be the ones adding it up.

  15. Money Schmoney! Historically speaking (as history is my thing) this is (for the rulers) a great thing. Mr. bush our beloved president has been throwing around money like the drunken frat boy for the last eight years. He has for some reason mirroring the late great Louise IV of France, spend spend spend, increase the taxes on the middle class, decrease the tax on the wealthy (Ok, the Royals in France refused to pay taxes). Spend Spend die,(Leaving France up to it’s eyeballs in debt).
    What happened on July 9 1779, you may ask, the poor and former middle class said enough is enough and made a bunch of Ponces shorter by a head.
    I know Revolution is fun and exiting (from a historical prospective) but not so much when you through in one just ask Marie aka. eat cake lady.
    This bail hopefully heads off the big party of Revolution and lets most of us keep their pates. Bush should loose his but that is for a different story.
    Yes huge ass money, but (Hopefully) no Revolution.

  16. The manned mission to Mars was budgeted at $125 billion. So … that’s thirty manned missions to Mars.

    I know this is a crisis, I know we’ll be paying for this for years. But next time the government says they can’t find the money to fund science or build schools or even just repair the inner cities … they’re lying.

  17. #3 yes. For this sort of question, what can the entire nation afford, as opposed to what can individuals afford, using GDP as a deflator is usually better than CPI.

  18. –Much of the bailout is a *loan,* whereas the war on Iraq and other projects are *raw expenditures* with no repayment. It’s unclear as to how much industry will actually pay back in the end, but the comparison is a little unfair – bailout is a fundamentally different kind of expenditure.

    –Be careful to normalize on a per-capita basis, as one commenter noted.

  19. #13:

    The problem with regulations (which, mind you, we have in spades) is that greed is always a motivation to circumvent them — even with greater oversight and greater regulation, the system can and will be gamed.

    What would have worked much better was to refuse to have government-backing of home loans in the first place. Without the insurer of last resort that is the US Gubmint, the banks would never have jumped into an orgy of pretend money.

  20. @OSKAR: The space-race money didn’t just “disappear” either. It was probably one of the most efficient uses of government money in terms of return on investment *ever*. I don’t know anything about you, and I can tell you you’re surrounded by stuff that probably wouldn’t exist were it not for the space-race.

    Why aren’t we assigning blame for this fiasco? How can Barney Frank claim that we need to be more creative, cautious, and use “common sense” with the bailout package (the combination of which means that we never actually bought out bad mortgage securities), and later in the same session sound SURPRISED that we can’t re-negotiate the terms of those securities, because the holders might sue…. If we bought them out like the plan was, we could choose not to sue and hundreds of thousands of people could have kept their homes. But our congressional leadership chose to play politics to make the opposition look irresponsible right before the election rather than actually try to solve the problem. They called their monumentally stupid plan “common sense”. Hopefully they stop behaving like fools now that the election is over.

  21. Isn’t the more relevant number the percentage of GDP, not inflation-adjusted dollars? America was a much poorer nation at the time of the Marshall Plan. $12.7 billion (wiki says 17) at the time it was actually spent represented a much larger portion of the GDP than $115 billion would today, and so, a much larger expense.

  22. @GMPALMER: You’re exactly right. But by current definition you’re also a racist, since what you suggest would imply that minorities that can’t afford houses wouldn’t be able to buy houses. The system that we had was set up specifically to cause the situation we had (tons of pretend money lent to people who couldn’t afford to borrow it).

  23. “A whole lot of it is in loans and stock-buys, and it’s not unreasonable to think that over time, much of that will be repaid.”

    the idea of any of the money being repaid is more incredible/preposterous than the above quoted figures!

    don’t we have loans from Gulf War 1 we can call our markers in on?


  24. Shock & awe. Even with the carefully presented examples I find the scale of this still intangible.
    #13, last time I looked the US wasn’t fully independent of oil as an energy source and raw material. Gasoline isn’t the only thing that comes from crude oil. Diesel for rail locomotives, fertilizers, plastics, bitumen….
    The wholly ironic thing about Bush & his focus on the war on terror is that he’s presided over a country that’s got itself into a bigger mess, that will directly affect more people more significantly than those terrible events of 11 Sep 01 ever did.
    Other countries are in the mire too, but we are led to believe that it’s founded in the sub-prime lending in the US.
    Or maybe we’re just finding out that capitalism is as unsustainable as soviet style communism but just outlasted it by 20 years. Here’s to an interesting 2009.

  25. That’s just the Federal Reserve numbers. If you take FDIC, Treasury, and the Federal Housing administration into account, add the Citi asset backing, and then newly announced TALF amount, you’re over $8.3 Trillion.

    Here’s $7.4 Trillion broken down (no Citi, no TALF):

    Yes, most of this is insured amounts and purchased assets. So IF the assets pay off and the insured assets don’t fail, everybody comes out okay, maybe even making money. That’s a big if.

  26. “”“Nobody really knows what’s going on,” said Gordon Kane, a theorist at the University of Michigan. Physicists caution that there could still be a relatively simple astronomical explanation for the recent observations.””

    True, he was talking about observations of Dark Matter, but I think his words also apply to the bailout discussion. They are making it up as they go along folks.

  27. This is totally inaccurate!

    Much of the bailout money is in the form of loans that will be repaid.

    Where as money spent on a war is completely lost.

    We will only know the true cost of the bailout once this crisis is over. My guess is it will cost 1/5 of the total amount.

  28. Well, I think that’s great. I mean, I knew we were saving that $4.3 trillion for something. And now we have something to spend it on! It’s like saving our allowance and then throwing a huge amazing party just for us and all our banker friends!

    Wait. What do you mean we hadn’t actually saved that money? That we’re going to have to pay it back somehow, at some point down the road?

    Man, that sucks.

  29. That is a LOT of money. (Sorry, not as good at the comparative visualizations.) Seems to me that some people are going to make out very very well from it.

    My questions would be: Who are they? Are they the same people who got us into this pinch in the first place? And… Can we get ourselves out of this pinch without making these folks any richer?

    Wish I knew the answers to any of the above. (Maybe I should read the book.)

  30. In what way will inventing more debt (and more money) help us all to get out of debt? Eventually we might as well start trading debt as a currency instead of money.

  31. If bailout money is spent buying assets that are too risky for short-term-memory instititutions like corporations to deal with, but in the longer term (and government is a long-term isntitution) might actually have some return on investment, then I don’t have a fundamental problem with the government doing that.

    Also, in cases like that, where the government buys short-term risky but long-term likely to profit assets, it isn’t quite the same as the government spending money on the Vietnam war.

    The devil is in the details, though.

  32. Is there enough paper to even print the soon to be worthless dollar now? We will have to rape the rain forest for enough wood pulp to make more paper. Everyone get their chainsaws out!

    P.S. – I know we won’t be actually printing it, instead it’s going into a black hole. I like the visual of a stack of hundred dollar bills reaching past Jupiter. Or how about paper-mâché the Earth with ones.

  33. This make sense. The ultra-rich saw their net worth drop considerably. Now the rest of us need to fork over a few trillion to make them flush again.

  34. @#20

    IMO, the point about regulation is this: we’re at a point where the govt is taking responsibility for saving private companies/industries, due to that company/industry being so indispensable to the economy. Whether or not you agree with the premise for the bailout, it doesn’t make sense for the govt to take on that responsibility without also taking steps to oversee the operational policies of those businesses. Responsibility without authority sucks (ask anyone in middle-management!).

    I ain’t no economist, but I would think there could be some benchmark of liquidity that banks would have to maintain. In other words, we won’t bail you out unless you make a good faith effort to stay liquid. Even if they game the system, they wouldn’t be allowed to dip into that cash reserve.

  35. This would interesting to see as percentages of GDP.

    For instance, the bailout is 5% of the US GDP. However, at the time, the space race at $36.4B was 9% of the GDP (1969).

    Granted these are rough figures pulled from the internet, and probably applied incorrectly, but you get the point. Basically, after adjusting for inflation, money is worth less now than it was then… but as a country, the US has much, much more money.

    (Agree with LUKEHARRISON and 098765, essentially)

  36. Hey , if we did have a french style revolution, then maybe we could test out those consciousness-after-decapitation questions we are all so curious about!

