Poof, you’re 7 percent richer
Monday, September 22nd, 2008 By Mike Maurer
This is some wizardry. The U.S. economy is right at $14 trillion annually (and that’s assuming price stability that doesn’t really exist). In the span of the summer (really, the span of three weeks) taxpayers have agreed to $1 trillion in bailouts.
Can’t be done. The system is already tapped with existing debts in Social Security and various health payment plans, and this level of commitment is so large that it’s no longer accurate to model it as a system having access to an infinite plane of resources. (Need another 7 percent? Fine. Here it is.) Rather, at this level, it’s a closed system, moving money out of one pocket into another.
If the panic is gone, maybe the best thing is to do nothing. If the panic is coming back, this bailout isn’t going to prevent it, it’s only going to kick the can down the road. For now, it seems investors will believe that the US government is an infinite resource. What will happen when it dawns on them that it isn’t? This panic won’t mean a thing next to that one.
