• Banks need about $75 billion to reach “adequate capitalization”
• “Adequate capitalization” is when common equity equals 4%
• Common equity being at 4% means a debt-to-equity ratio of 25-to-1
• The current bank needs do not factor in the potential for bank assets to lose their value
• The current bank needs are based on a rosy worst case scenario of a 3.3% drop in GDP this year and unemployment of 8.9%
• The government’s latest understated unemployment data is already reporting unemployment at 8.9%, so the government is trying to convince us that the worst case scenario is unemployment stays the same

Additionally, here are what some of the larger banks needed according to the stress tests:

• Citigroup $5.5 billion
• Wells Fargo $15 billion
• Bank of America $34 billion

Keep in mind that these are the amounts of money that must be given to the banks now in order for the banks to get themselves UP to a 25-to-1 leverage ratio. Also, while Citigroup appears to be less incompetent than Wells and B of A, a recent article in Time magazine says that Citi “got credit for a capital conversion it has yet to complete. Strip that out, and the amount of capital Citi needs balloons to nearly $63 billion, more than any of the other banks tested.”

A few months ago, I linked you to a shorter, free 30 minute version available on YouTube. If you haven’t taken the time to watch the 30 minute or 80 minute version, then here’s the 2 minute, 24 second version;

[youtube=http://www.youtube.com/watch?v=gGgjU-h_xQw]

^— The hidden track record of U.S. deficits as told by the U.S. government’s chief accountant!

[youtube=http://www.youtube.com/watch?v=-FSoXKapKQs]

^– If you can watch this video and not feel the need to do something, then something is wrong with you  :-O

[youtube=http://www.youtube.com/watch?v=Dp8ZmQMCtqA]

^– This outlines the PRE-BAILOUT/STIMULUS unfunded government promises.

[youtube=http://www.youtube.com/watch?v=FZlmqx8CNKc]

^– The forecast of future debt-to-GDP ratios

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Our economy is 70% consumerism. That means it is mostly based on individuals buying stuff. So the current setup of our economy holds two basic facts:

1. Individuals buying more stuff than they can afford to buy (based on their income) has a net effect that is good for the economy.
2. When individuals lower their spending and save and invest money, the net effect is bad for the U.S. economy.

That said, should we even care about “the economy” in its current setup? If individuals were really doing what is good for themselves (saving and investing), it would be terrible for the economy.

So could Obama’s stimulus really work? Absolutely not. Not if you consider “it really working” to mean more than just temporarily. We don’t need a stimulus. We don’t need a boosted economy. We need a changed economy. There are only three ways out of this mess.

1. The financial and economic system of the U.S. (and much of the world) is not repaired and we enter a very long, long, long depression that includes unprecented levels of poverty in the U.S.
2. The U.S. merges with one or more countries. In the same way Merrill Lynch had to be bought by Bank of America… the United States might have to be bought by one or more financially sound countries.
3. We redefine the rules of our economy to be healthy and sustainable. Rather than require individual consumers to jump on the grenade of “just spend, spend, spend for our country’s sake”, we completely rethink our economy to measure its health in a way that it is parallel to the financial health of the individuals who live here.

It all starts with the individual. And for the individual, it all starts with the basics of financial statements: the balance sheet and the income statement. Individuals’  income statements need to be in the positive. If we can figure out a way to measure “the economy” in a way that would celebrate individual financial health, that would be great. If we can’t, then we should be building and spreading individual financial health anyway, despite its terrible effects on “the economy”.

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