  37. I once calculated that the cost of the Iraq War alone is more than enough to build a maglev train system that spans the US, assuming $50 million per mile and roughly 4,000 spanning the US going East to West. To span in other directions too, we’re probably looking at same price as the Iraq War.

  38. Except this “bailout” isn’t just a huge pile of money. These are low interest loans from the federal government. Which I find amusing. Why are my taxes providing low interest loans to banks that are offering high interest loans back to the tax payers. Why not cut out the middleman????

  39. It should be noted that a large portion of the total “bailout” figure is in the form of guarantees, which are not nearly the same as payments.

    The numbers are huge, but while most of the items listed above are payments, most of the “bailout” is not.

  40. I think the larger point, aside from illustrating the vastness of the dollar figures associated with the current financial crisis, is that we seem to have a difficult time prioritizing discretionary spending these days. There are trillions available to rescue financial institutions (and likely the auto industry as well, by the time the fat lady’s sung), yet we are stingy when it comes to spending on many things that have a promise of great future yield. Education, health care, crime prevention and the like have tremendous positive effect on society and can all contribute to future growth, yet we can never come up with quite enough to meet our present needs. Bailing out these institutions is vastly more expensive. While it is an admissible argument that these institutions also contribute to the public good by generating wealth, the enormous expense means our return per dollar spent is much lower. We have become penny-wise and pound-foolish.

  41. corvi42:

    except for that time the government lost about 200 billion dollars in the S&L bailout (the only one that begins to compare) — which more than wiped out any gains made.

  42. stoobe – We will only know the true cost of the bailout once this crisis is over. My guess is it will cost 1/5 of the total amount.

    So… only about as much as the Korean War then? And even you admit that’s somewhat optimistic.

  43. Ah, knew I would probably miss a zero in there :)

    Pretty hard to imagine the scope of this thing. That helps clarify a lot. And… wow.


  44. Abel, “as a country, the US has much, much more money.”

    No we don’t that money did not exist. The bailout is dollars that don’t belong to anyone. They print it out of thin air. That IS what monetary inflation means. They are creating money, making all of the rest of the money in existence worth LESS.

    The very problems that the bailout are ‘supposed’ to fix were caused by inflation to begin with!!! And this is just to put it on top of the basic premise that you don’t give money to companies that are going bankrupt. That is a bad investment. Bankruptcy is meant to get rid of companies that are not good at what they do. It creates a moral hazard and rewards them for poor management. This is the very antithesis of capitalism and will spell out doomsday for the dollar and our economy.

  45. Some GREAT comments here… I especially like the one from Bagehi about “cutting out the middleman.”
    So true, but sorry Bagehi, socialism (or is it corporatism/fascism?) is only for the wealthy. You know, socialize the costs/losses and privatize the profits. The problem is the Fed and their fiat money system creating billions out of thin air and the massive debt they create for the U.S. taxpayer; the “sub-prime mortgage crisis” is merely a symptom. Abolish the Fed and you will see our economic woes go away. All we’re doing with this massive bailout is prolonging the inevitable, and it may not work this time around anyway. If you aren’t familiar with what the Fed is and how it works, do yourself a favor and do a web search and start reading. Warning; you WILL get pissed.

  46. Is nobody concerned that the bailouts are just going to make things worse? Did anybody pay attention to what Peter Schiff was saying in the video posted earlier? We are spending beyond our means and printing up bundles of new money to keep the cycle going, which of course just devalues the money of everyone who actually bothered to put money in savings.

    This is not an unprecedented amount of spending to right ourselves, it’s an unprecedented amount of spending to keep the screwed up system in place.

    Mark Frauenfelder seems to have gotten the picture: the rich were getting screwed by their own rampant speculation, and now they want their money back. Republicans, Democrats, and Big Bankers are all responsible for this together. It wasn’t just lack of regulation, the companies issuing security ratings were essentially fraudulent, although you could never get that proven in court. The idea of spreading “The American Dream” of everyone getting a home, also played a significant role. And of course, the willingness of bankers to overextend themselves enabled bad shit to turn truly disastrous. And at this point, it’s hard to believe there isn’t rampant collusion between guys like Henry Paulson and his pals in the financial industry.

    While I voted for Obama, I’m afraid he just doesn’t have the balls to say fuck the lot of ’em, and hold on to your asses, ’cause it’s gonna be a rough ride.

  47. Anyone else wonder whether the intention is to bankrupt the Treasury and discredit the American Republic?

  48. #33 posted by Purly , November 25, 2008 7:52 AM

    “In what way will inventing more debt (and more money) help us all to get out of debt? Eventually we might as well start trading debt as a currency instead of money.”

    Purly, you getting warmer;

    1. This is what the banks do.
    2. This is why we are in this mess.
    3. This is what the banks are being bailed out from.
    4. This will happen again(and again)


  49. The problem is the Fed and their fiat money system creating billions out of thin air and the massive debt they create for the U.S. taxpayer; the “sub-prime mortgage crisis” is merely a symptom. Abolish the Fed and you will see our economic woes go away.

    Holy crap in a crap-basket.

    The Gold Standard???

    Why not the “sea-shell” standard? Or the “carbon” standard? You think assigning arbitrary value to some element on the periodic chart is sound economic planning?

    Or, is it that you don’t like the government “meddling” in your affairs, so if the gold standard gets rid of government “meddling”, then even if it runs the economy of the entire planet into the ground, so be it. Better to rule in the hell of an eternal depression than to submit even one dollar of inflation to the fiat banking system.

    Give me liberty (and a barter-based economic system) or give me death!

  50. 1. This is what the banks do. 2. This is why we are in this mess. 3. This is what the banks are being bailed out from. 4. This will happen again(and again)

    I see that smoking dope makes you paranoid.

    there are currently no governments using the gold standard. They all use a fiat system.

    During the Great Depression every single major currency was forced off the gold standard and onto a fiat system of some kind.

    The “gold standard” only works when everything else is working fine. If the economy starts to nosedive, the gold standard is a ball and chain that will only drag you down further.

    The only people who are shouting for a return to the gold standard are not ecnomists using economic reasons, but instead are people who don’t like the government having any influence over them, and want to remove that influence.

    Fiat systems can be abused, but a well managed fiat system is better than the best gold standard when the economy starts to tank.

    If you want a commodity based economy, then convert all your cash to gold and bury it next to your shack in the woods. If you don’t have any cash, then the government can’t inflate your dollars, and the rest of us can live in reality.

  51. Can’t we just invade some country and take their oil or something to make up for it? Canada’s got oil, right?

  52. Questions?

    Yeah, (1) can you tell me how many times in history a currency based on a Gold STandard had to be taken off the gold standard?

    (2) Since currencies had to be taken off the gold standard over and over again in world history, is there any reason to believe it wouldn’t happen again and again if we returned to the gold standard?

    (3) Doesn’t the fact that currencies repeatedly had to be taken off the gold standard mean the gold standard doesn’t actually work when the economy is tanked?

  53. #35 posted by Marcel , November 25, 2008 7:54 AM

    Can I have a gadget-oriented conceptualization please?

    How many Large Hadron Colliders is it?

    According to Wikipedia the total cost of the LHC was $3.2-$6.4 billion dollars.

    You can get 2000 LHCs for the bailout money… If only there were enough physicists with crowbars to combat the aliens that would colonize the Earth after we fire them all up.

  54. Gold standard? Really? Why not debase further to a Silver standard or copper maybe? How many jewelers out there could mock up a $50.00 gold piece and devalue the base metal? (economic free fall),,,a fiat system is not perfect but dear lord even I have a small forge and jewelers wax and a hammer and anvil!

    I still think it is silly when shop keepers check to see if my bills are real, do you trust them to check the purity of a Gold currency? I am a Luddite at heart but still there has to be a line drawn in the sand somewhere.

  55. Bahhh! Numbers, what are those? Last I checked you’re using ARABIC numerals– sounds like a terrorist plot! We all know Arabic numerals have a “liberal bias”– give me the info in Roman numerals, or better yet, we should come up with our own Patriotic American Numbers, then we’ll know the truth: the bailout only cost “W amerillions” of dollars.

