Tuesday, November 25, 2008

How Many Trillions?

How many trillions does it take to save a financial system? Sounds like a bad joke involving ethnic electricians and light bulbs. In many ways, it is.

According to a Bloomberg story, the total amount pledged so far by the Fed alone is a staggering $7.4 trillion. Readers are encouraged to perform for themselves the appropriate arithmetic calculations and come up with GDP, dollars per person and other appropriate ratios for what this unfathomable number really means outside the virtual world of finance. (Actually, let me save you the trouble: it means nothing. It's just money.)

But how about some alternative uses for this capital. What would $7.4 trillion buy?
  • Fully pay for 2,000,0000 wind turbines (3 MW each). Better yet..
  • Provide a 40% subsidy for 5,000,000 wind turbine. Even better...
  • Provide government loan guarantees for an almost unlimited number of wind turbines.
I'm focusing on wind turbines because they provide the closest cost/benefit to conventional power generated by coal-fired generating stations. And that's before any environmental benefits are taken into account.

Feel free to substitute your favorite program for taking our economy into the 21st century. I believe it's high time to leave behind 19th century technologies and their attendant socio-economic models - don't you?

So how many trillions does it take to save our current system? None. Think about it..


  1. This comment has been removed by the author.

  2. Nice post Hell. Until people understand that government does not produce anything, but merely shifts money from one pocket from another, we will continue to have trillion and quadrillion dollar bailouts.

    Thanksgivings gift for Thai -


  3. It's only money, you can always make more.

  4. Even better, fund a whole lot of Molten Salt Reactors

    (they're very good at getting rid of long term waste)

  5. Is this bailout mentality an extension of the pervasive mentality of the last 30 years? We are now using the state (American or European) as the debtor of last resource. What happens after? Do we trust (fiat) money? Can we?

  6. Soon we'll be going back to the days of barter trading...

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  9. You know how much is a trillion dollars ?

    Well, if you spent $947.50 dollars every minute of every hour, of each day and night since the time Jesus was born in the year zero of our era and up to the year 2008; you'd end up spending ONE trillion dollars.

    That's $947.50 spent every minute for a solid 2008 years and you'd spend "just" one trillion. Now how much do the obligations in the US amount to ? How many trillions ? Food for thought.

  10. Our children are really really going to hate us...

  11. Jim Rogers on Bloomberg TV last night, always interesting http://www.policevideonews.com/index.php/2008/11/24/night-talk-an-interview-with-jim-rogers/

  12. @Ben- I totally agree... And to think Boomers complain about Gen X,Y,Z laziness? Sheez.

    @Greenie- that is way cool! I never thought of fractals and taxes before but it makes total sense if you think of the component building blocks to taxes and how these component building blocks are predictably iteratively combined. Thanks.

  13. @Hell- by the way, you might just want to visually compare Greenie's fractal tax map (really network maping map but same math) to this image of the microtubule cytoskeleton of a cell. Biology can be fun!

  14. Good interview -


  15. The whole problem stems from wishful thinking - that houses could go up in price for ever, that risk could be spread to those who understand it best, and so on. Wind turbines are also just wishful thinking - wind power is too dilute to make economic sense.

  16. Wind power is too "dilute" for a Permagrowth economy, not so for a Sustainable economy.

  17. Hell - I'm a dedicated RGE follower that just recently found your blog.

    While I agree with you in principle, I'm curious to know your thoughts on the short run implications of shifting these bailout funds from established institutions requiring the funding to stay afloat to institutions (either existing or new) that could use the capital in an arguably more efficient manner. My concern is that the long run gains of spending the money alternatively would be great, but those gains might not have the opportunity to exist or would be greatly mitigated by the failure of the institutions requiring help with their balance sheets today.

  18. Dear Chad,

    My premise is that we cannot borrow our way out of a debt crisis.

    Instead, we should focus on liquidating debt and raising earned income in order to re-balance the debt/income ratios which have zoomed in recent years.

    The only way to liquidate debt is to wipe it out via bankruptcy and Chapter 11 (or to forgive it).

    Now, the main institutions that are of concern in such a case are deposit-taking banks, and I agree we should be VERY careful in handling them and their depositors. We do not want to create a panic rush to withdraw money a la 1930's.

    That's where FDIC comes in and that's why we have not seen any trouble. A small part of the trillions being used now to shore up a failed system could instead be used to:
    a) Double deposit insurance and,
    b) Launch the alternative, sustainable economy I have in mind.

    Unfortunately, it is being used to keep the terminally ill Permagrowth/Sudden Debt patient on life support. That's a complete waste of resources and will do more damage in the end than good.


  19. Millions of behemoth arm waving wind turbines. I can't wait. After that we can build a bunch of tall buildings to house all the folks who were displaced by wind farms by stacking dirt around them to carry the materials up and afterward dig all the dirt away. Think how many jobs that would create.

    Seriously, who can say they have been negatively impacted by global warming? Let's stop making stupid decisions that do nothing but guarantee a harder life for future generations. Global warming is not hurting anybody, if it is in fact happening. The government should stop subsidizing everything and let the markets discover the price of energy and everything else. And one more thing. Go back on the gold standard unless you want a loaf of bread to cost $5,000,000. Fiat money has no underlying value. Just ask Zimbabwe. Soon the world bank will be printing the money. "Can you change a trillion?"

  20. Hi Hell,

    You discuss steady state economies consistent with sustainable resource/energy use. What are your thoughts about a monetary system to match sustainability. I suppose this issue will be or is being forced. When permagrowth is no longer possible, a debt based monetary system which requires ever increasing debt MUST fail. We have reached "Sudden Debt". Anyway, nice blog you have here.

  21. Not a comment specific to this post, just a general "thank you" for your posts over the last two years (when I started reading). Please continue!

  22. The bailout's are leading to easier ways for you and I to get out of debt. The debt situation is getting better. With the recent bailout, it has opened more doors for the consumer. Most people don't take the time to check all options before claiming bankruptcy.


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  24. 2,000,000 wind turbines in and of themselves would constitute an environmental and financial catastrophe.

  25. I'm not sure if the turbine suggestion was serious or not. Turbines are about as 19th century as technology gets. The grid cannot depend on wind power, because wind is not reliable. The grid can only "accommodate" wind power up to 20% of total demand. Electricity accounts for 20% of energy usage, so at maximum deployment wind can only provide 4% of our energy needs. Even then, no fossil fuel plant will be shut down because of turbines and many gas plants will have to be built to balance the erratic output of the turbines.

  26. This post has been removed by the author who does not tolerate dissent of incredibly stupid posts.

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