Why bailout can not be distributed to all

ART - Irvine, California
Entered on October 4, 2008

Why bailout can not be distributed to all

The executive and the legislative branch in Washington DC approved the bailout to rescue the failed companies in the United States. I happen to agree with the representatives who disagreed with the measure first. Maybe we believed instead of people the companies themselves have to pay for their failed behavior. After some calculations, I changed my mind and recognized why the bailout was needed.

Seven hundred billion dollars is a significant amount of money during regular times. However, in times of war and economical instability this amount seems to cover the cost of a tourniquet that used to be less than one dollar. In order to understand the value of $700’000’000’000, I would try to translate the figure in more tangible numbers.

If the bailout is distributed to 7 billions population of earth, each person will be entitled to $100. While 100 dollars is insignificant in some parts of the world, it can feed the majority of poor families of the developing world for one month. On the other hand, if the distribution is to 40’000 millions poor and uninsured Americans, each would receive 17’500, an average cost of living of such families for one year. Since neither the poor in the developing world nor the ones in the United States could rescue the economy after one month and one year respectively, it is not economical to rescue them.

Distributing the bailout to all 310’000’000 people in the United States would mean that each American, poor or rich, would be entitled to 2258 dollars, average cost of living for one month in the country. Again there is no guarantee that after one month of average living, the country would recover economically. On the other hand if the bailout is distributed to people with an average income of 250’000 dollars, which is equivalent to the average weight of a donkey in grams, then 700’000 people would be able to pay off their mortgage of 1’000’000 dollars. It is unclear if such people would be motivated to do anything about the economy after they pay off their mortgage; therefore other measures might be needed.

If the bailout is distributed to people with an average income of 5’000’000, which is equivalent to the weight of a small elephant in grams, then 140’000 people would receive 5’000’000 each. Since such people are used to having more, then they have to borrow another 5’000’000 to expand their business. However, there is no more money available to borrow, and therefore a more drastic measure is necessary to rescue the economy.

Based on the above calculation, it makes sense to rescue only 7 major companies with an income of 100’000’000’000, in order save the bleeding of capitalism in America. Since other economical systems in the world have already failed, there is no option but to rescue this reaming competitive and self regulating system from bleeding.