In September, the Federal Reserve Bank of Dallas reported that the financial crisis cost the U.S. economy between $6 trillion to $14 trillion, and the low end of that range assumes a relatively quick return to the pre-2008 growth trend.
However, the authors astutely note that “output may never return to trend — the path of future output may be permanently lower than before. If that’s the case, the crisis cost will exceed the $14 trillion high-end estimate of output loss.”
The shocking total of $14 trillion is almost a year’s worth of economic output, representing $120,000 for every U.S. household. That’s a lot and it’s good that at least someone in the Federal Reserve is willing to look at the cost of the financial crisis.
But the report only talks about one part of the cost of the financial crisis – lower economic growth — and not the REAL cost of the financial crisis. That is the cost of massive increases in money printing and government borrowing.
It’s not just the Fed that overlooks this enormous cost, of course, but nearly everyone in the financial community.
Everyone would like to believe that there is no cost to the borrowing and printing we’re doing.
But in reality, the nearly $5 trillion of debt and $3 trillion in printed money that we have added since the crisis are just making another crisis inevitable and far worse. And, we keep adding massively to these costs every year: another $700 billion in government borrowing in 2013 and $85 billion in printed money every month.
It’s funny, surprising and a bit terrifying to see how easy it is to overlook the biggest cost of the recession — the costs that are still rising rapidly. How easy we forget, that is, until we finally do hit the wall. Then we will see the real cost of the financial crisis.
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