What the current spending actually means at Calling John Galt

What the current spending actually means

Written by Nathan K.

April 8th, 2009 at 12:24 pm

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Except that none of the items he mentioned were “spending”, they’re mostly loans, the U.S. gov’t is getting paid interest in excess of their borrowing costs, and is likely to come out ahead. The Bear Stearns thing was a guarantee and there has been zero cash laid out.

Brian H

8 Apr 09 at 12:51 pm
[...] a hat tip to the Calling John Galt blog, I have to bring this powerful visualization to your [...]

Firewallender // Cassie Wallender » If you’re not outraged, you’re not paying attention.

8 Apr 09 at 12:55 pm
Brian H:

Which isn’t to say that they aren’t free, or that they don’t distort the market.

Which is entirely the point – without the cheap government loans all of the major financial institutions would have gone bankrupt, solvent or not (I’m not convinced that any of the largest were), due to mark to market rules.

To say that the gov’t will make money on this mess is fatuous. Does anyone actually believe that say… GM will pay back it’s loan? This is, in fact, the precise reason the government had to step in – no one believed that any of these guys would pay their loans back, so no one on the market would give them loans (or few… there was Buffett).

The cost difference between a loan at 2% interest (or whatever it is) and an infinite interest rate is quite large. Quite frankly, the only reason this wealth transfer was made as loans is to make it more politically palatable.

Johnny Abacus

9 Apr 09 at 10:22 am