  56. Conservative estimates put the actual cost of the invasion of Iraq at $3 Trillion and an argument can be made that the war has weakened the overall economy by depleting resources, injecting uncertainty and diverting our attention from domestic concerns. Imagine if we had spent 3 trillion building a green infrastructure instead of destroying and re-building Iraq.

  57. As long as people (such as our so-called “representatives”) are willing to exploit the power of government to keep incompetent and/or unlucky rich men from becoming poor, there is no real capitalism, just a window-dressing over exploitation of the many to profit the few. With whatever fancy fluff you want to drape over it – reaganomics, bailout, chicago school economics, stalinism, oligarchy, plutocracy – it’s all the same; the rich and powerful act to prevent their incompetent children and friends from becoming poor, no matter how badly these cronies may have mismanaged their affairs.

    So, why buy the apocalyptic hype? Haven’t the same people who are openly defying the will of the people and wasting our taxes to fund fruitless “bailouts” already proved they are incompetent to run an economy, and shouldn’t we consider doing the opposite of whatever they think is wise?

    I can’t see that there’s ever been any objectively defensible philosophical or economic reason to prevent capitalist enterprises from failing. Capitalism requires obsolete businesses to fail, and preventing such failures is likely to horribly damage any culture that bases its ethical system on capitalist values such as private property and individual social mobility.

    I personally think the best thing for the US economy would probably be to ignore the failure of buggy-whip manufactories, stop profitless foreign military adventuring, and invest our tax dollars in massive public works projects – such as free college educations and sustainable energy infrastructure.


  58. #76 – 3 Trillion dollar Iraq war.

    This estimate comes from the book ‘Three Trillion Dollar War’ by nobel prize winning economist Joseph Stiglitz, and co-author Linda Bilmes.

    Transcript of a great interview of them found here…

    Here is the intro bit:

    “Nobel prize winning economist Joseph Stiglitz, and co-author Linda Bilmes, argue the Iraq war has led directly to America’s current economic crisis. The price of a barrel of oil has quadrupled since the war began and the total cost of the invasion is staggering. Stiglitz and Bilmes describe how they came to the figure of three trillion dollars, and how difficult such an estimate is to achieve in the face of the Pentagon’s accounting procedures.”

  59. Chill everyone. Sure, the bailout money will primarily benefit the very wealthy.

    You can already feel it trickling down, like warm, tinkly golden showers of wealth from on high.

    Oh, wait, that’s just a bunch of bankers peeing on us while they laugh their heads off.

  60. US$3,000,000,000,000.00 to:
    -remove a dictator initially installed by America
    -stop WMD that didn’t exist
    -seize oil that ended in private hands
    -spread democracy by destroying America and Iraq
    -kill 1,400,000 Iraqis
    -kill 5,000 plus Americans

    heck of a job, georgie.

  61. Demidan @70, “the gold standard” doesn’t mean everybody carries gold coins in their pockets and uses them to buy groceries. We would still use paper currency (and non-gold metal coins for small amounts) like now, but that currency would be backed by gold instead of being backed by faith.

    It’s still a questionable idea, for the reasons Greg London brings up, but you should at least have some notion of what the term means.

  62. @74

    Roman numerals – YAY. But we don’t have ones big enough.

    So I propose that we use “W” for “trillion”

    Sounds fair to me

  63. Given how much money the Fed has injected into the system you will need to adjust also the TARP for inflation.

  64. Greg London: I stand by my comments. You must be a banker and/or a republican. Fiat money systems are only as good as the government(s)which back them, and I haven’t seen a good one yet; this is one big reason the WORLD economy is in trouble. Gold isn’t the only thing a gov’t can back their currency with. Besides, you haven’t commented on my take on the Fed. Are you saying the Fed is viable and well-run, and for “We the People?” As long as the Fed keeps churning out fiat money with NO accountability and charging the U.S. taxpayers for the cost (which is why we have the lovely Federal Income Tax) our monetary system is doomed. Example: the Fed prints 100 million in new dollars in various denominations. It costs the Fed about $80,000 in labor, paper and ink. The Fed then turns around and bills the U.S. for the 80k, the 100 million and INTEREST. Congress granted these powers under the Federal Reserve Act of 1913. One reason they did this is so their operating expenses would be permanently be taken care of(currently running at over 100 million per year)and the thinking at the time was that “the banks best know how to handle money.” This massive bailout we are seeing now is simply more of the same we saw in 1987, only on a much grander scale. Comments Mr. London?

  65. Answers to everybody’s questions! Well, the ones I know, anyway.

    GregLondon – the “sea-shell” standard has been tried; it was called “wampum” in my economics classes. The difficulties associated with detecting counterfeiting and the opening up of new sources of one particular sea-shell helped the system to collapse, but it was probably doomed anyway by the coming of Europeans (who had gunpowder, xenophobia, and a willingness to sponsor trade in human scalps). The “carbon” standard is still in use, but deBeers has had to engage in ridiculous amounts of market manipulation to keep it working. Those measures will no doubt eventually fail to stave off the collapse of kimberley-process carbon (aka “diamond”) markets due to the increasingly widespread availability of cost-effective carbon-modification processes and the wide distribution of unmodified carbon sources.

    Demidan – that’s the whole point of a gold standard. Gold is rare compared to other elements, cannot be economically created, and is only destroyed in extreme circumstances such as nuclear annihilation (it does not corrode or evaporate) so you cannot devalue the base metal, the value is inherent in a set weight of gold and is solely determined by the market. You require a dollar’s worth of gold to create a gold coin, and government-issue currency exists only as “branding” to provide some small assurance of quality and weight. Note in passing that you can create 100% perfect counterfeit banknotes with modern technology, anyway. A gold standard is supposed to keep any entity from easily outspending real wealth, which is considered (by some – read on) to be an effective check on governments’ willingness to extend their power at taxpayer expense.

    GregLondon again – it’s arguable whether any currencies have ever had to be taken off the gold standard. Certainly, many times governments have been unable to finance their plans without retreating from systems that inherently limit deficit spending. The UK for example has gone off and on the gold standard several times, and there are many more such examples. Historically, you can readily support the argument that since power corrupts, whenever corrupt powers are unable to finance the continual expansion or maintenance of their power they will seek to destroy any limit on their ability to spend. Unfortunately, the imposition of some other currency does not solve this problem at all. However, you can certainly argue that since corruption is historically inevitable, it really doesn’t matter if you’re on the gold standard or not, does it? You could also argue that humanitarian goals trump sound fiscal policy and justify deficit spending, although there you are making a dangerous supposition that people who can’t manage money are capable of achieving other, more difficult goals. As for your query “Doesn’t the fact that currencies repeatedly had to be taken off the gold standard mean the gold standard doesn’t actually work when the economy is tanked?”, well, that’s also arguable, but the way you’ve phrased it makes it really hard. “The economy is tanked” has no meaning subject to universal agreement, and there’s no strong evidence that any currency ever “had to be taken off” it. There are some very sane and convincing gold-bugs who can make completely logically sound arguments for their point of view. (I will not try to repeat them because I don’t agree with their premises, I prefer barter. Wikipedia has a reasonably good round-up.)

    Nixon took us off the gold standard (supposedly, because previous administrations spent everything in Fort Knox) and put us on the petroleum standard. Basically, as long as the US government was successfully preventing the trading of oil in currencies other than dollars, all energy-importing nations had to maintain reserves of dollars, which guaranteed their acceptability world-wide. The purchasing power of a dollar was thus determined by the value of oil, which in turn was easily manipulated by OPEC production, and the OPEC nations were willing to play ball with US administrations in exchange for propping up various oil-powered tyrannies. The first major oil producers to propose accepting currency other than dollars for oil were Saddam Hussein (who proposed a petro-euro… but then something happened to him and I haven’t heard from him lately…) and Hugo Chavez (who was immediately thereafter deposed, but the peasants put him back in power, D’OH!).

