The Cost of the Crisis


THE COST OF THE CRISIS….The latest international bailout news:

Hungary has been granted a multi-billion dollar rescue package by the IMF, the EU and the World Bank. The deal, worth $25bn (£15.6bn;19.6 euro), is intended to help Hungary cope with the ongoing effects of the world financial crisis.

Given the numbers that we’ve all gotten used to lately, I know this doesn’t like all that much. But it’s over 10% of Hungary’s GDP. Meanwhile, BBC Business Editor Robert Peston estimates that taxpayers around the globe have spent (so far!) about $8 trillion to shore up the world’s banks. That’s more than 10% of total global GDP.

Given that, it seems likely that when it’s all said and done, the U.S. is also going to spend 10% of GDP or more to bail out the financial industry here. That would be somewhere in the neighborhood of $1.5-2 trillion — double or triple what we’ve allocated so far. That fits the data I presented a couple of weeks ago, and it’s also about what Paul Krugman thinks is possible. Buckle up.

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