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I think this kinda fits in here... Basically... what will 700B mean when the need is 4+ T
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To put the problem into perspective, let’s just consider some base statistics.
The publicly issued debt of the Unites States was, until very recently, a massive $5.3 trillion. The total debt, including non-public IOU’s and unfunded obligations including social security and Medicare, is now a staggering $50 trillion! The total annual wealth generation, or GDP of America, is some $14 trillion.
Contrast those figures with the current debt problem ascribed to the reckless pursuit of predatory lending. Incidentally, predatory lending was made illegal in most states until overridden by President George W Bush to protect Wall Street profit opportunities.
The US mortgage holdings are some $14.8 trillion, including some $3 trillion of commercial mortgages. Local government debt is about $3 trillion. But, even these gigantic figures pale in comparison beside the $20.4 trillion of consumer and corporate debt. Therefore, the total of non-federal government debt is in the region of $38 trillion!
Of course, not all of it will default. All things being equal, possibly only a small proportion will fail, at least initially. But today, all things are not equal. We know that we are heading into a recession. This means that increasing amounts of debts will default.
The main problem is that predatory lending incurs a high default rate. So if only 10% of outstanding loans default, the government will have to raise some $4 trillion, or more than five times what Congress is being asked. It will increase the US government public debt by some 80%.
This will threaten the triple-A credit rating of US government debt. It will also crowd out corporations and entrepreneurs from crucial debt funding. Finally, it will put upward pressure on interest rates at precisely the time when lower rates are called for to avoid recession slipping into depression.
If the economy moves into a severe recession and then depression, default rates will explode. These, in turn, will cause stock markets to implode, as they did in 1929. In addition, the US dollar is likely to plummet, driving up the trade deficit in the longer term. Considering these factors, many of which the government prefers to hide, things look bad - very bad.