    The Bush II administration has not been able to maintain the global diplomatic and military dominance that has sustained the petro-dollar, so all the world’s powers are probably going to need to dump their reserves into the market. The very prospect of this can drive the value of each individual dollar down, and it can only get worse if dumping actually starts happening on a large scale. The Bush cronies – who are currently rich and powerful – are acting like they believe it is soon going to require a wheelbarrow full of benjamins to buy a loaf of bread (and after all, we’ve seen that happen to other nations) so the only way they can remain rich is to massively increase their dollar holdings at the public expense. The best part, for them, is that they can eventually “pay back” the debt with devalued dollars after the Chinese and others give up and just dump their trillions. In the meantime, they use the bouncy market to convert current-value dollars, milked from the public coffers, into non-dollar holdings like battery factories, agro-business, mining, etc.

    Wanna see something interesting? Look at the “official” price of gold and silver – the price you’ll pay for a piece of paper that says “I own an ounce of metal stored somewhere in somebody else’s vault” – and compare it to the price of gold and silver on eBay… only auctions where you’ll actually get shipped some physical gold. I’m not entirely sure what it means, but go look for yourself.


  66. @ Purl , #33:

    > In what way will inventing more debt (and more
    > money) help us all to get out of debt?

    Obviously it makes it much harder, but the size of the national debt isn’t the problem right now. It’s the lack of retail credit. To the other poster who asked who’s going to benefit from this money: the benefit has already been felt. You felt it, along with the rest of the country, over the last eight years. Obviously the quality and quantity of good time-ness varied across the country, but IMO that’s really rather a detail. The elite super-rich either spent their cash, saved or invested it (which are the same thing in effect.) Either way, others in the economy felt the benefit of it; undeniably though a very small number of people had / have private jets, a dozen mansions, limos, permanently reserved hotel suites and a household staff, though, and obviously those are the ones who got most enjoyment from the cash… assuming someone with 10,000 times the squarefootage of real estate in their name than I have attained ten thousand times more pleasure from theirs than I do from mine… (Hmmm, doubtful, although presumably they either believed they DID, or expected to do so, or… ack. My brain hurts. That’s twice tonight :/

  67. I think the moon landings were conducted by the U.S. Air Force before the formation of NASA so they wouldn’t be included in NASA’s lifetime budget.

  68. the point is that really abstract long shots like space programs and the LHC don’t happen unless you have an sophisticated economy capable of sustaining the essential lie.

  69. The $7.7 trillion that we are all referring to as “bailout money” has some real meaning in our economy. That figure represents money that Freddie and Fannie Mac, big banks, and insurance companies owe. Right now, their creditors are uncertain whether they can pay that money back.

    Even though the individual creditors all are only owed little pieces of that money, they can’t take the risk that they’ll be last in line and come away with nothing. Therefore, for that debt to retain *any* of its value, confidence has to be restored that *all* of it can be paid back.

    Although it is a distasteful option, at this point having the government guarantee that $7.7 trillion will not disappear is the best option. If the companies get on their feet, no one loses in the long run.

    If we don’t do anything, though, it is almost certain that creditors will have to fight over the remains of these companies. That would mean that a larger fraction of that $7.7 trillion will be lost. Worse, though, would be the lingering lack of confidence in our system. That would last for last for years, making it impossible to obtain loans to invest in the infrastructure (new jobs for recent graduates, factories, roads) that our economy needs.

  70. 7 trillion fake money printed out of nothing means I will be importing a TON of stuff next year from US after dollar tanks. Thank you so much.

  71. MercuryTransit: Well inflation is a compound interest formula so it’s exponential rather than mulitplicative.

    Also, the cost differential on things like the Louisiana purchase isn’t just the inflation, but the new development that’s been done on the land over the last 200 years or so. The total cost of buying the Louisiana Purchase now is much greater than the inflation-adjusted value of the unimproved land. And different commodities (Land, Silver, Gold, etc.) have inflated at different rates over time. So is the inflation formula based on the mean inflation rate of the affected commodity (land for the LP), or is it based on the general cost of living inflation rate?

    Also, where are we getting $4.x trillion as the cost of the bailout? I’ve never seen that figure, although if you add up the $700B + the individual costs of some of the other “investments” that the government has made, I’m sure you can get to $2 Trillion pretty easily.

  72. avran@84 ,,,,uh, yes it does, it traditionally meant gold coinage, and the ability to exchange paper currency for gold at a bank. (NICE CAPS BTW)

  73. #88 Anonymous grr,,,, I know what I am talking about not you obviously, Debasing gold,,,hmmm how about a Gold alloy? that is how you debase gold. that has how(other than light weight coins) gold has been devalued throughout history.

  74. So, Charlie, I see the logic in your reasoning, and I agree, a corrupt government shouldn’t have access to something like your federal banks as it is, basically, a license to print free money. Bad idea.. But, do you think that scientific and social progress could be made on something like the gold standard? Or barter, for that matter?

    What system is there to insure that the value of gold doesn’t crash? Say, a discovery of vast gold fields in Antarctica under the melting polar ice. wouldn’t that just bring up the same problem all over again? How would I buy a new iPod on a barter-system?

    Don’t you think that the easier solution would just be to create a set of checks and balances that insured something like this couldn’t happen?

    Its always been my opinion that a pure anything-system can’t work (pure socialism, communism, capitalism, libertarianism, etc.). You need a little of everything to maintain large societies. The secret lies in maintaining the right balance.

  75. So, will we see T-Bonds get the junk rating they deserve from Moody’s and S&P before or after Obama’s inauguration? What a lovely Christmas present that would be …

  76. Greg London: I stand by my comments. You must be a banker and/or a republican.


    God as my witness, that is the absolute first time someone has accused me of being a Republican.

    While we’re taking wild-ass guess about political affiliations, I’ll guess that you must be a libertarian, and objectivist, or some such. At the very least, I’ll wager money that you identify as an “independent third-party” voter of some kind or other.

    Fiat money systems are only as good as the government(s)which back them, and I haven’t seen a good one yet;

    Dude, look in the mirror, your gold standard failed every time there was a depression. Every time there is an economic problem, in any nation on a gold standard, the nation had to take their currency off the standard. We had to do it several times, one of which was during the Great Depression.

    The Gold Standard doesn’t work when the chips are down. And saying the Gold Standard is safe as long as the economy is good is like saying the Pinto was safe as long as someone didn’t tap your backside in traffic. It is meaningless.

    Really? Is that your learned economic opinion? We’re in a depression/recession because the world is not on a gold standard? Seriously? Have you completely drunk that koolaid to the point that you believe your own mythology?

    I’m pretty sure that a lot of the problems of teh current downturn is due to deregulation of mortgages causing banks to approve mortgages to people they shouldn’t have approved. THen those mortgages become assets that get sold off and purchased by various investment groups, and then when those mortgages start going south because the people who borrowed the money can’t pay it back, then all those groups that are holding those assets in the form of mortgages start going south. When they go south, then credit starts going south. When credit goes south, the economy goes south.

    That’s got nothing to do with “gold”.

    Gold isn’t the only thing a gov’t can back their currency with.

    You think that if you can walk into a government bank and exchange your paper for gold, aluminum, oil, or some other physical commodity of some fixed quantity, that that suddenly solves an economic system involving the interactions of billions of people on the planet?

    All you’ve done is solve the problem for yourself, said screw the other people, and justified the whole thing by painting twenty gallons of economic handwavium over the problem and saying “yeah, it’ll just work out”.

    No. It won’t. History shows the gold standard repeatedly fails. To insist that it is some magic elixer for the failed economy now when it has NEVER worked in a failed economy before, is to take a long cold drink from that magic koolaid that says your opinion of how econmies work somehow overrides all realities of how economies work.

    Besides, you haven’t commented on my take on the Fed. Are you saying the Fed is viable and well-run, and for “We the People?”

    I don’t have to comment about your opinions of the Fed. Your opinions are worthless. They are not backed by gold or by any fiat system of value. Me, I simply point to the facts of history, and the fact is that history shows countries on teh gold system REPEATEDLY going into recessions and depressions and those countries having to respond by taking their currency off the gold standard until their economy turns around.

    Your opinion about the fed doesn’t trump the facts of history. Your conspiracy theories about the Fed doesn’t change the fact that history shows that your proposed solution is based on your mythology of the gold standard, not the actual history of the gold standard.

    I don’t have to comment on your opinion about the Fed because it doesn’t change the facts. Facts beat opinion every time.

