There is so much talk about trillions of dollars that I thought it was only fair that those who are destined to pay all of this money back should understand what it is. A trillion is 1,000 billion. That was easy! Of course a billion is 1,000 million, for those of you who didn't know. But what does it all mean? Have you ever thought about owning a house worth $500,000 or a half - million dollars? It means the following: Using the formula we have in front of, us a billion dollars would be 2,000 half- million dollar houses; A trillion would be 2,000,000, half- million dollar houses. When you realize there are probably 100 million houses in this country, that represents only 2% of the market. Doesn't sound that bad!
Here is the best use for this knowledge. General Motors said they need $2 billion to last another month or else they would have to go bankrupt. Now you know what they really want is 4,000 half-million dollar houses. So maybe we give them Fresno, California.
Now, every time a politician mentions a trillion dollars, you just need to think about 2% of the houses in this country. If every state were equal it would be all of the houses in two states, which wouldn't be that bad if you were thinking Rhode Island and Delaware. If, however, you decided to go with Texas and California, it would seem a whole lot worse.
We forgot one small item: we don't have the money. So we need to borrow it and pay interest on the money we borrowed. Let's use 3.5%, approximately the yield on a 30 year treasury bond. I believe that’s only $35 billion a year! That's 70,000 $500,000 houses. Now we are starting to talk substantial monies. We might have to fork over St.Paul, Minn. or maybe Oklahoma City. And that would be every year! We could start running out of houses, or cities, or both.
Up to this point I have been mixing money and real estate which could be confusing , but now I have a real example. The President talked about helping around 9,000 homeowners escape foreclosure and giving many more people help with their mortgage payments. The cost: a smallish $75 billion. Now we can see apples versus apples because we know that this would equal 150,000, half-million dollar houses. I don't know about you but it seems out of line to me. I wouldn't think it would come close to costing $500,000 a homeowner to fix their problem and this is over 15 times as much. Where is the money going? This can't be another TARP venture, could it?
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.
In Other News: Bi-Partisan Agreement that Debbie Wasserman Schultz is a Horrible Person | Michael Schaus
In Other News: State Department Covers Up for Hillary – Asks IRS How to Destroy Hard-Drives | Michael Schaus