$8.6 Trillion Was a Drop in the Bucket

Like the quicksand victim who claws and squirms to climb out, the collective response to this ongoing financial crisis has left the United States mired ever-deeper in a pit of debt with no branches in sight.

While we await details on the next phase of bailout measures, the undeniable deterioration of the global financial system makes it clear that more interventions will be required if we are to retain this strategy of spending our way out of the quicksand.

Given the enormity of these measures, Fools may be right to question whether any amount of money will prove sufficient to slay this depressionary beast. To help assess these important questions, I continue to keep a running tally of the interventions. On the heels of Obama's $787 billion stimulus plan, even the incredible $8.6 trillion figure reported last November is now history.

Drawn from independent research and diverse published sources, the following table provides as precise an accounting of the crisis as the public record presently permits. By my calculations, the combined total of existing and announced potential outlays from the Federal Reserve and from U.S. government agencies that are directly attributable to the financial crisis has climbed to more than $10 trillion!

* "Other loans" total from the Fed's statistical release as of February 11, 2009, which includes discount window lending to banks and brokerages, and the Asset-Backed Commercial Paper Money Market Liquidity Facility.

To be clear, this is not a tally of monies already committed, which remains a much smaller sum. Nonetheless, I consider this tally of pending and potential outlays very informative in quantifying the scale of the government's total response. If, as we're often told, we are facing essentially a crisis of confidence, is it not noteworthy that more than $10 trillion in potential responses and a zero-bound interest rate have failed to restore that confidence?

Also, many are quick to suggest that major portions of these outlays are essentially investments that will be recuperated or will even turn a profit once the markets return to normal. Again, as the sum grows ever-larger, such best-case scenarios could become the exception rather than the rule.

For Fools wishing to know what they're on the hook for, $10.16 trillion amounts to $33,261 a share for every soul in the United States. In terms our fast-food nation can visualize, that's a McDonald's (NYSE:MCD) cheeseburger for every American every day for over 90 years.

The Yucca Mountain of debt
At some point, we must concede that the scale of these outlays calls into question the collective ability of borrowers to repay these loans. We have no way of knowing what portions of these outlays will be recovered … nor when. We do know that both the Federal Reserve and the Treasury are amassing debt securities as collateral that no private entity will touch right now, and we know that the Fed is still refusing to disclose related details despite a lawsuit from Bloomberg.

The continuing indications from Washington that dollars will be hurled at this crisis in any quantity deemed necessary raises legitimate concerns about the future purchasing power of the dollars in your wallet, your CD, Treasury bonds, or other dollar-denominated instruments. Occurring in a vacuum, a deleveraging event like this one would be decidedly deflationary. In the context of these outlays, however, I believe stagflation will instead be among the words used by historians to describe this period.

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