Former Treasury Secretary Henry Paulson, who was also the former CEO of DC favored financial institutions Goldman Sachs, testified before congress about the severity of the crisis and the possibility of financial armageddon in 2008 had the bailouts not been passed:
Facing criticism on Capitol Hill, former Treasury Secretary Henry Paulson on Wednesday defended his decision to complete a $182 billion bailout of American International Group Inc., arguing that the unemployment rate would have risen easily to 25% without the bailout. “If the system had collapsed millions more in savings would have been lost,” said Paulson, who was Treasury Secretary at the time of the bailout, at a hearing. “Industrial companies of all size would not have been able to raise funding and they would not have been able to pay employees, this would have rippled through the economy.” Lawmakers grilled Paulson, arguing that government officials failed to obtain concessions for taxpayers.
We’re not sure whether or not Mr. Paulson has reviewed the latest from Shadowstats.com analyst John Williams, but the real unemployment rate is currently at 22%.
Perhaps these are, in fact, the statistics Mr. Paulson is referring to, in which case, from Mr. Paulson’s perspective, we could consider the unemployment rate to be “better than expected.”
If it weren’t for people like Mr. Paulson, we might actually be in some serious economic trouble.
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So is the 25% the real unemployment number or the gov’t unemployment number? If the 25% is derived from gov’t numbers, then the “real” number would be somewhere in the fourties. Ouch. That said, I don’t know if I’d congratulate Paulson all that much since he could have done something to prevent this mess in the first place. He also structured this to help is Goldman friends a bit too much.
This is a joke. Do we just take his word that unemployment would have gone to 25% if there were no bailouts? What proof does he have that the rate would have been that high? It’s awfully easy to look back and say we made the right decision by prognosticating without any actual data.
Paulson and Bernanke told Congress that we would have a financial meltdown and martial law if they did not immediately get the $700 billion so that they could buy troubled assets. Then, knowing full well they would not use the $700 billion as they said they would, they let Congress vote on the matter and pass the legislation – and then blew the money on something completely different from what they said they would.
If they lied about what the $700 billion was to be used for and the seriousness of the financial crisis if it wasn’t used as stated, then I suspect the 25% unemployment figure mentioned by Paulson is nothing more than an arbitrary number he kashkaried to give credence to his ridiculous scheme.
Food for thought.. Why is it that banks/brokers can run to the Fed “as a borrower of last resort” but industrial companies that “would not have been able to raise funding and would not have been able to pay employees” cannot? Are industrial companies just “less important” than the BOA’s and GS of the world or are they just not part of the “club”?
Unemployment, both in the U.S. and the world as a whole, marches ever higher because the field of economics doesn’t account for the relationship between population density and per capita consumption.
Following the beating the field of economics took over the seeming failure of Malthus’ theory about overpopulation, economists adamantly refuse to ever again consider the effects of population growth. If they did, they might come to understand that once an optimum population density is breached, further over-crowding begins to erode per capita consumption and, consequently, per capita employment.
And these effects of an excessive population density are actually imported when a nation like the U.S. attempts to trade freely with other nations much more densely populated – nations like China, Japan, Germany, Korea and a host of others. The result is an automatic trade deficit and loss of jobs – tantamount to economic suicide.
Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!
If you‘re interested in learning more about this important new economic theory, then I invite you to visit my web site at http://PeteMurphy.wordpress.com.
Pete Murphy
Author, “Five Short Blasts”