I was jokin

And yes, we are fucked. I have been saying that for a year (along with others). You can't borrow your way out of this. You can't get in trouble for living above your means, and then expect to get out of it by living above your means.

It's not rocket science. We just have really fucked up people in Washington (and not just this administration).

Meanwhile China has announced their next move for their massive dollar reserves:

http://www.ft.com/cms/s/0/b576ec86-761e-11de-9e59-00144feabdc0.html

It seems pretty smart to me, they'll probably buy oil resources in developing countries for cheap prices.

Not such good news for Western countries (especially USA), though...

Yes, you (or, actually, the BBC) are reading it wrong.

He assumed that every single home mortgage backed by the government would default, and that every single home would have a value of zero dollars.

He assumed that every single bank in the country fails, and turn out to have a value of exactly zero dollars.

He assumed that Treasury bills would turn out to be worthless.

He assumed that the US would be on the hook for recovery programs that were proposed but never actually went into effect.

He assumed that existing programs would use every single dollar available to them under law (amounts which are, as his own tables show, many times larger than what they've actually used), and lose every single one of them.

He, in short, assumed a lot of crazy things, including that some that are cosmically unlikely, and some that are just plain impossible.

This has approximately zero chance of happening. The report, which is available at http://www.sigtarp.gov/987egapograbme123654/J09-3-SIGRTC.pdf, actually estimates US-backed assets at risk to be less than $3 trillion.

Desroko that's what "risk exposure" means. If I take responsibility for guaranteeing $100,000 in debt, that's my exposure.

Until the recession is over (and then for a while), no one knows what the actual losses will be.

I don't know why I'm bothering but....

You can't lose money you didn't risk. Table 3.4 of the report you obviously didn't read is how this lunacy got started. For example, TARP is correctly estimated to be on the hook for 600 bn. But he pulls a number out of his ass and says that its total potential liability is 3 trillion. It's not. TARP is only authorized up to $700bn, by law, and hasn't spent most of that. If Congress changes the law and authorized Treasury to disburse that much, it might make sense to include that in potential risk. If Treasury actually spent that money, it would definitely make sense to categorize it as a risk. But neither of those two things have happened.

Say I walk into a casino with $1000 to my name, and bet $500 on a spin of the wheel. If you would say that I have $1000 at risk, congratulations - you're an idiot.

Here's a fun sentence: "In certain cases, programs included have been canceled or repaid." In other words, no money is at risk, yet he included it in his risk estimate anyway.

"Also, there is potential for some double-counting."

"Note that many of these programs are collateralized or have not been drawn down to their full authorized
levels, and as such, the actual potential for losses is likely to be lower. "

"Not designed to provide a firm financial statement."

"Has not been evaluated to provide an estimate of likely net costs to the taxpayers."

Is there anyone here stupid enough to think that a house can possibly be worth zero dollars - let alone every house with a mortgage backed by Fannie Mae or Freddie Mac?

I think the TARP is a revolving credit line, like a credit card, not a one time $700 billion fund.

In other words, when a bank pays back some of the TARP funds they can risk it again by lending it out to someone else.

Regarding the $3 trillion figure, it seems it was already being quoted in April:

http://online.wsj.com/article/SB124028315955338071.html

"The rescue efforts have expanded since Congress approved the $700 billion bailout package last fall. The initiative now includes about a dozen programs that could reach a price tag of $3 trillion when Federal Reserve loans, Federal Deposit Insurance Corp. guarantees and private money are factored in, according to the report by the Office of the Special Inspector General for the Troubled Asset Relief Program set for release Tuesday."

If the united states keeps on spending this way, sooner or later it will end up like the old USSR.  You need to cut back on all spending and stop bailing out private business (banks, airlines etc).

These wars in Afgan and Iraq are destorying america from the massive amount it is costing, from the cost now and the cost in the future (from rebuilding these countrys and looking after its own soldiers).