  77. (which is why we have the lovely Federal Income Tax)

    MIssed this. You must be one of those ntjb libertarians (as opposed to the not-insane ones).

    You’re presenting smoke and mirror reasons to make it look like your opposition to fiat money and to income tax are all based on economic reasons. They’re not.

    You’ve memorized a bunch of random stuff and spew it out when a debate comes up but you’re not saying anything that shows an understanding of the economics as a system. You’ve just got a bunch of “yeah, but”s that you throw out here and there.

    The real reason you don’t like fiat money systems and federal income tax and so on is because you hate government. Any government really. Power corrupts and absolute power corrups absolutely and all that. Therefore our government is no different from Darth Vader’s Empire. And so you want to get rid of the fiat system because you see that as feeding this evil government power. And you want to get rid of the income tax because you see it as feedin this evil power. You hate government. Any government.

    To which, I’m sure you’ll reply:

    “I don’t want to abolish government. I simply want to reduce it”

    Right, but the second half of that statement is this:

    “to the size where I can drag it into the bathroom and drown it in the bathtub.”

    Go buy a shack in the woods, convert all your dollars to seeds, farm implements, and fuel, and live in your little survivalist independence compound, and the rest of us will live in reality.

  78. A friend told me they that Bill Gates $50 billion (at the time) was just incomprehensible. I told him, imagine waking up one morning to find out you had lost 90% of everything you owned, if you were Bill Gates you would still have $5,000,000,000 left. Now imagine a room with 100 Bill Gates, maybe even 150 before this is over.

    Worldwide we are talking hundreds of trillions of dollars has changed hands or been devalued. Every capital market in the world has lost approximately 40% of its value in one year! The run up to this disaster siphoned trillions of dollars into a very few pockets. Some hedge fund managers, who saw this coming early on, have realized billions in salaries. The top 50 took home 29 billion, the highest was over 3.7 billion USD.

    One manager — John Paulson of Paulson & Co. — earned $3.7 billion last year, which management consultant Peter Cohan pointed out means Paulson in 2007 made in one hour 30 times what the median family made all year.

    Driven in part by fees hedge fund managers are making, income inequality in 2007 was at the highest level since 1928, the year before the Great Depression began.

  79. what I stated about the Fed was fact, not opinion; educate yourself by reading and viewing the vid clips on this site (snip)

    (googling freedom to fascism)

    wikipedia’s entry

    “Some of the premises of the film include:”
    “Federal income taxes are unconstitutional or otherwise legally invalid.”

    Holy crap, you drank the koolaid then swallowed the bowl it was being served in.

    also from wikipedia: “The film has been critiqued as factually dubious by some reviewers.[4] It has, however, developed a cult following.”

    Now, I’m not an automatic defender of wikipedia’s accuracy (mostly because the next thing you’ll want to do is go to that article and LIE LIKE A RUG about just how TRUE this film REALLY IS), but I gotta admit when I read “cult following” I just had to say:


    The edit history page is here. I assume I will see a new editor in the history (you or one of your meat puppets) sometime soon.

    The inaccuracies are pretty obvious that this guy doesn’t care about reporting anything in context.

    Heh. cult following. Anyway, you were saying something about the infallibility of your so called truth?

    I’ve got history. You’ve got some nutjob cult leader who’s trying to make some money selling conspiracy theory stories and you saved up all the box tops from your cereal to buy the secret decoder ring.

    Look. you’re obviously wedded to your mythology far more than you’re interested in an objective, non-conspiracy-theory version of history.

    Jst s y knw, lthm s n lngr vlbl n crdt.

  80. A review of “freedom to fascism”.

    I’ll just get this out of the way: There are a lot of stupid people in this world, and some of those stupid people are going to see America: From Freedom to Fascism and buy into its half-baked, hole-ridden, libertarian rhetoric about the alleged illegality of the federal income tax. And that’s a shame, if for no other reason than it’ll be a small defeat for logic.


  81. half-baked, hole-ridden, libertarian rhetoric

    also from the review: it’s only up for debate among anti-tax conspiracy theorists who have anarchist, anti-social tendencies

    Oh, that reminds me, you never responded to my guess of your political affiliation:

    I’ll guess that you must be a libertarian, and objectivist, or some such. At the very least, I’ll wager money that you identify as an “independent third-party” voter of some kind or other

    so…. libertarian? objectivist? Yes?

  82. Ww, y hv lt f ngr, hh? Sr thr mght b sm xggrtns nd nccrcs, bt th hstry f th Fd s ld t prtty clrly (nd rltvly ccrtly) n Rss’s flm. D y ls nt blv JFK std p gnst th Fd nd ws klld bcs f t? Y prbbly ls by nt th “ln gnmn” thry s wll. ‘v sn th rgnl Zprdr clp, nd Knndy s ht frm th frnt-rght. wn frrms nd hv bn t hntng nd trgt shtng mny tms, nd knw tht whn bllt hs vscs trgt/bng, thr s smll spry frm th frnt, nd BG hl t th bck nd th bllt mshrms(vn smwht wth fll-mtl jcktd mm); ths s xctly wht hppnd t Knndy. stnd by my ssrtn y r prbbly ffltd wth th bnkng, brkrg r mrtgg ndstry, (prbbly th mrtgg r pssbly rl stt mrkt snc y sm t hv s mch tm n yr hnds) nd stnd t prft frm th prsnt blt, nd hv prbbly prftd n th pst frm th blt n 1987 f th S&Ls nd pssbly frm th NFT blt whn Cnd nd Mxc cldn’t(r wldn’t)py thr shr(s). ll knw Grg, s tht hv bn dctng myslf n pltcs nd r ft mny systm nd th Fdrl Rsrv fr th pst svrl yrs (nstd f drnkng th cld)nd ll s s crrptn nd grd, nd crrptn nd grd bng PSSD NT LW. Hw s ths gd thng nlss y r prftng frm t, nd/r prtctd by t? D y dny th fct tht th Fd s md p f PRVT BNKS tht prnt p crrncy wth N ccntblty nd chrg th .S. fr t t fc vl pls ntrst? t lst rbt ths f y cn, bt y CNNT bcs t s FCT. f y dsgr, DCT m wht s rlly gng n wth th FD prntng p r crrncy nd chrgng th .S txpyr fr th fc vl pls ntrst. Hw DS t wrk, Grg? BTW, gt sm ngr mngmnt thrpy.

  83. Wow, you have a lot of anger, huh?

    Dude, “bwhahahaa” means I’m laughing.

    Do you also not believe JFK stood up against the Fed and was killed because of it?


    I think we’ve established that no further progress can be made with our discussion.

  84. Demidan, it’s extremely easy to detect tampering with elemental gold. There are simple, cost-effective means of determining purity that were developed thousands of years ago (Eureka!, common solvents, etc.). You can make fake gold, but you can’t make undetectable fake gold. This is why uber-goldbugs want real gold coins and not “paper gold”. You simply can’t ever “debase” a gold coin system, but you sure can play games with a gold certificate system, right up until there’s a run on the banks and Fort Knox can’t cover their paper with raw metals.

    Blaatann, although “scientific and social progress” certainly has been made on the gold standard, at least in wealthy cultures, I’m pretty sure that a pure barter system doesn’t scale elegantly past one’s immediate neighborhood. That being said, I think that barter is better for friends and neighbors, because barter is a good way to foster local self-reliance while simultaneously limiting taxable economic activities, both of which appeal to me as a check on government power and a way to decrease pollution caused by unnecessary shipping. I wholeheartedly agree with your insightful remarks about checks and balances, and the dangers of applying “isms” to large systems. The steady elimination of the built-in conflicts that the US government once prominently featured – such as the guarantee of having presidents and vice-presidents from opposing parties, the inability of the executive branch to declare war, and the inability of the representative branch to wage war – seems to be leading us ever closer to self-imposed tyranny, just as Plato and van Vogt predicted.

    GregLondon, I tend to agree with your conclusions, but that disturbs me since you are misrepresenting historical fact and conflating cause and effect. I do not believe that the sun goes out every night simply because I can no longer see it; I do not believe that a gold standard is bad because populist governments always abandon it whenever the mob howls for largesse from the public coffers. I can see many advantages to an economy based on an immutable element in limited supply, even though it is not a panacea for bad government or mismanagement of resources, and any such economy would crash if the limits on supply were suddenly lifted (as Blaatann points out).

