Weekend Reading – Gee, 20,000 Billion More Stimulus?

According to CNBC, the G20 is now considering a $2Tn rescue fund for EU bailouts, double the $1Tn they put in during the crisis in 2008.  Of course the markets plunged in 2009 as it occurred to people that, if the banks needed $2Tn to be rescued, then we were in what leading economists refer to as "deep shit."

The plan is to combine the EFSF and the ESM to create a 1 Trillion Euro fund ($1.34Tn) and to augment that with the other $700Bn coming through the IMF (on top of the $350Bn already pledged).  While $2,000,000,000,000 is a staggering amount of money – enough money to more than double the net worth of the bottom 40% of the planet – but, is it enough?  

It's enough to kick the can down the road but Greece alone is $500Bn in debt and Ireland alone owes well over $2Tn externally (mostly to England), Italy owes $2.6Tn externally and $400Bn just to France and Spain is also at $2.6Tn of debt owed to other nations but they spread the pain around pretty evenly by comparison.  That's the damages in the PIIGS before we even get to France ($5.6Tn), Germany ($5.5Tn), the UK ($9.8Tn) and, of course, the United States, which owes over $1Tn to Japan and the UK and another $2.5Tn to China within their $15Tn external debt load.  How's that $2Tn looking now?  

So let's not confuse can kicking with "fixing" as there is NOTHING about this $2Tn that fixes anything but the ability to roll over that $40Tn for another year.  Unfortunately, in another 12 months, some portion of the $120Tn of unfunded liabilities that no one likes to discuss will also drop to the bottom line.  The US alone will add over $2Tn of additional debt in 2012 and about $5Tn is expected of the others – but that was before they all pledged this new $2Tn that they will be lending themselves to pay themselves for the old debt while the add on new debt.  

IN PROGRESS