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girl gone mad's Journal
Posted by girl gone mad in General Discussion
Sat Aug 13th 2011, 01:07 AM
This is a good piece about how the gluttony of the banks is now threatening to tear Europe apart. The bailouts cannot and will not succeed and the longer this game continues, the riskier it becomes.

Unlike America, European countries do not maintain currency sovereignty. The German taxpayers will have to take a direct hit from these doomed rescue plans. Our massive bank bailouts did not impact our tax rates. The money was funded mostly through monetary operations as an end-run around Congress after the overwhelming public backlash to TARP. We've paid the price in other ways, though, such as higher commodities prices, significant malinvestment of capital and this lingering economic malaise reminiscent of Japan's "lost decade".

It seems like no one is out of the woods yet, except maybe Iceland. Zombie Bank Apocalypse.. coming soon to a theater near you.

German Taxpayers Willingly Subsidise Bankers
August 11, 2011
By Michael Hudson /

NY Times, August 11, 2011
A debate between five economists on “Why Aren’t Germans Protesting?”

Rightly Disgusted at the Banks

A bailout, like any other government expenditure, is a tax. Someone must pay all this money. And it is unfair to tax the broad population to pay for a special interest. Instead of being a progressive tax policy, bailouts enable bad behavior by the financial elite, sticking taxpayers with the cost.

Bailouts are unpopular among Europeans who see them as a tax being paid by the population as a whole to financiers at the top of the pyramid. These bankers have lived in the short run, taking large risks of capital for short-term gains to outperform their rivals. It is a game that most individuals have not played with their own savings, and they don’t think that governments should compensate banks for taking these risks.

The bonds in question are held largely in German and French banks in Europe, and by U.S. banks. Germans are especially angry by reports that U.S. Treasury Secretary Timothy Geithner intervened in opposition to the insistence of Germany’s chancellor, Angela Merkel, that bondholders should take a loss on their irresponsible investments. News reports say that as many as half the troubled securities are held by U.S. money market funds or subject to derivatives gambles. So it is not only European banks that are being bailed out, but also risk-taking U.S. speculators.

Banks bought these bonds to earn high rates of interest; they took a risk, and now the taxpayers will pay. This is morally repugnant.

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Posted by girl gone mad in General Discussion
Sun Jul 31st 2011, 05:49 PM
Since this idea went mainstream, the reaction has consistently been: ZOMG! Inflation!!1!

This response seems to be based on the misconception that the money being created is going to be "spent" in the economy, but that's not what actually happens.

For the uninitiated, the basic idea is:

The US Constitution gives Treasury the authority to mint coins, and there is no legal limit on the face value Treasury can set for platinum coins.

Treasury can mint a platinum coin and stamp $1 Trillion on the face, then swap the coin for $1 Trillion USD credits from the Fed. The coin will be stored in Treasury's vault at the Fed where it will never circulate.

Treasury would then use those USD credits to retire $1 Trillion worth of US Treasury bonds. This is the key to understanding why the operation is not inflationary. $1 Trillion in US dollars are going into the private sector while $1 Trillion in Treasury bond holdings are being removed.

No net financial assets have been created in the private sector. The net effect is actually slightly less money in the private sector because once the bonds are retired, they no longer bear interest and cash reserves pay a much lower interest rate.

This procedure would give the government the ability to pay its debts, but again, this is not inflationary since they are merely paying for spending that was already approved back when the budget passed and not doing any additional spending now. The entities to which money is owed already expect to be paid and have budgeted according to that expectation.

Just wanted to make an OP since this comes up in every single thread on the subject. Feel free to correct any errors or add more details.

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Posted by girl gone mad in Economy
Tue Dec 08th 2009, 11:44 PM
For it to survive, there will need to be a lot of structural changes.
Read entry | Discuss (1 comments)
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