The Secrecy of the Bailout Money

The money is not from the taxpayers (yet). Its printed by the US Treasury. So in about 2 years there will be hyper-inflation in the US economy from all the printed money and nothing to show for it.

Zenium - I find it hard to believe that the money is from extra money printed from the US Treasury. It also would not result in a hyper-inflation in two years; it would result in a falling dollar against every other country almost instantaneously. This would have a knock on effect on imports - making them more expensive in current monetary terms. Out of imported and exported goods in 2004 imports made up 60% (they were the most recent figures I found).

I must point out that I live in England and although I am not aware of all American news, I do try to stay fairly involved. In the UK we have been undergoing similar “initiatives”; however it seems to be the case that where your government has just lent money - ours has traded money for shares in the company. There is an advantage to this - which gives our government more control over our (tax payer’s) money, we have to trust the government in times like this.

There is a disadvantage to this as well; it means that the government has direct control over these banks, in America I am fairly sure that it would be deemed as unconstitutional for the government to hold such high stakes in major mortgage lenders and major loan holding companies.

I do agree with you though, Catherine. The tax payers should be allowed to see where the money is being spent. After all they have already proven to be naïve with money - by allowing risk to outweigh potential profit (resulting in our current problem).

The high lending in the 1920s led to high speculation - a similar problem to todays. The trouble is that speculation does not disappear quickly. This speculation will no doubt increase the distrust of banks, which is why they should be more transparent and honest about what they are doing with the money. It would not surprise me if they were using the money to secure their bonuses, or if they had risked it by lending it to people who they probably shouldn’t have lent it to - especially in this climate. That last sentence was speculation and although it may not be true, that is what people may believe. This lack of trust will not lead to any people being willing to invest a seemingly underhand company and investors is what these banks need, as much as customers.

Politicians are Criminals! How else do you explain this Scam? It is phony as Global Warming!

Both zenium and bceent are saying the same thing. the US Government has injected US$8.5 TRILLION into the monetary system so far. Milton Friedman did a study going back over the centuries that shows there is a two year delay before an increase in the money supply causes an increase in inflation. The formula (from Wikipedia) is:
the “basic inflation identity”:
%P = %M + %V - %Y
Where Inflation (%P) is equal to the rate of money growth (%M), plus the change in velocity (%V), minus the rate of output growth (%Y).

In layman’s terms, if you double the money supply, (US$8.5Trillions is about double the M1 Money Supply), and we return in the future to ‘normal’ velocity and output growth, the US dollar will only buy half as much at home and around the world. If other currencies increase their money supply at a slower rate, then the US Dollar will devalue in direct proportion to the difference in the money supply between the two currencies.

So, having real assets now, will pay off over the next two years, rather than holding onto cash equivalents that will be devalued.

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