Monday, December 22, 2008

Hot Links: Holiday Version

What I’m Reading this Week:

Check out some of the best bloggers and stories this week.

Free Money Finance posts a Christmas Sermon.

US News gives details on tactfully handling relatives who ask for money.

Vik Dulat gives 7 rules for grocery shopping.


A Guest Writer at Get Rich Slowly explains when to buy new vs. used.

And if ING Direct’s rates are too sub-par for you, consider FNBO! (No minimum balance, but there is a $1000 MAXIMUM balance).

Merry Christmas, Happy Holidays, and we’ll see you soon.

Sunday, December 14, 2008

Seriously, How Much Is a Trillion?

I’ve been perusing the Internets trying to find a nice, visual idea of a (US) trillion dollars. It’s really hard to find. Go on, look at Wikipedia. You’ll be sorely disappointed. However, I found a guy who explained the concept in pretty recognizable terms here.

Here’s a modified version of the visual amount of 1 trillion dollars. And it involves something most of us do every day: drive!

So let’s say you have a $100 bill. A stack of $100 that reaches 40 inches in height (just slightly taller than height of a typical desk or table) would total $1 million dollars. So you gather that amount of cash and toss it in the trunk of your car and you begin driving from your house. Now let’s say that you live close to the freeway/interstate and as soon as you enter the on-ramp, instead of the white line on the shoulder you see $100 bills stacked sideways along the side of the road. The distance 1 trillion dollars would cover almost 680 miles—that’s the distance from Atlanta to Baltimore, or New York City to Flint, MI.


That’s only 1 trillion. The US GDP (economic output of the US) is $13.8 trillion per year. We currently have debt obligations (to other countries, Medicare/Medicaid, and Social Security) of over 54 trillion. And as I mentioned before, we have committed about 8.5 trillion to help “save the economy” over the next two years, pending a stimulus package that will total 500-700 billion over 2 years, and we haven’t started talking about universal health care plans yet. For all the economists out there who say debt doesn’t matter and we need to spend our way out of this—let see what happens.

Monday, December 08, 2008

Bailout Bonanza!

Remember that 700 Billion Bailout? It's a "shade" higher now…

And the shade we're talking about is the size of the one caused by a solar eclipse. The government, hoping you don't know how to add, wants you to believe that they're asking for "only" $700 billion in bailout money from the much-publicized bailout. However, the number now is about 10 times the original asking amount. Again: the number now is about 10 times the original amount—about 8.3 TRILLION dollars. Here's the invoice, as of Monday December 8th:



Not included: a $15 billion bridge loan to the Big Three American automakers.


Some numbers are so big most people just gloss over the number. But taxpayers are on the hook for it, and it is a really big number. Just how much will $8 trillion cover? Look at the federal departments' average annual budgets below, funded primarily with taxpayer dollars:



NASA: $17B

US Postal Service: $34B

Dept of Labor: $10B

EPA: $7B

Dept of Treasury (in a normal year): $12B

Dept of Energy: $24B

Dept of Transportation: $12B

Dept of Justice: $20

Dept of Agriculture: $20

Dept of Interior: $10

Dept of Homeland Security: $120B

Dept of Defense: $515B



Total: $801B



So the money the government has pledged to save our capitalist system is enough to run these government entities for 10 years, and they are giving this money out to a handful of banks and financial entities within the next year or two. There is now a plan to give the Big Three auto companies $15 billion, (small potatoes now) and a pending stimulus package of between 700 billion and 1 trillion dollars. And the automakers are, in my opinion, trying to scare people into believing that they either need bailout money or that they will cease to exist. It's a false either-or choice (but more on that later on).


Our leaders are telling us deficits don't matter. I'm not an economist by any stretch, but to me it doesn't seem to pass the common-sense test. But man, I really hope they're right. I really want their plan to work. Because if it doesn't work, we're really going to be in trouble after we add more to the stratospheric rise of our debt to other countries if said countries lose faith in our ability to pay the debt back.

Tuesday, December 02, 2008

Want a Piece of Bailout Money? Become a Bank! (Or a car company)

Seriously. Learn to follow the money. You may have heard of many of our investment ban king firms re-organizing themselves as bank-holding institutions. Want to know why?



Well, investment banks, unlike the commercial bank you visit each week to deposit checks and/or withdraw money, are not secured by the US Government. Investment banks insure their money privately. Commercial banks get FDIC insurance, which means you can get most of your money back if the banks "fail." Up until this year, the insurance limit was $100,000. Now it is up to $250,000. Many private firms were under private insurance, but by spinning themselves into commercial banks, they now can get a piece of the $700 Billion bailout plan. Goldman Sachs, Morgan Stanley, American Express, and even General Motor's lending firm, GMAC have magically turned themselves into commercial banks so that they can get in the government-bailout line.



And while we're here, let me also take a moment to formally take a stand AGAINST the bailout for the car companies. Continued pleas from the CEOs plead that if the Big Three don't get billions of dollars from the American taxpayers, their companies will fail. I don't see it. Companies go into and out of bankruptcy all the time. Injecting cash into companies does not provide an incentive to really get their acts together. Giving the companies $25 billion now won't assure us that they won't need another $25 billion next quarter. See what's going on with AIG.



*Note: I've also been against the bailout for the banks as well—I don't have anything against GM in general. They make great cars now.