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EIB WEB PAGE DISGRONIFIER

The Bailout's Cost in Perspective

BEGIN TRANSCRIPT

RUSH: All right, Barry Ritholtz, a financial blogger, has run the numbers on the bailout, and he cites a guy named Jim Bianco of Bianco Research who crunched inflation-adjusted numbers and compared some previous federal government expenditures to the current total of the bailout. Now, depending on where you look, the total bailout money to date is either $6 trillion or $7.4 trillion. These guys, they just ran it up to $4.6 trillion, and it's more than that now. It's at least two trillion more than that. Now, the current national debt is like $7 trillion. Maybe it's higher than that. But regardless, that's irrelevant here. This current bailout, calculated only up to $4.6 trillion, has cost more than all of the following government expenditures combined. Are you ready? The Marshall Plan. The Louisiana Purchase. The race to the moon. The S&L crisis. The Korean War. The New Deal. The invasion of Iraq. The Vietnam War. And NASA.

All of those combined, in inflation-adjusted dollars, equal $3.92 trillion in today's dollars. This bailout is more than all of those combined. Now, would you like to hear the inflation-adjusted dollar amounts for each of these line items? The Marshall Plan, back when we did it, cost $12.7 billion -- and it rebuilt Europe after World War II, for those of you who voted for Obama. If we did the Marshall Plan today, it would cost $115.3 billion. We rebuilt European for $115.3 billion in today's dollars; and we have just spent, according to these guys, $4.6 trillion on bailouts of the US financial industry. The Louisiana Purchase, in today's dollars, would cost $217 billion. Now, for those of you who voted for Obama, the Louisiana Purchase was Thomas Jefferson. That's how we got New Orleans and much of the territory all the way to the Left Coast, and it gave us the Lewis and Clark expedition, which Jefferson ordered to go find out what the hell we just bought.

The race to the moon, in today's dollars, would have cost $237 billion. That's more than the Marshall Plan and Louisiana Purchase in today's dollars. The S&L crisis. We bailed out the S&Ls and fixed that. In today's dollars, it would cost $256 billion. Back then it was $153 billion. The Korean War, $54 billion back in the fifties. Today's cost would be $454 billion. The New Deal. Today's dollars, estimated to be $500 billion, if we did the New Deal today. That's half a trillion. We have spent $4.6 trillion. The New Deal was half a trillion in today's dollars. We have spent $4.6 trillion, and probably more than that, at least six or seven. The invasion of Iraq, $597 billion in today's dollars. The Vietnam War. Back in the era of the Vietnam War, it cost $111 billion. To do it today would cost $698 billion. And NASA. This is not the race to moon. This is the whole NASA budget. Over the years, $416.7 billion. In today's dollars, it's $851.2 billion. Maybe this is an annual cost here for NASA -- yeah, it's an annual.

So, all of these add up to $3.92 trillion: Marshall Plan, New Deal, Louisiana Purchase, race to the moon, S&L crisis, la la la la, and we have spent $4.6 trillion. The only thing that comes close is World War II, and even that cost less than what we have spent. But at least in World War II, we were producing something, and everybody was working, and there was a tangible result, and that is we were able to stop Hitler. We did a great thing in World War II. Again, I have to emphasize, this is using a figure of $4.6 trillion as the bailout today. It is far, far more than that.

BREAK TRANSCRIPT

RUSH: This is Peter in San Mateo, California. Hi, Peter, you're on the EIB Network. Nice to have you with us.

CALLER: Rush, thank you for taking my call. Very quickly here, the nation in World War II was actively persuaded to buy War Bonds. One of my professors from Stanford, Professor Elmer Fagan cautioned FDR and [Hans] Morgenthau that after World War II we'd face a major inflationary period because of the debt. Well, Morgenthau and Roosevelt argued that it doesn't make any difference how large the debt is, we owe it to ourselves; and Fagan argued, it is crucial who owns the debt, the savings bonds. Namely, the holders of the debt had a high propensity to spend rather than save after the war. The result: inflation; too much money chasing too many things, homes, cars, appliances, and furnishings. That was a very instructive period, and it was remarkable because Fagan parted ways with Roosevelt and Morgenthau over this issue of what would happen after the war when all of this debt, all of these savings bonds were going to be redeemed and the inflationary period we would have. I'm not going to try and outguess what's going to happen in the future here, but I think this was a very instructive period of how people didn't really know their economics and think it through.

RUSH: Okay, give us the modern-day scenario. What's going to happen after this? 'Cause there's no World War II here.

CALLER: That's true. All of these debts that are out there, all of these loans and everything are going to have to be paid back at some point.

RUSH: Who says?

CALLER: Well, of course if they want to wave a magic wand and put it aside, but this economy has just gotten upside down.

RUSH: But I thought Obama's going to fix this with his infrastructure program.

CALLER: (laughing) Yeah, and the moon's blue, too.

RUSH: Well, we gotta fix the crumbling roads, the crumbling bridges and the crumbling schools, and the crumbling states and the crumbling mountains. There's a lot crumbling and we're gonna fix it. I'm jazzed. Okay, well, Peter, thanks for the phone call out there. I appreciate it. So I guess we are to expect hyperinflation after awhile with all this. Either that, or a very bad deflationary cycle, and it... (interruption) Snerdley just asked if foreign governments are buying all this debt don't we have to pay it back? Theoretically, yeah, you have to pay everything back. But I call your attention to the national debt, which never gets reduced. Every year's budget deficit gets added to the national debt. But this, what's happening here is unprecedented, and it has never happened before. There isn't the money to pay it back. There's not going to be the money to even service annual debt payments. We're going to have an annual budget deficit of $1.3 trillion, maybe more, in one fiscal year -- a budget deficit. They're gonna continue to buy the debt, but they're not buying the debt in order to get it back. At some point, maybe, but it's just like the federal government is telling Big Three auto, "You want the money, here's what you gotta do for it."

The big danger here in having all this foreign debt owned by the ChiComs is the leverage they hold and whatever other foreign countries. It's the policy leverage that they hold, and it is the threat of calling the debt, "Okay, we need the money. You give us the money." That's the threat that's always hanging over you. You deal with loan sharks. Now, one of the reasons all these countries have been buying foreign debt is because we've been the economic leader of the world and they've had an interest in our economy being strong and so forth even while they compete with us. It's a little bit more complicated than all this, but look, folks, pay this back? Pay it back? Wait 'til you see what's going to happen to the federal budget once we start nationalizing health care, once we start raising taxes. Pay it back? I just saw that Citibank deal. The government's taking an ownership stake in Citibank now. So they're taking an ownership. Barney Frank wants to own 80% of the auto industry -- and while this hasn't been stated, it wouldn't surprise me if someday (if that ever happened, for example) that he would suggest the federal government just give the ownership of the auto industry to the unions.

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