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164 comments on Freddie Mac/Fannie Mae bailout: Guess Who Wins
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164 comments on Freddie Mac/Fannie Mae bailout: Guess Who Wins
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They're going to borrow the money. This isn't a taxpayer bailout because nobody's talking about raising taxes to pay for it. This is a bailout through inflation so the people who are really paying are savers and holders of U.S. dollars around the world.
Once the government can no longer borrow money from foreign creditors at reasonable interest rates the Federal Reserve will begin to monetize the debt by just creating new money out of thin air. Welcome to the hyperinflationary depression. I think we'll call it The Greater Depression.
This is along the lines I was thinking. The government is "printing" the extra money needed for these banks. Through this additional injection of money into the system I'd expect the dollar to weaken and inflation to continue to increase, unless demand is somehow curtailed at the same rate that money is being created.
It would be helpful to talk in terms most people can understand. So my question is: What does this move do to the purchasing power of an American family with about the median income over the next few months to few years?
no matter whoever takes whatever moves, either the income will be diminished (through the massive unemployment and diminished economic activities brought on by the deflation) or the purchasing power of the income will be diminished (through the inflation).
...hyperinflationary depression.
Yeah, that's what I think. That's two catastrophes at the same time. But you're leaving out one more: war.
Davebygolly,
I know what a balloon going up is like and I know what it is like when it goes down but going both directions at once sort of stretches the imagination. Our pretty balloon has a hole in it and unless hydrogen in equals hydrogen out we can only have a uppy or downy balloon.
Now show me how that equilibrium will come about. Housing down, markets down, big bucket bailouts, ... Could be this moon but while I think the guys got the sentiment right thier direction is 180 off. I think they hadn't quite got the last of this out of their imagination.
You have to wonder why Japan and other nations have lent us so much money, already. There has to be a hidden political element to this.
In the case of Japan, maybe it's that we have our mitts on the oil spigot, and so they have to settle for a crappy return and ultimately take a currency loss.
Of certain oil producing nations, we protect their rulers and they buy our Treasuries, knowing that they must never, ever cash them in.
Hyperinflationary depression...exactly. John Williams called it back in April and so far it looks like he's been right on the money: Shadow Government Statistics HYPERINFLATION SPECIAL REPORT