Parasites and Chiselers Who Benefit from the Bailout

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Here come da judge…

Oh Dear Reader, it may be a cruel, cruel world for some…but it’s a delight to us!

Little by little, gradually, haltingly…the commentators are putting two and two together. In just four days, global stock markets lost more than $3 trillion. Then, the fellows who saw no danger at all – Greenspan, Bernanke and Paulson – suddenly insisted that if immediate action were not taken the world’s whole financial system would implode! Meltdown! Collapse!

What did that mean, exactly? They didn’t say. But it sounded like big trouble. And people want to avoid trouble at all costs – especially if the costs can be laid on someone else.

“The private market has screwed itself up,” explained Representative Barney Frank “and they need the government to come help them unscrew it.”

(He left out the extenuating circumstance that the U.S. money supply, the shortest term lending rates, Fannie Mae, Freddie Mac, the Fed, the Federal Housing Administration, the SEC…and a whole plethora of agencies, commissions and meddlers…as well as one out of every 4 dollars spent…were all under government control all along!)

And so, Bernanke, Paulson, et al took the witness stand yesterday. They clearly had some explaining to do. But the more they explained…the more we didn’t understand. If government were capable of understanding and fixing the problem…how come it didn’t see it coming in the first place? How come it let it happen?

But this morning, we put aside the question of whether the government will unscrew things or screw them up even worse – as it usually does. Instead, we come back to the issue of who will bear the ultimate cost of bailing out Wall Street. No one knows the answer. And no one seems to feel bothered by it – even though the cost will rise to about $2,000 per family. But no one is complaining about the cost.

There’s “bipartisan outrage” in Congress, reports the Washington Post. But it’s not about the money. Instead, some argue that Wall Street fat cats getting away with murder. Others want an even bigger bailout – one for the homeowners, too. And others just want to rant and moan for the benefit of the voters back home.

But here at the Daily Reckoning mobile headquarters, we are like an old detective with a new clue. As to the issue of who will benefit from the bail out, we have no further questions, your honor. We know the answer already – it will be the usual collection of parasites and chiselers with good lobbyists in Washington. As to the question of who will pay for it, we want a lab report on the blood samples…and a fingerprint match.

The measure includes a provision in which the public debt is raised to over $11 trillion. This will put it at about 85% of US GDP. We recall from a couple weeks ago that Louis 16th lost his head after France’s debt rose to about 80% of GDP. The problem is, when you get to that level of debt, lenders balk and the borrower runs room to maneuver. In the modern world, that probably means higher interest rates…and what was once unthinkable, a downgrade of America’s debt rating from AAA to something less than that – and possibly junk.

This would be accompanied by a sell-off in the dollar too. In this regard, here comes an insight from the democratically elected president of Iran:

“The world,” explained Iranian President Mahmoud Ahmadinejad, “no longer has the capacity to absorb fake U.S. dollars.”

Of course, that is exactly what we’re about to find out. Mr. Ahmadinejad has rushed to judgment. We’ll let the court take its time. But we have a feeling that the Iranian president is right about the ultimate verdict.

“If the U.S. government were a publicly traded stock,” writes expert witness Chris Mayer, “the dollar would be its shares and the value of the dollar its share price…. And this huge increase in money supply is like a massive offering of stock, which dilutes the value of the shares everyone else holds. (Assets stay the same, just a lot more claims on them).

“The bailout tab so far could top $1.6 trillion – assuming the new $700 bill happens. Consider that M1 money supply – cash in circulation – only totals $1.39 trillion… Consider that M2 – including certificate of deposits and such – is only $7.72 trillion.”

Economists will tell you that this increase in the supply of “money” is just what the world needs. Deflation is acting like the hair dryer from Hell – liquidity is evaporating fast. The feds are trying to put it back.

The feds giveth; the markets taketh. Hallelujah. Hallelujah.

Currently, the markets are taking away more than the feds are putting back. But as to who is going to prevail…who will pay court costs…and who’s going to jail…the jury is still out.

But we know one thing for sure…during periods of uncertainty, it’s best to be prepared. Make sure you know how to protect yourself from what’s coming around the corner…

Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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Comments

  1. They didnt sell it well it should be For only the price of a cup of coffee a week you can save wall street and the USA.

    Reply
  2. Robert: Bahahahaha! That’s gold!

    The US will probably end up like Zimbabwe with skyrocketing hyperinflation. And sadly any move they make from now on to buy the debt out of the global economy is just going to speed up the process.

    So my question is this: Why aren’t the rest of the world detaching themselves from the US dollar now, or at least starting the process? Surely they’re not stupid and can see what’s coming around the corner. Is it just too difficult? The Iranian President, Mahmoud Ahmadinejad has spotted it, why nobody else?

    Reply
  3. Can you see what is wrong with this picture? No?
    Well let me paint one for you.

    How about the fact that while looking out for their own interests, our Government officials have helped the wealthy run our economy into the dirt. When our economy needs stimulating what does our Government do? They give us some measly stimulous check, A bandaid to hide the real progressively growing problem. The other thing they do is print more money. Look we are all Americans and we need to open our eyes to the truth. Why are you all believing a bunch of wealthy people telling you a pack of lies about the fall of our economy. It takes money to stimulate an economy. It takes money to pay a mortgage. It takes money to pay off debt. Well who has all the money? For the past 30 years or more the wealthy has gotten extreamly wealthy, while the cost of living has driven the middle class and the lower class poorer and into debt. Where do the wealthy spend all of their money? Among the wealthy. So why are the poor in this country suffering for what the wealthy have created. If wages in this country had kept up with the cost of living we wouldn’t be in this mess. We at Struggling American Workers Coalition say let those that created this problem, pay for this problem. How about our wealthy polititions who for the past 30 years have helped the wealthy take more and more from the middle and lower class by raising the cost of living while fighting us for every nickle in wages. How about the wealthy, whos greed has gotten us further in debt. If the Government really wants to help the economy, let them drive down the cost of living while freezing the American wage. Put that wealthy money back into the economy where it belongs. Our tax dollars belong to all Americans, so why make all of us pay for what the few have done.

    http://www.sawcoalition.org

    Reply

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