Three ways to think about $700 billion, in the context of the U.S. economy and the last 30 years of financial booms, crashes, and bailouts:
(1) Larger than earlier rich-country bailouts. The obvious comparison for America, the Savings and Loan bailouts of the late 1980s, eventually cost about $125 billion in taxpayer money. This was 2 percent of GDP in 1989, spread over about four years. Britain's 1976 exchange crisis also required about 2 percent of GDP. The $700 billion proposal is almost exactly 5 percent of the U.S. 2008 GDP. (Note though that, early estimates of the S&L cost were well above its final cost, with taxpayers eventually recovering money through asset sales.)
(2) Smaller relative to national economies than the developing-economy crises of the 1980s and 1990s. The IMF and other international rescue loan packages for the Mexican crisis of 1995, the Asian financial crisis of 1997-1999, the Russian and Brazilian crises of 1998 and the Argentine crisis of 1999-2001 ranged from roughly 5 percent to 12 percent of the local dollar-value GDPs before their crises. Note though that these are less comparable than earlier rich-country crises; IMF loan packages served in part as a deterrent to continuing market panics and weren't always used in entirety.
(3) Larger relative to the global economy than the developing-country crises. The $700 billion envisioned by the Treasury Secretary and Federal Reserve Chairman is about 1.2 percent of the world's $60.1 trillion currency-basis GDP as of 2008. The combined IMF packages designed for Mexico, Indonesia, Thailand, Korea, Russia, and Brazil between 1995 and 1999 totaled about $209 billion, roughly 0.7 percent of the world's $29.9 billion currency-basis GDP in 1998.
A final bit of context: In current dollars, the 1989 S&L bailout, 1995 Mexican loan, and 1997-1998 financial crisis packages would combine for about $610 billion.
Two views --
PPI President Will Marshall on the Treasury proposal, the questions and alternatives Congress and the public should ask and consider, and the path ahead:
http://www.nydailynews.com/opinions/2008/09/22/
2008-09-22_marshall_on_bailout_only_fools_rush_in.html
Testimony from Federal Reserve Chairman Bernanke:
http://www.federalreserve.gov/newsevents/testimony/
bernanke20080923a1.htm
Two retrospectives --
The IMF (2006) looks back at the Asian financial crisis:
http://www.imf.org/external/pubs/ft/fandd/
2006/06/burton.htm
FDIC analysts review the S&L bailout and its final cost:
http://www.fdic.gov/bank/analytical/banking/2000dec/
brv13n2_2.pdf
Entertain friends with gloomy, irrelevant fun facts --
$700 billion is slightly below the $829 billion value of all the U.S. banknotes and coins now circulating worldwide. It is slightly above the $550 billion in total world textile and clothing exports. A country with a $700 billion GDP would tie Taiwan as the world's 21stth-largest economy. More:
- Weight: A dollar bill weighs about one gram. Therefore 700 billion one-dollar bills would weigh about 700,000 metric tons, about eight days' worth of all U.S. paper production, or the combined tonnage of seven Nimitz-class aircraft carriers.
- Height: A dollar bill is 0.1 centimeters in height. Stacked one on top of the other, 700 billion dollar bills would form a pile 52,000 miles high, roughly a quarter of the way to the moon.
- Length: The length of a dollar bill is 15.6 centimeters. End to end longwise, 700 billion bills would stretch 65 million miles, two-thirds of the way to the Sun.
- Area: A dollar bill is 15.6 cm x 6.63 cm, or 103 square centimeters. Arranged in a big square, 700 billion bills would carpet 2,800 square miles, a swathe of land twice as big as Rhode Island and half the size of L.A. County.
The U.S. Treasury explains the weight and dimensions of U.S. currency:
http://www.treas.gov/education/faq/currency/production.shtml
