Please help my puny brain understand ..... $7.4 trillion???
Posted By Rob Millard - 1 Comments -
OK .... I'm stumped. I may not be an economist, but something just doesn't make sense here to my puny mortal brain. $7.4 trillion (the current total estimated cost of the economic stimulus / bailout package in the USA) is just a crazy figure (remember when it was "only" $700 billion, just a few weeks ago?) Here's Bloomberg's breakdown of the $7.4 trillion. This excludes the more recent bailout of Citi and anything that might go to the three auto dinosaurs, too. For perspective: the GWP (gross world product) of the whole of planet earth in 2006 was $65 trillion, according to Wikipedia, and the GDP of the USA (purchasing power parity) was then $13.13 trillion (according to the CIA) and I'd guess it will probably about the same in 2008. So ..... how does one get to spend the equivalent of > 50% of the total economic output of a country (or 11% of the entire planet's) for an entire year on an economic stimulus package? When that country is already running a deficit? Where does the money actually come from? Bloomberg's breakdown gives headings but doesn't actually answer the question. I can't help worrying that this could all crash and burn in 2009 ..... whatever that might mean! To say nothing of the economic impact of the cost of other economic stimulus packages being implemented around the world. There seems to be a great deal of emphasis on short-term fixes, which usually have a long-term price attached that can be more painful than the immediate hurt. I'd like to say that I'm confident that the great economic minds deployed to fix this are assured of success .... but have a nagging concern that they include those that got us into this mess in the first place.
One thing that I am sure about: when this recession recedes, the world will be a very different place. Also, that the road between now and then is highly likely to get much rockier before it gets smoother. So, if you haven't torn up the strategic plan that your firm compiled early in 2008 or before, then it really is time that you did. It may well be more dangerous right now than no plan at all. Your strategy right now needs to be focused squarely on (a) short term survival and (b) making sense of what is going so that you can position yourselves correctly for the new market that will exist when this is over. This new market is almost certainly likely to be:
1. More global
2. Less dominated by the west
3. Much more technologically driven
4. More dynamic and unpredictable than ever before
President-elect Obama really does have his work cut out. Apologies for the cheerful start to the week!
Hat tip to Richard Schuchts for the link to the Bloomberg article.
http://www.robmillard.com/admin/trackback/99652
You're probably familiar with the systems rule: Things always get worse before they get better.
Hope the "worse" doesn't last forever.
