The Real News: The 800 billion announced Tuesday and 7.76 trillion from the Bloomberg estimate add up to $8.56 trillion or $26,500 for every man, woman, or child in the United States. We spoke to journalist and author Nomi Prins about where these trillions might come from.
Nomi Prins: . . . All of that is coming back to us, because if more debt needs to be raised, that means that the US as a country, if it wants to stay solvent with respect to other nations who also own our debts, has to make those interest payments. The more debt we have, the more interest payment we have to make, and therefore the more money comes off of the federal budget before anything else happens. Already, it’s the third largest line item in the budget, the interest on our debt. It will become bigger, and it is necessary to pay, in order to maintain our national solvency. In the end, even though the numbers are really astronomical, in the trillions to date, the simple infusions of capital, the lending of it in return for toxic assets, will not in itself work, unless it’s done to the amount of the potential loss that is in the system which we’re all unclear on because a lot of the leverage on a lot of these assets was not fully disclosed and is not still transparent and is not still being announced by various financial institutions. They’re still holding on to this knowledge. So, until that is gone, although this is a tremendous sum of money, and it will have ramifications for years in terms of national debt and what doesn’t get used to finance other federal budget items, it is unfortunately not really going to fix anything until the losses are all shaken out of the system, and we’re just not there yet.
Nomi Prins is a journalist and Senior Fellow at Demos. She writes about politics, money, and relationships. Prins is the author of Other People’s Money: The Corporate Mugging of America and Jacked: How “Conservatives” are Picking Your Pocket. Before becoming a journalist, she worked on Wall Street, as a managing director at Goldman Sachs and running the international analytics group at Bear Stearns in London. This interview was broadcast by The Real News on 26 November 2008. The text above is a partial transcript of the interview.