US Debt Increases By 50%
Speaking of government bail outs (which we weren’t, but anyway) the long anticipated move by the US government to fully finance and support Fannie Mae and Freddie Mac appears to have finally come to pass this morning.

The US government has in all but name nationalized both institutions. It effectively means that the US government owns nearly half of all outstanding mortgages in the United States and follows on the heels of news last week that the UK government was offering “free” mortgages to first home buyers.

As Moody’s chief economist points out “the federal government has now become the nation’s mortgage lender.”

How much money are we talking about here? It is, wait for it, USD$5 trillion, that’s USD$5,000,000,000,000 in home loans. That is one big exposure to the mortgage markets that the government is burdening its taxpayers with.

But sleep easily, because US Treasury Secretary Hank Paulson thinks that the government may only have to cough up a maximum of USD$200 billiion to cover any debt shortfalls. That’s USD$200,000,000,000 - which still looks like a whopping big number to us.

Let’s just put these numbers in perspective. Over the past few years you have all read about the massive debt hole that the US government is in, how it is unsustainable, how the country is living beyond its means. The current US national debt (although by the time you receive this email it will be higher) stands at USD$9,674,134,313,303 so in one fell swoop you could argue that the national debt has been increased by over 50% to just under USD$15 trillion.