The cost of mopping up after the world financial crisis has come to $11.9 trillion (£7.12 trillion) – enough to finance a £1,779 handout for every man, woman and child on the planet. The staggering total is equivalent to around a fifth of the entire globe's annual economic output and includes capital injections pumped into banks in order to prevent them from collapse, the cost of soaking up so-called toxic assets, guarantees over debt and liquidity support from central banks. Although much of the total may never be called on, the potential outlay still dwarfs any previous repair bill for the global economy. – Telegraph
Dominant Social Theme: A lot of money.
Free-Market Analysis: We have been estimating that the total cost of the latest financial crisis may be up to US$100 trillion. According to this analysis we are only at 10 percent of this total. But it depends on how you add up the figures and how much is really known. US figures that were recently released indicated that the total from the US$700 billion TARP program alone could end up costing the US government trillions if the economy continued to go south. This doesn't include the British tax bailouts, the European Union figures, etc.
US congressional questioning revealed that the Federal Reserve had loaned out up to US$8 trillion or more to a variety of domestic and foreign financial entities. And who knows what other loans and payments have been made by other central banks as a result of the recent financial crisis.
This was no ordinary financial crisis. The fiat money system spawned by the West over the past 100 years basically ended in 2008. It may seem to have come back now, but the idea that markets, investors and savers can merely continue on in a system that lay in ruins only months ago seems difficult to fathom. There are too many people now distrustful of the system and because the system decayed in real time on the Internet, too many people have been exposed to free-market explanations that make more sense than the ones provided by the authorities.
True, stock markets around the world are up and there is a good deal of talk about a financial recovery. But from our point of view, a paper money recovery does not necessarily create the jobs that people in the West are desperate for. We think that if the monetary system were more rational and less stimulative people would have more faith in their collective future. The idea that central banks have to expend vast sums to keep the system from falling over is not going to engender confidence, ultimately, either in banks or banking.
The amount of expenditures by Western nations to salvage the larger economy is more than a number. It is a testament to how out-of-whack the current capitalist system really is. People have become aware of these vast expenditures and there is nothing much the monetary elite can do to explain them away. No normal market-based economy demands this sort of salvage.
And while people may not verbalize their doubts, the actions of central banks will spread like a stone tossed into a pond. The ripples have not yet been felt and the ramifications are not yet clear. But we think they result in significant changes over time – not simply from inertia but because the crisis has been played out on the Internet and people have had access to information regarding monetary problems that they would never have been available without the Internet.
Conclusion: We still stand behind our US$100 trillion figure. It is not so outlandish when you start adding up corollary costs having to do with unemployment, bankruptcies and other figures not directly associated with monetary and fiscal stimulation. Regardless of the ultimate figure, we do believe that the current system has been basically destabilized along with ability of central banks to count on a limitless well of citizen good faith. The American Federal Reserve carries an approval rating around 30 percent – the same as the IRS. More than that, the ability of central bankers to stabilize a world economy with so much liquidity (along with a paucity of good will) is highly doubtful. In fact, we believe it is just as likely that economic struggles will lead eventually to some kind of renewed hard-money standard.
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