US bailouts prevented 1930s-style Great Depression

An in-depth modelling exercise by Moody's chief economist, Mark Zandi, and a Princeton University expert, Alan Blinder, paints a bleak scenario of a 1930s-style Great Depression if the US government had enacted none of its $1.7 trillion programmes to avert a financial meltdown.

Using historical statistical relationships and a focus on the government's impact on narrowing credit spreads, the pair found that the downturn would have continued into 2011, with unemployment peaking at 16.5% rather than last year's actual high of 10.1%.

They believe US gross domestic product would have slumped by 7.4% in 2009 and by 3.7% in 2010, producing a "peak to trough" decline of 12%, rather than the anticipated 4%. Starved of demand, shops and employers would be cutting prices and wages.

"With outright deflation in prices and wages in 2009 to 2011, this dark scenario constitutes a 1930s-like depression," says the study, entitled How the great recession was brought to an end".

Zandi and Blinder say that although economic activity and job creation remain extremely sluggish, the US economy has made "enormous progress" since its nadir last year: "Maybe the country and the world were just lucky. But we take another view: the great recession gave way to recovery as quickly as it did largely because of the unprecedented responses by monetary and fiscal policymakers."

There's no doubt that all kinds of programs have been abused and misued since Obama got in.

However, that doesn't mean TARP was initially a mistake. TARP was was and is demogogued by the political class who use it for their own gain; unfortunately most people on both right and left believe the lies.

TARP has only stemmed the panic. It hasn’t actually solved the debt crisis we are still facing.
Doesn’t it seem bizarre to you that if we had a crisis, we could solve the problem with $498.3B*?

(page 10,paragraph 3 http://sigtarp.gov/reports/congress/2010/July2010_Quarterly_Report_to_Congress.pdf)

Consider the Government Balance Sheet

Consolidated Statement Federal, State and Local Government
Assets:
Present Value of current US tax system: $3.74 trillion/4% = $93.5 trillion
Government Land and Structures: $10 trillion
Private Sector Financial Assets: $3.6 trillion
Social Security Trust Fund: $2.5 trillion
Market Value of Federal Reserve System: $45 billion(’09 profit)/.04= $1.1 trillion
US Military’s overseas bases, military hardware equipment, and Federal patents: $5 trillion

Total US Government Assets: $115.7 trillion

Liabilities:
Current Federal, State, and Local obligations: $11.9 trillion
Social Security Trust Fund: $2.5 trillion
Total Liabilities: $14.4 trillion

Net worth: $101.3 trillion

Liabilities/Total Assets = 12.4%

The government can of course increase taxes at will to boost its tax revenues and assets...
Other liabilities including medicare , medicaid etc it has no Constitutional obligation to pay, and the government makes its own law so they have no legal obligation either. As such they would not appear on any corporate balance sheet, and in all likelihood will never be paid..
Off balance sheet assets: US Private Sector Assets, non-government assets available for taxation: $67.8 trillion...

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