Reinko

The Bailout to End All Bailouts

I have just done some calculations and they say:

In the most rosy picture, toxic debt will rise with at least 900 billion US$ a year for the next two years.

Let me explain:

The US financial sector is about 20% of the US economy and as such is about 2800 billion US$ a year in gross domestic product terms.

The total debt of the US fin sector is right now 16507.5 billion US$.
That is far above the GDP and in the most rosy picture it grows on exponentially with 5.4% a year.
Since it is above the GDP and grows faster than the GDP, large parts of the 16507.5 debt are in fact toxic.

5.4% is about 900 billion new debt, hence toxic debt grow in the fin sector is at least 900 billion a year.

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At last: The toxic debt that is bought by Paulson is mostly consumer related; houses, cars, student loans and so on.

All in all: 700 billion is not enough, 2500 billion or more would be better...