Originally Posted by
DNK
It's less than a third and near 5% of the nation's GDP.
Destroy is a bit excessive. 5%, remember that. And it's going to start only as $250bn, which is maybe 1-2%, then $100bn later, another <1% increase, with the other $350bn for later if necessary. Any resulting inflation will be spread out, and the numbers aren't high enough to ruin the economy. I mean, what's the rate so far this year? I think the 12-mo difference in August was in the 5-6% range.
I don't recall hearing anything about a tax hike. I'm assuming the money is coming from the same place about 20% of the rest of the government's money comes from: lenders. There is a good chance the taxpayers won't really "lose" their investment in the end, and the government will get a good return on it. I think the deal is that they're buying the securities for fairly cheap, and in a normal economy they'd probably be worth more than their proposed purchase price.
Probably there will be a net loss to taxpayers, but it's somewhat likely that it won't be major - a few percentage points worth of interest over a few years. In the short-term the price tag is huge, but in the long-term it could be quite small.
Or the economy collapses and the paper is worthless, but in that case we're screwed anyway.
It's a fairly decent bet, although the long-term ramifications of yet another bailout aren't good. It's a logic the market runs on, and it's not healthy. But in this case it seems like the only real solution to a major meltdown in the credit markets and economy as a whole.
You can't win: too little government interference and the economy goes haywire; too much and it gets dependent and overly confident. But there's more to it than that, of course.