    I don’t believe the US can convert back to gold coinage simply because I don’t believe our existing volume of trade can be sustained by the amount of gold currently above ground. 99% or more of all gold ever mined is still in circulation, according to the goldbugs. A “paper gold” system (such as Ron Paul advocates, which the USA had before Nixon) is no less subject to manipulation than so-called “fiat currency” so I don’t see any point in it.

    And incidentally, Greg, I myself do convert my dollars to seeds, farm implements, and fuel, along with a few other things. I can’t feed my kids dollars, either paper or gold. You might scornfully call my home a “little survivalist independence compound”, but I don’t feel that I’ve lost touch with reality – quite the opposite! I don’t want to argue with you about it, though; if you hate intentional self-sufficiency you’ve got every right to your own opinion. Some people like anchovies and iPods, I like live music and fresh brook trout.

    I promise, no more long posts this week!


  85. Thank you greg and acacia for providing amusement, and can we please get a 9/11 truther in here next, it’s been a while since I’ve laughed at one of them.

  86. Agent86,

    I’ll be here all week. Try the veal.


    Happy Thanksgiving everyone,
    including you, acacia.

  87. Greg:

    Our glorious experiment in debt-based fiat currency and fractional reserve banking, 95 years old this December 23, is coming to a conclusion. We shall see who is “living in reality”, you with your paper money, or me with my gold.


    If you think love of money is the root of all evil, wait till you see what love of paper money gets you.

  88. Acacia, Greg London is neither a banker nor a Republican. You’ll have noticed he’s a stubborn man. I’ll also vouch for his being an honest one.

  89. Shit one, I missed all the fun. I’m hereby seconding 86’s request for more sport!

    (also, it’s thanksgiving? missed that too.. enjoy!)

  90. Greg, I don’t so much mind the thorns, but you should leave the tiny barbs off the ends of them.

    I’ve taken to using “stick-figure Libertarianism” because it conveys more information and is less harsh. As in, “Marko, if you think this all comes down to paper vs. gold, you’re running on stick-figure economic theories.”

  91. I didn’t have to work today, so I can comment. Here’s another thing I simply can’t wrap my brain around. In the current economic meltdown The Fed ok’d a 3% loan for JP Morgan Chase to be able to buy out/take over Bear Sterns. This is circular logic and a conflict of interest at best, criminal at worst. Why? Because JP Morgan Chase IS one of the banks which make up the Fed! Isn’t this a little (or a lot) like the fox guarding the henhouse? If I’m not seeing this right, then someone please explain to me how it works (but I think I have it right).

  92. “Marko, if you think this all comes down to paper vs. gold, you’re running on stick-figure economic theories.”

    Ah. Yes. Name-calling. How convincing.

  93. Teresa: You’ll have noticed he’s a stubborn man.

    I’m trying to make some progress in that area. I’m not sure what I keep missing.

    I’ve taken to using “stick-figure Libertarianism”

    I tried to convey a similar distinction with my “(as opposed to the not-insane ones)” caveat. “stick figure” works a lot better though. (It’s a dessert topping and a floor wax.) I’ll keep that in mind for future use.

  94. populist governments always abandon it whenever the mob howls for largesse from the public coffers

    Ah. This is the “drown it in teh bathtub” point of view coming across. The main reason these people want to drown the government in a bathtub is because they see government as a welfare organization, they see themselves as “rugged individualists”, they see anyone getting any benefit from the government as NOT being self sufficient, and they hold that if they are self sufficient, then goddammit, everyone else should be to.

    But they are forced to pay taxes to this welfare state against their wills. And they are forced to accept fiat money systems against their wills. And they are forced to sit and watch all these welfare queens driving around in their cadillacs while they sit there with their seeds, their tractors, and try to eek out a self-sufficient living.

    And it is so unfair. It isn’t right. So they want to stop it.

    They argue that federal income tax is unconstitutional, not because they are constitutional lawyers, but because they don’t want to pay taxes that support a welfare system.

    They argue that the fiat money system is broken and that the gold standard (or some other version) is a much better system, not because they are economic experts, but because they don’t want the government to be able to create money to support a welfare system at the expense of causing inflation.

    They stand against what they see as enablers of the welfare state. But they don’t simply come out and admit that they are against welfare (largesse). They have to wrap it up in a faux legal argument about the unconstitutionality of federal income tax. They have to wrap it up in a faux economic argument about the superiority of the gold standard.

    In reality, these people do not care whether or not Federal Income tax is legal or not. They don’t want to pay taxes to what they view as a welfare system. In reality, these people do not care whether or not the Gold Standard is a better system or not. They do not want the government they view as a welfare system using the fiat system to create new money for what they view as welfare projects.

    These people don’t support what they view as welfare, but can’t stop it on those grounds. So they come at it sideways, pretend to be constitutional or economic experts and argue for changes to the system that they believe would reduce the capability fo the government to continue what they view as a welfare system.

    They want to reduce government in size so its small enough to drown in a bathtub, not because they hate the government per se, but because they hate the part of the government they view as a welfare system.

    Did you ever notice: It’s always people who view themselves as the “rugged individualist” who are arguing the unconstitutionality of federal income tax, not constitutional lawyers. It is always the “rugged individualist” who are arguing against the fiat system and arguing for the superiorty of the Gold Standard, and much less is it actual economists.

    I don’t have a problem with “rugged individualists” per se, either. It’s when a person so much self identifies as a “rugged individualist” that they have no space in their worldview for society. I’m talking about the ones who hold as true that there is no such thing as society. These are the sorts who are invariably arguing for the unconstitutionality of federal income tax and the evils of fiat money.

    They’re not arguing it because they understand the sytems and believe their system is better. They are arguing it because in their worldview, there is no such thing as society, that we’re all nothing more than individuals who happen to live next door to each other, and anything more than that is welfare. And taking away federal income tax and taking away the fiat money system and forcing the governent to adopt a fixed gold standard is there way of tryign to stop what they view as a welfare system.

  95. Did you ever notice: It’s always people who view themselves as the “rugged individualist” who are arguing the unconstitutionality of federal income tax, not constitutional lawyers. It is always the “rugged individualist” who are arguing against the fiat system and arguing for the superiorty of the Gold Standard, and much less is it actual economists.

    It sure is fortunate that we’ve had actual economists at Treasury and the Fed running our banking system for the last several decades. If not for them, things might get out of control, to the point where we’d have an economic crisis or something.

  96. Marko, did you ever notice that the US has a long history of economic crisis during the time the country WAS on the Gold Standard?

    1819, 1837, 1857, 1873, 1893, 1907,
    1953, 1957,

    1960’s was when we started to get off the gold standard completely.

    Just doing a ballpark scan through the numbers, thats a recession or economic crisis of one sort or another about every 20 years. The gold standard didn’t protect against those crisis, including the Great Depression which went on for a decade.

    Historically, the gold standard failed to protect the economy.

    But that’s the problem. YOU DON”T CARE if the Gold standard prevents a financial crisis or not. History clearly says it doesn’t. So why do you defend it? Not because you think it’s a better system for society as a whole, but because you think there is no such thing as society, and anything trying to masquerade as society is either some form of welfare or some form of conspiracy, or both. And because you see fiat money and federal income tax and other such things as nothing more than outcomes of some conspiracy and as enabling the contiuation of the conspiracy.

    Acacia and his Kennedy assasination conspiracy theory are a fine example of this. He doesn’t oppose fiat money because he thinks the gold standard is better for the system, he opposes fiat money because he thinks the Fed is some sinister shadowy entity who killed Kennedy, and of course the way to stop the Fed is to stop fiat money, so guess where acacia stands on fiat money???

    I’m sure if we came up with a psych profile we’d find a statistically disproportionate number of survivalists, conspiracy theorists, and so on, all proposing the end of fiat money and the Fed and a return to the Gold Standard.

    Do you think there is some shadowy conspiracy behind Kennedy’s assasination?

    Do you think there is some conspiracy involving the US government and 9/11? That flight 93 was shot down by US warplanes? That the Pentagon was attacked not by an airliner, but by a missile or something launched by a us warplane?

