$450 Trillion is a Big Number

Some interesting articles for your perusal regarding the US economy, and the rather beat-up shape it’s currently in.

Mike Whitney has a thought-provoking article on the “Bush Financial Bust of 2008”. Mr. Whitney is obviously not a fan of the current administration, but at least his bias is out there in the open. Don’t let that keep you from reading this story, particularly the part about how the current mortgage crisis *may* just be a drop in the bucket compared to the possible unwinding of the financial derivatives complex. His notes on the FDIC and how they are updating their rules & procedures for handling bank failures should get peoples’ attention as well.

I’ve written about derivatives in the past, and like most people lacking Ph.D’s in economics I barely understand what they’re about. What I do know scares the crap out of me, though… especially about how it has jump-started the creation of private credit streams so large it boggles the mind. If derivatives start biting the dust, some analysts think the losses could be more than $450 trillion dollars. Consider that the total value of US household wealth in 2000 was around $44 trillion, and then you get an idea as to the scope of the problem.

Mr. Whitney thinks we’ll see more (& more visible) bank failures this year. Combine that with the news leaking out about how US banks may not be holding any reserves at all, and it could very interesting presidential election. It’s hard to promise hope for the future when the present is collapsing like a house of cards. Let’s not kid ourselves into thinking that such a crisis would force any of the candidates will start talking realistically about problems and solutions…

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