Economic Bailout

The huge budget-busting bailout of the financial and automotive segments was estimated to cost near $700 billion. A massive amount that would cost future generations more than double that to repay.

I do not believe that the numbers have been tallied yet, but after most financial institutions have repaid their portion of the loans, I am confident that the final numbers of the bailout will be closer to $90 to $95 billion.

This, on the other hand, is a tiny sum of money if calculated as a percentage of 2009 GDP. Past bailouts have not been this small. If my math is correct, this number represents less than 1% of GDP; which makes this bailout trivial.

Historians will have to determine if the bailout indeed made an impact on the employment rate. I doubt it. See my blog from a couple of days ago where I discussed employment versus population growth over the past decade.

Since most banks repaid the government, this leaves GM and Chrysler as the biggest beneficiaries of our government’s generosity. A bit too late.

Both these companies had failed to make wise business decisions in their home markets. They should have been allowed to disappear from the scene.

The only way we could really help these companies, and all US companies is to establish fair trade rules. This would help all industry that is willing to manufacture in the USA. It would not help quality, however.

So, a tiny bit of money was set aside to help GM and Chrysler linger on for a few more years. This is what the bailout of 2009 accomplished.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s