    Do you think federal income tax is unconstitutional or somehow illegal?

    Do you think there are secret organizations wielding power and controlling the US government from shadowy corners?

    Do you think that getting rid of fiat money or federal income tax will somehow stop these shadowy organizations?

    As far as the current economic crisis goes, I believe that it is mostly a problem with credit availability, and that is something that can be fixed by government intervention, central banking, fiat money, and so on. So, I believe it is quite possible that this economic crisis might turn around by the end of 2009. Next christmas should be better than this christmas.

  97. Greg, say what you will about how I think the Fed is a “shadowy organization.” Yes, I think they are are pretty shadowy, there are 300 core members who even the president doesn’t know the names of, and they print “our” currency with NO acountability, and they bail themselves and their buddies out with LOTS of fiat money almost at will. Now, go ahead Tell me I’m wrong about the fed.
    The who and why inre to who killed Kennedy is debatable, but there were a lot of powerful people pissed at him, that much we DO know. I don’t really care if you subscribe to my point of view or not really, but I saw the uncut Zapruder film in the mid seventies, and it is obvious Kennedy is hit from the front right. Maybe Oswald was shooting at JFK as well (and I personally believe he was) but the killing shot was from the front.
    As far as 9/11, I don’t buy into the whole gov’t conspiracy and subsequent cover up theory, but I do think it was likely that the gov’t was caught flat-footed and tried to cover THAT up, instead. Still, there are many inconsistencies with the official 9/11 commission’s findings, and BTW, what the heck DID hit the Pentagon anyway? Why all the secrecy immediately covering up the pieces of whatever it was and immediately hustling it all away? Why won’t the gov’t allow us to view the video of it hitting the Pentagon? There were security cameras all around, and you must admit, the hole the “airliner” made in the Pentagon WAS rather small with no wing marks. As far as flight 93 being shot down by the U.S. gov’t/Air Force, why wouldn’t that be posssible? It certainly posed a serious threat, so I would EXPECT the Air Force to shoot it down! Also, what happened to all the debris? All there was in PA was a hole in the ground, no seats, no body parts, no clothing, no pieces of airliner… WTF? Do you not question these things? Why was bldg #7 “pulled”? Do you actually accept the gov’t version of all the events of 9/11 at face value? As you said to me a few posting ago, “wow.”

  98. We’ve had booms and busts both before and after adoption of a completely fiat currency in 1971.

    The ostensible reason for creating the Federal Reserve System was to eliminate such booms and busts, and stabilize the value of the dollar. Neither goal has been realized in the 95 year history of that institution.

    Compare pre and post Fed economies. Have we had fewer, or more, boom/bust cycles per unit time, since Congress handed over the power to create money to a private banking cartel? How do these booms and busts compare in duration and severity? Did any of the pre Fed busts rival the severity of the Great Depression?

    What do you think we are entering now….a recession, or a second depression? Can you predict which is beginning now? If you can’t make such a prediction using your favorite economic theory, is it even possible to manage the economy? If not, why create institutions to try to do so?

    We left the gold standard in steps, beginning with the creation of the Fed in 1913, then with FDR’s confiscation of domestic gold in 1933, and finally with Nixon’s closing of the gold window in 1971. And yet still, the central banks of the world continue to hoard gold. Why? Do they actually think this ‘barbarous relic’ has some value as money? If not, why hoard it?

    If the world’s central banks keep gold reserves, shouldn’t you? Has hyperinflation any historic precedents? Do fiat currencies ever become worthless? Do governments always balance their budgets? If not, do they sometimes print more fiat currency to pay for their deficit spending? Is the US doing that now?

    What is the price of the following items over time, expressed in dollars, and in gold or silver: A bushel of wheat, a barrel of oil, a loaf of bread, a car, a house, a suit of clothes, the Dow Jones Industrial Average? Which currency holds value better over time?

    Do you think the flat tax is a good idea? Is inflation a progressive or a flat tax on savings?

    What is the role of fractional reserve banking in creating boom and bust business cycles? Has there ever been an economy based on full reserve banking? If so, did it experience booms and busts?

    Is the dollar a unit of value, or a unit of debt?
    Does holding dollars expose one to counterparty risk (risk of default)? If the US government goes bankrupt, what happens to the value of the dollar? What has recently happened to the value of the Icelandic krona?

    Does holding gold and silver expose one to counterparty risk?

    Good luck to you!

  99. acacia: what the heck DID hit the Pentagon anyway?

    You only prove my point that your position against the federal reserve has everythign to do with whatever conspiracy theory you have about it in your mind.

  100. “You only prove my point that your position against the federal reserve has everythign to do with whatever conspiracy theory you have about it in your mind.”

    WTF? That doesn’t make any sense or prove anything, Greg. Are you saying that I think the Fed is behind 911? You were the one who originally brought up 911; I’m just commenting that the gov’t may have bungled things inre to 911, not the Fed. Besides, the Fed is NOT the gov’t; it is a cabal of PRIVATE banks. Why would I think the Fed had anything to do with 911 unless I thought the Fed WAS the gov’t? The Fed is about as FEDERAL as Fed-X, even YOU should know that!

  101. if often wondered; if the world is run by a shadow government of secret elite, why don’t they make it a paradise? Wouldn’t they be all the wealthier if their cattle were wealthy too?

  102. marko: What do you think we are entering now….a recession, or a second depression? Can you predict which is beginning now?

    I made a prediction in my last post to you. I think this current crisis is caused by a credit crunch. Not all recessions and depressions have been caused by credit crunches. Credit crunches are something I believe that intervention of the central bank/government can fix. Buying up risky mortgages and sellign them long term, with the potential for a government profit, is a good solution. Corporations are generally short-sighted, thinking only of the revenues for the next quarter and for the end of the year. These bad mortgages may only become profitable and non-risky after several years.

    If the government buys up these assets, it removes the risk from short-sighted corporations. If the economy recovers, then those assets shouldn’t lose value because most of those mortgages shouldn’t default. At which point they are no longer risky, and the government could potentially sell them at a profit, or at the very least, sell them at a loss, but recover a lot of the money used to buy them in the first place.

    Which means the “cost” of the bailout, after those assets are sold off by the governmetn is a lot less than the initial “cost”.

    My prediction was that whatever metric you use to measure the commercial movement for this christmas season of 2008, I predict that that same metric for christmas 2009 will be better than 2008.

    I see this as a relatively short term crisis (a year or so) that can be fixed by direct government intervention (i.e. buying short term risky, long term less-risky assets), potentially at a government profit over the long term.

    Oh, and I found this link:

    It’s dated May 2008 and is titled “What if we’d been on the gold standard?”

    “Suppose the Fed had been dutifully implementing that procedure in August 2007, when there was a sudden increase in doubts about the soundness of key financial players. A savvy speculator would then reason as follows.”

    “The U.S. has promised that it will continue to convert dollars to gold at $600 per ounce. But that will require them to raise interest rates at a time of potential financial panic, and I don’t believe they have the stomach for that. I’m going to ask for my dollars in gold right now, in the guess that they’ll abandon this policy shortly. When they give up the standard, my gold will have appreciated, and I’ll have a handsome profit.”

    “And how could the U.S. respond to such a speculative attack? … we drive interest rates higher and watch the deflation mount. Outstanding debt that is denominated in dollars becomes more and more costly for people to repay, and we’d see a really impressive level of bankruptcies and business failures. The cycle would continue until the politicians who promised to stay on the gold standard are driven out of office and the deflation spiral could finally be ended by the new leaders choosing” (to get off the gold standard)

    “I know that the gold-standard bugs (this means you, Marko and acacia) are howling at this point, “but that’s not how a gold standard would actually work, because…” But what I just described was not a hypothetical scenario. Instead, in my opinion it’s a pretty accurate description of what happened in the United States during the Great Depression of 1929-33″

    So, there you have it. Attempting to enforce the gold standard against speculators caused the government to drive interest rates up to keep the price of gold in dollars in line with the price of clothes and other products in dollars in line with each other. That only made the Great Depression worse.

