Monday, 1 December 2008

Getting ready for the next financial crisis

Some food for thought in the Los Angeles Times at the weekend. The paper added up the staggering cost of battling the current financial crisis and shuddered at the thought that the foundations are being laid for the next one. Consider this:
"Just last week, new initiatives added $600 billion to lower mortgage rates, $200 billion to stimulate consumer loans and nearly $300 billion to steady Citigroup, the banking conglomerate. That pushed the potential long-term cost of the government's varied economic rescue initiatives, including direct loans and loan guarantees, to an estimated total of $8.5 trillion -- half of the entire economic output of the U.S. this year.Nor has the cash register stopped ringing. President-elect Barack Obama and congressional Democrats are expected to enact a stimulus package of $500 billion to $700 billion soon after he takes office in January."

That colossal figure caused Maya MacGuineas, president of the Committee for a Responsible Federal Budget to comment that 'there's a huge risk of another economic crisis, a debt crisis, once we get on the other side of this one."
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