Did you know that the cost of the proposed Wall Street bailout (in 2008 inflation adjusted dollars) exceeds the cost of all US wars, the Louisiana Purchase, the New Deal, the Marshall Plan and the NASA Space Program Combined?
This is Ilargi's intro from today's post over at The Automatic Earth.
Things sure move fast these days. Two weeks ago, a bad bank would have been impossible to even seriously consider. Now it seems a given. We remember the fight over the TARP last year, and the limits set on it, $700 billion in two phases. Obama has been president for 10 days, and there are new numbers: $2 trillion for a new bank rescue, on top of the $350 billion TARP phase II that is still on the shelf. Goldman advisers form the second party today who call for $4 trillion, after the Peterson Institute yesterday. I called for $5 trillion earlier. I’ll soon be known for my conservative estimates. Something new at last. And we see brilliant notions about using the money on a basis akin to the Federal Reserve's fractional ways. Well, that would surely get to add up. But they wouldn't, would they? Remember how many times you've thought that over the past year and a half?
Despite the fact that I have criticized Robert Shiller and Nourel Roubini recently for not being able to draw the logical conclusions from their often good analyses, I still like both. And that makes it all the more harder for me to see them praise people like Bernanke and Geithner. Shiller praises Bernanke for having the courage to experiment, and conveniently forgets to mention that this is an $8.5 trillion experiment already, carried out with other people's money. It must be easy to forget that part when, like him and Nouriel, you are being fêted in Davos by the world's richest salt of the earth.
You would almost forget what the word experiment means, and that there is no certainty whatsoever Bernanke can provide that all the people's money won't simply be lost. Shiller's remark somehow made me remember Michael Jackson dangling his baby out a hotel room window. I don't remember Wacko Jacko being praised for his courage back then. I recall lots of comments, but not that one. Even though the risk involved was not nearly as high as the one takes by Bernanke, Paulson, Geithner and Obama these days. Why do you think that is? Who's the real Wacko here? I think I know the answer: You don't need to show people that you are capable of doing what you say you will, you just have to make them believe that you can do it.
But I still think it would be an excellent idea to have all of the finance masters put up all the money they have, and that of their children, and hand it over to the banks that their plans are reportedly designed to save. If they can do it with the American citizens’ money, it would seem only fair to include their own. I think we can guess what their answers would be. And that should make us think. That and the fact that the bank bail-outs have already cost us more than all major US endeavors put together, including all wars, land purchases, New Deal, Marshall Plan and NASA programs. In 2008 inflation adjusted dollars.
For the rest of this article, i want to focus on Asia, and do so by simply giving you a number of quotes from articles you can find below. We have a lot of talk about the US, Canada and Europe on a daily basis here, with pundits from each reassuring us that the others are doing worse. Well, Asia is sinking like a big bad boulder, and we need to start paying attention for real. Here goes:
* In the fourth quarter of 2008, GDP probably fell by an average annualised rate of around 15% in Hong Kong, Singapore, South Korea and Taiwan; their exports slumped more than 50% at an annualised rate.
* In the fourth quarter of 2008, real GDP fell by an annualised rate of 21% in South Korea and 17% in Singapore....
* Asia’s richer giant, Japan, has yet to report its GDP figures, but exports fell by 35% in the 12 months to December. In the same period, Taiwan’s dropped by 42% and industrial production was down by a stunning 32%, worse than the biggest annual fall in America during the Depression.
* Japanese industrial production fell a larger-than-expected 9.6 per cent and unemployment rose sharply to 4.4 per cent in December...[...] The deterioration in the jobs market was further underlined by the continuing fall in new job offers, which declined 12 per cent last month, following a sharp 23.7 per cent drop in November....
* The Nikkei has lost more than 10% this year after shedding more than 40% last year.
* South Korea’s annual production plunged 18.6 per cent from a year ago, following a 14 per cent drop in November, the national statistics office said. December output fell 9.6 per cent from November
* In South Korea, net exports actually made a positive contribution to GDP growth in the fourth quarter, while consumer spending and fixed investment fell at annualized rates of 18% and 31% respectively. South Korea is an exception to the rule of Asian prudence. Its households’ debt amounts to 150% of disposable income, even higher than in America.
* In Hong Kong average house prices have already fallen by almost 20% since the summer and Goldman Sachs, an investment bank, forecasts another 30% drop by the middle of 2010....
* ... on average, emerging Asia’s exports amount to 47% of their GDP, up from 37% ten years ago. The share varies from 14% in India to 186% in Singapore (see chart 2). In Japan, which is often viewed as an export-driven economy, exports are only 16% of GDP.
* Two decades ago, consumer spending accounted for 58% of Asia’s GDP. By 2007 it had fallen to 47%. Consumer spending in China is just 36% of GDP, half the American share.
* Even if household saving rates have been falling, they are still high, at around 20% in both China and Taiwan.