    Let me just repeat that for you gold bugs:

    Trying to force the US Dollar to remain on the Gold Standard during the Great Depression required interest rates to be raised to attempt to keep the dollar price of gold on par with the dollar price of all other goods. And raising interest rates made the Great Depression worse.

    It didn’t make it better, it made it worse.

    I know at this point, you’re screaming and howling and won’t actually respond to this direct point with anything other than wild ramblings that vear far off topic, but that’s because your not fighting for the better system.

    You’re fighting against whatever conspiracy you believe in your mind.

    Also from that same page: A 1991 research paper by Ben Bernanke and Harold James noted the very strong correlation between when a country abandoned the gold standard and when it began to recover from the Great Depression.

    Again, attempting to hold a currency to a Gold Standard made the Great Depression worse for that country the longer it tried to hold it.

    As for the rest of your questions, I answered some of yours. You haven’t answered any of mine.

    Do you beleive there is a conspiracy going on around the Fed? Kennedy’s assasination? The US Government? 9/11?

    Are you an objectivist? A libertarian? Ever vote for a third party presidential candidate?

    Would you consider yourself an “individualist”? That there is no such thing as “society” other than individuals? Do you have a stockpile of food, guns, water, or any other item which might be considered “survivalist” stock?

  103. acacia@135, antinous flagged it. If you think the Fed is a “cabal”, then you’re relating to it as a conspiracy theory, and conspiracy theories can never be disproven to a conspiracy theorist.

    Any evidence that attempts to disprove the conspiracy, can be explained away by simply widening the circle of the conspiracy. That’s how conspiracy theories reinforce themselves.

    You hold a belief about the Fed that is unfalsifiable. You will bend all evidence to fit your conspiracy, and you will never question the conspiracy itself. So there’s no further point in talking to you is there? There is no way to convice you that the Fed is not a cabal, a conspiracy, a shadowy entity, yada, yada.

    So, even if a fiat money system is theoretically better than the Gold Standard, you will view that through the lense of “The Fed is a cabal that must be brought to an end, and the Gold Standard will bring it to an end, therefore the Gold Standard is better than any fiat system.”

    I can’t argue against that because it’s based on this conspiracy theory about the Fed. It’s a faulty premise, but you will do anythign to refuse to address this premise.

    You keep arguing from the premise. I keep trying to tell you that your premise is faulty.

  104. Greg, I haven’t widened my argument/conspiracy theory; I simply made some statements and I stand by them. For example, how can the Fed give a loan (and a low, 3% loan at that)to JP Morgan Chase to aquire Bear Sterns when JP Morgan Chase IS the Fed? You haven’t answered my questions either, Greg. As far as calling the Fed a cabal, maybe you don’t agree with my choice of words, but this is how they operate, as they have NO accountability for the currency they print, and supposedly the Fed turns it’s profits over to the Treasury, but if there is no accountability for how much currency they print and exactly what they do with it, isn’t calling anything the Fed gives back to the treasury a “profit” really a farce? So yes, I would call an organization which operates in this manner a “cabal.” And Greg, what do YOU really know about the Fed? You know what you’re told by the MSM and what you read on Wikipedia, and that’s about IT, right?
    As far as my political affiliations, if you really want to know, I voted for Obama and am of course delighted that he won! I am FAR from being a libertarian, as I consider them “republican light” but I do happen to agree with a couple of their views. You did get one thing right, I am a registered Independent; I voted for Clinton in ’92 and ’96, but shortly after voting in ’92 I felt Perot had gotten a raw deal and that’s when I became an Independent. Still, I haven’t liked any of the third party candidates since Perot, so I haven’t voted for any of them. That makes it ZERO times I have voted for a third party candidate.
    Oh, one more thing; you’re also wrong about me being some type of survivalist; I live in town, have a wife and kids, dog and cat and a regular job. I own firearms but haven’t been out shooting in several years and haven’t hunted in over 30 years. Hell, I haven’t even been fishing in the past 5 or 6 years! Anyway Greg, it’s been fun but now I’m done. I’ve answered your questions the best I could, and I honestly can’t tell you that I think the fiat money system is better than the gold standard, but I will say you have made some good arguments. Still, I will refer back to the poster who said that the gov’t has PHD economists employed by the score to help run this fiat money system, and look at the wonderful job they’ve been doing! Have a good life Greg, and try to keep an open mind!

  105. when you don’t use paragraphs it hurts my eyes. Something about muscle strain trying to keep the place in the block of text.

  106. Greg: If you put ~15% of your assets in gold or other similar commodities, then it really wouldn’t matter who’s predictions are right, would it?

  107. Greg: If you put ~15% of your assets in gold or other similar commodities, then it really wouldn’t matter who’s predictions are right, would it?

    Actually, that ignores the fact that the value of a commodity is primarily a function of the supply and demand for that specific commodity.

    If we were to find a massive gold mine that had never been discovered before, the value of your gold compared to other commodities would go down.

    If we were to discover some new battery technology that used gold to make extremely high energy density batteries, then the value of your gold would go up compared to other commodities.

    Oil skyrocketed this summer because speculators were driving up demand. Now the price of oil is plummeting on the prediction that a weak economy will cause demand to drop, so price drops to follow suit.

    If you bought oil this summer, you’d be screwed this fall or winter. There’s a lot of people who got screwed by this from “price lock” contracts with their oil companies. Oil companies were offering their customers the option to lock in the price of their heating oil for the winter season. And then the price dropped.

    It wouldn’t matter if you locked in that price of oil using dollars based on the gold standard or a fiat system. Either way, the value of oil changed significantly relative to other commodities, and relative to the value of a US dollar.

    for all the years that the US was on the gold standard, why is it that we still suffered inflation? Why is it that the relative value of the dollar changed even when it was supposed to be tied to a fixed amount of gold? Why did the price of land or wheat or oil change over the years if not because the value of the dollar changed over the years?

    Locking X dollars to Y pounds of gold is arbitrary and doesn’t stop the process of inflation. Certainly keeping a lot of cash around that earns less than inflation will lower the value of your money over time. But if you want to cheat inflation, then I wouldn’t recommend buy gold or some physical commodity. I’d recommend putting your money into the S&P500 for the long haul.

    If you want to get savvy about it, find stocks that have some long term viability and pay a dividend. Then you actually make some money from them every year without having to sell them. You avoid trading fees and capital gains taxes on having to sell anything. YOu just pay taxes on the dividend. Buy enough shares and you start building up passive income.

    You don’t make money off of gold or silver or oil until you sell it. And I’m not sure if any physical commodity has a return on investment that consistently beats inflation over the long term.

  108. Bailout 2008, a poem by David Jeffrey from Canada

    Like a bloodied warrior,
    laying broken and torn.

    Like a dying soldier, hopeless and forlorn.

    But the blood, it be green,
    the color of money.

    And the soldier is an economy,
    and it is anything but funny.

    Broken are it’s people and shattered are their dreams.

    Thanks to the ultra rich and their full proof schemes.

    It is a tragedy with more pain to come.

    Finance will be Hell, and their wills will be done.

  109. “Loans” to bankers? And you think we’re going to get some of that back? Kids, that’s like giving the “Truth” to a lawyer, or a “Purpose” to a politician.
    You could hardly even save money in a bank without losing some of it, so how in the hell do you think we’re gonna be getting “loans” back?

  110. I don’t think the inflation calcs smell right … if the invation of Iraq (assuming this is the 1990s invasion) cost $551B … at 2% compounded per year it would be $670+B

    I thought the recent Iraq stuff was much more expensive than $551B …

  111. Bailout 2008, a poem by David Jeffrey:

    Like a bloodied warrior,
    laying broken and torn.

    Like a dying soldier, hopeless and forlorn.

    But the blood, it be green,
    the color of money.

    And the soldier is an economy,
    and it is anything but funny.

    Broken are it’s people and shattered are their dreams.

    Thanks to the ultra rich and their full proof schemes.

    It is a tragedy with more pain to come.

    Finance will be Hell, and their wills will be done.

  112. Your cost figures would become more meaningful if they were expressed as a % of GDP at the time they were incurred. Such ratios would take into account the demographic (and productivity) differences that are probably huge if you go as far back as the purchase of Louisiana.

    Thanks for the good work,

    Art Retti
    Geneva, Switzerland

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