Headlines, then and now…
1975: Gerald Ford To New York City: Drop Dead.
2008: George Bush To AIG: Are You Sure $85 Billion Is Enough?
Of course, headlines rarely tell the whole story. But my, my, how times have changed. As the above Daily News front page shows, a drop of 12 points in the Dow was big news in 1975. This past Monday, it took a one-day drop in the Dow of 500 points to make Wall Street nervous (which was followed by another drop today, only two days later, of another 450 points). Another day or two of this, and we should be South of 10,000 on the Dow. Throw in a couple more banks or financial giants going belly-up, and you’ll see them skydiving without parachutes on Wall Street.
Oh, and Washington didn’t let New York City drop dead back in 1975, after all. The Federal government agreed to a bailout in the form of $2.3 billion in short-term loans, thereby allowing the City to avoid bankruptcy (read about it at americanheritage.com). These days, $2.3 billion is chump change.
Just how much is $85 billion ? Well, if you were given that much money, in say, ten dollar bills, and were told to count it, how long might that take ? Let’s assume you spent 24 hours a day, 7 days a week, 365 days a year, with no breaks. Even if you could count 200 ten-dollar bills ($2,000) every minute, and started counting as soon as you were born, you’d probably never finish before you died. It would take more than 80 years. If it was in one-dollar bills, then it would take you more than 10 lifetimes, and your pile of cash would probably weigh in the neighborhood of 200 million pounds or 91 million kilograms (a rough estimate, since we’ve never actually weighed a stack of money).
$10 x 200 per minute x 60 minutes x 24 hours x 365 days x 80 years = $84 billion ! (You’d still have a billion dollars left to count, and since you’re now 80 years old, there’s a good chance you’d forget how much money you counted, and you’d have to start all over again.) Sort of reminds us of Sisyphus.
We know what you’re probably thinking. You’re probably thinking that we have way too much time on our hands, if we’re calculating how much $85 billion would weigh. Well, it’s a good bet that you haven’t met this fellow yet. Not only did he do the math, he manufactured the bills, took pictures of everything, and created a website about it. Is there anything you CAN’T find on the Internet ? Probably not.
Put another way, $85 billion would easily pay for another fun-filled year of war in Iraq, with billions and billions of dollars left over to spend in Afghanistan, Pakistan, Iran, and anywhere else we wish to venture.
The $85 billion federal bailout announced yesterday of American International Group (AIG), the 18th largest company in the world, gives a whole new meaning to the term “economic stimulus“. Propping up AIG seems like a good idea. But then, so would distributing buckets to the passengers on the Titanic, and telling them to start bailing. Unfortunately, neither plan addresses the root of the problem.
Who insures the insurers? You do. The recent bail-outs of Fannie and Freddie, and now AIG, indicates that many people are getting very nervous about the economy. How nervous? Economic collapse nervous. Black Monday, 1929 nervous. Losing your home nervous. Civil unrest nervous.
Better start polishing those apples.
We love some of the nautical references you often see in annual reports and prospectuses, used as euphemisms for real bad financial news . Phrases like “staying the course”, “rough sailing”, “turbulent waters”, “sailing into a headwind”, etc. In our mind, the U.S. economy resembles a ship that is being tossed about by increasingly turbulent seas. As the waves get higher and higher, our ship runs the risk of encountering one that will push it past the tipping point. We think an $85 billion Federal bailout of AIG says that we’re not the only ones worried about the ship going down.
Hey, General Motors… Are you paying attention?
GM has gotten a lot more press than AIG, regarding their hemorrhaging of red ink. In our opinion, all they need to do is a bit more hand wringing, and then show up on Uncle Sam’s doorstep, hat in hand, and ask for a few bucks (see “Detroit wants its bailout too” on cnn.com). How much do you need, Rick ? $100 billion ? $200 billion ? more ? As we’ve written, the death of GM might not be a bad thing, but GM’s demise might scare too many people, so OK, Mr. Wagoner, here’s your money. Next in line ?
And it appears that in the past few days, that line has gotten a lot longer. Another down-on-their-luck financial giant, Lehman Brothers, apparently didn’t get that whole hat-in-hand routine right. Merrill Lynch has sold it’s soul to Bank of America. Do you see a trend developing here ?
It’s a good thing Uncle Sam owns those Intaglio presses, over at The Bureau of Engraving and Printing. Who says the Treasury Department doesn’t have a sense of humor ? The BEP website is at “moneyfactory.gov”. But the people at AIG probably think they should call it rescueme.gov. To paraphrase Popeye’s J. Wellington Wimpy, “I will gladly pay you Tuesday, for a bailout Today”.
With Walmart’s interest in expanding into banking and financial services, and given Walmart’s runaway profits, we’re kind of surprised there wasn’t a Walmart-AIG merger. It makes a lot of sense to us. They could sell AIG insurance policies at an AIG kiosk in every Walmart store, right next to the toilet paper and Pampers.
The AIG bailout sort of makes the economic stimulus checks the rest of us got from our rich Uncle seem stingy by comparison. It also begs the question… Who’s next ?
All this economic turmoil does have one benefit. Nobody even mentions Iraq anymore !
– Routing By Rumor
P.S. – We found this blogger, who is just as scared about all this as we are. She even chose almost the same title for her post.