Sunday, November 09, 2008

The Magic Money Machine

The details of what is going on are very complex, but what it boils down to is that the banks have found a "magic money machine" in the form of our current public policy. Of course, magic is really the art of illusion. The banks are not magically creating more money, rather they are making money for themselves by slyly stealing it from the rest of us. This is happening through both acquiring more dollars and draining the value from existing dollars.

The financial details are very complex- that's how they keep people from realizing what is really going on and demanding that both they and the politicians who are enabling them be hung or thrown into prison for life. The simplest way I can say it is that the Federal Reserve is giving banks a higher interest rate for reserve deposits which banks put into the Fed than it charges the banks to borrow money from it overnight.

Imagine if your bank charged you only 4% interest on a loan, but offered a CD that paid 4.5% risk free. You would borrow as much money from that bank as they would loan you, and use it to buy CDs from the bank. The more CD's you bought, the more money the banks would "have" to make loans. You would then get more loans and buy even more CDs, and the cycle would start all over again with you pocketing the difference.

You might protest that no sane banker would ever operate that way- its crazy! Perhaps so, but it is just what the Fed is doing right now, and the congressman that you likely just voted for helped to greatly accelerate to process.

It looks like the global financial entities know that the United States is bankrupt and will be for a generation, so they are looking to steal as much as they can going out the door. The politicians they have purchased, including the congressman and senator you likely just voted for, have shoveled two trillion (TRILLION I SAY) dollars at them so they can suck us dry faster, before we have time to catch on or stop them.

The male bovine fecal matter reason these sell-out politicians give for the bailout is that "liquidity must be restored to the market". That is, they wanted banks to make more loans. But there are negligible amounts of loan-worthy private business out there to make loans to. Everyone is up to their eyeballs in debt right now. So the banks just loan it back to the government which just loaned it to them! How does that restore "liquidity to the market"?

See how that works? The government gives two trillion dollars to the bankrupt banks, hoping that they will use it to start making more loans to bankrupt customers. Instead, they loan it back to the government because that's the only big "safe" place left to loan to. It is called a "liquidity trap" when banks can make money both borrowing from, and lending to, the Fed.

Their whole rational for the bailout was bogus anyway. There was still credit available even at the height of the scare that "banks are going to stop extending credit". I applied for credit at the height of the scare and got a line bigger than I could hope to pay back. The people that were not getting credit were businesses that were insolvent. Why is it the taxpayer's problem when an insolvent business can't get credit? Why should an insolvent business ever get credit?

The "bailout" was a fraud, and the Fed is a scam. I urge my fellow voters to quit voting for crazy, even if the TV pundits (that you don't trust anyway) tell you that your only options are one of two scamsters in nice suits. Vote for someone that the media won't tell you about over someone they pump up.

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