Tuesday, September 23, 2008

$700Bn vs higher risk of recession: relative risk?

Has anyone attempted a basic analysis of relative risk regarding the proposed $700,000,000,000 bail-out?

Today Fed Chair Bernanke
"... bluntly warned reluctant lawmakers Tuesday they risk a recession with higher unemployment and increased home foreclosures if they fail to pass the Bush administration's $700 billion plan to bail out the financial industry."
[Bernanke: Recession more likely without bailout]
What are the competing costs involved? Long-term cost to taxpayers/country of $700,000,000,000 bail-out versus long-term cost to taxpayers/country of recession?

Is it worth $700,000,000,000 to reduce risk of recession, or to mitigate effects of recession should one occur anyway?

I am unprepared to undertake this analysis, but it seems reasonable to ask both Congress and the Administration to provide at least a back-of-the-envelope calculation of relative risks. Who knows, maybe it'd be better in the long-run to let the financials fail.

Aside: "... in the long run":
"Long run is a misleading guide to current affairs.
In the long run we are all dead."

[John Maynard Keynes (1883–1946), British economist. A Tract on Monetary Reform, ch. 3 (1923)]
Have a nice day!

1 comment:

Anonymous said...

Check out this blog:
http://www.scottgoold.org/bailout.php