Tuesday, September 30, 2008


You'll see this number - $1.3 trillion - as the amount of wealth lost in the U.S. yesterday because the stock market dropped in the wake of the failure of the bailout bill. For some perspective, the total wealth of the U.S. in 2007 was around $58 trillion. So a loss of about 2.24% of wealth in the U.S.

For comparison, the bailout bill, even if the "bad assets" that it buys up turn out to be truly toxic and equal to exactly zero, would represent a loss of $700 billion, or only about 1.2% of all U.S. wealth. In reality, the bailout won't cost $700 billion because the assets are not worthless, they are just worth less than we thought. So the true cost of the bailout is (depending upon who you ask) between $0 and $200 billion. So the loss to U.S. wealth from the bailout would be between 0% and 0.3%.

So the failure of the bailout cost people an extra 1.94% of total wealth. Oops.

No comments: