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Where is the bailout money coming from?
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by djangofan | October 3, 2008 at 11:23 am
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Funding for 700 billion bailout comes from US taxpayers and not from foreign bond purchasers. The proof is in Section 118 of the house bill passed on October 3rd, 2008. The government is actually "appropriating" funds from the government budget for government bond purchases. It does so by raising the public debt value as told in Section 122 and uses the new debt to buy treasuries from itself. This is recircular financing, using money created from debt to finance more debt-base. Once the new credit is deposited into Federal Reserve bank accounts, the 700 billion of new deposits will quickly become 7 trillion new US dollars into the economy. Raising our money supply by 10%+ via the passing one bill by congress is a tax that every American taxpayer is paying in order to bail out bankers who made mistakes. Every dollar you own or earn was just inflated by over 10% and so what are you going to do about it?
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Section 118. Funding.
Provides for the authorization and appropriation of funds consistent with Section 115.
Section 115. Graduated Authorization to Purchase.
Authorizes the full $700 billion as requested by the Treasury Secretary for
implementation of TARP. Allows the Secretary to immediately use up to $250 billion in
authority under this Act. Upon a Presidential certification of need, the Secretary may
access an additional $100 billion. The final $350 billion may be accessed if the President
transmits a written report to Congress requesting such authority. The Secretary may use
this additional authority unless within 15 days Congress passes a joint resolution of
disapproval which may be considered on an expedited basis.
Section 122. Increase in the Statutory Limit on the Pub
Raises the debt ceiling from $10 trillion to $11.3 trillion.
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Most RecentMost Recommended Comments (7)
at 14:59 on December 2nd, 2008
I'm very concerned with the government "bail out" and the long term effects to our economy and standard of living.
How long before we can no longer pay the interest on the debt? How long before other nations lose confidence in the American dollar? When this happens the dollar will be worthless and we will experience hyperinflation and a real depression.
We are going to be hit by a huge tidal wave!
at 22:54 on March 12th, 2009
"How long before we can no longer pay the interest on the debt? How long before other nations lose confidence in the American dollar? When this happens the dollar will be worthless and we will experience hyperinflation and a real depression."
Glenn you hit the nail on the head. China is already loosing faith and has said very recently it is going to at least seriously reduce its purchases of T-Bills if not eliminate it. Japan has very recently been saying it feels it is going to have to forgive a portion of the debt.
The only thing we have going for us is that the World still does need the US. The rest of the World thought it was actually decoupling from us but they are almost deeper entangled with us financially than ever before. Within time it will fade just like it did with the UK (Before WW II the UK was THE World Power), however if there is a major economic collapse, which is still very much in the cards (Don't believe the Wall Street cheerings, or the White House rhetoric) than it could be like the UK and WWII; wecould loose our power just as quick.
Trust me, I have heard all the stories how it could not happen in the US, but believe me, Britons were saying the same crap and believed it also before the end of WWII. People said that what we are facing now was impossible but here we are, and they said it was impossible before the Great Depression hit. "Nothing but blue skies"! It can happen, and it just might.
Time will tell.
at 08:17 on December 27th, 2008
I'd be more worried if every other nation with similar problems weren't doing the exact same thing.
at 18:30 on December 27th, 2008
I acquired more info since writing this article. After the bailout bill there is a $11.3T US national debt limit. Of that, about 5T+700 billion = 5.7T is marketable US treasury securities, which means the money supply will rise to 57Trillion. China has financed about 10% of that, or about 600billion in Treasury securities. The remaining "intragovernmental debt" is the rest, or 11.3 minus 5.7T = 5.6Trillion. So, there is a surge of intragovernmental debt that will be represented by Obama "pet projects" and infrastructure projects to give jobs to americans. It will create jobs at the expense of a lot more debt. Serious situation.
at 12:41 on February 4th, 2009
It is a scary situation when our government is so "willy-nilly" to pass out funds that we don't have to pass out. I am in the banking industry and as far as Im concerned all the banks that passed out huge bonuses and where drowning should have suffered it through. (just my opinion). As a homeowner I think it would have been better to assist those Americans that might have been layed off etc and struggling with keeping their homes. This would allow billions of dollars to be sent to homeowners for the purpose of paying down their mortgage debt, thereby lower loan losses at banks - hence providing the banks a stronger financial portfolio. A win-win situation if you ask me. At least that way Americans are getting something in return for higher taxes we will eventually have to pay for this billion dollar catastrophe. Oh well, we shall see...
at 14:13 on February 17th, 2009
Djangofan, any clue as to where the money for Obama's stimulus is coming from? Hardly anyone is talking about that. Folks still must be star-gazing from all that election hype.
at 19:48 on February 25th, 2009
Bella, have you heard of the Federal Reserve? I can guarantee you, that you don't know anything about how it works. The Central Bank of the U.S., or the Federal Reserve stopped making copies of "Modern Money Mechanics" because of it's all revealing purpose starting on page 6, the last paragraph. Ill show you an example, the quote from, and a link to Modern Money Mechanics.
Lets say the Government wants $10,000 to give and loan out. The Government creates bonds(Promissory Notes) and the Fed creates and gives them for exchange for the notes $10,000(The loan). They then deposit it into a bank account, and this then becomes legal tender. 10% ($1,000) of the deposit to the bank is held by the bank as a reserve requirement.. Therest is known as "Excessive Reserves" ($9,000), Which can be used to loan out to people. Lets then say someone wants to get a loan for $9,000. You think the money comes out of the excessive reserves. But this is not true. That money is actually created out of thin air on top of the existing $10,000.
It says, I quote,
"If business is active, the banks with excess reserves probably will have opportunities to loan the $9,000. Of course, they do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts. Loans (assets) and deposits (liabilities) both rise by $9000. Reserves are unchanged by the loan transactions."
Here is Modern Money Mechanics in .pdf:
http://www.truthsetsusfree.com/ModernMoneyMechanics.pdf