Show Me the Money!

The Gadfly ^ | The Gadfly

[The Conservative Yogini]

As I pointed out in my last post, the American taxpayer will not come to know what has happened to his hard-earned money, the money that has been taken from him in order to "bailout" the corrupt banking system and the illusion that is the U.S. economy:

It's something any bank would demand to know before handing out a loan: Where's the money going?

[TUX]

Its going to buy campaign contributions and therefore votes silly. The system of money power must be preserved by the working taxpayer, his children, and children's children. We, the government, know best how to spend your money, and will use it to keep you in debt servitude forever.

[Papabear47]

Lets see,graft,patronage jobs,vote buying to mention a few.

[ThePythonicCow]

the money that has been taken from him

It wasn't taken from us ... we didn't have it.

There are three ways for a government to get money:

1. They can collect it in taxes.
2. They can borrow it to be paid from future tax revenues.
3. They can print it, reducing the value of pre-existing dollars.

Tax revenues are down, not up, thanks to the weakening economy. So this new money didn't come from current years tax collections. So they most have either borrowed it or printed it.

The usual affect, all else being equal, of printing money is inflation - rising prices paid for by weakening dollars. However we didn't see that affect right away, because there was an even more enormous deflation going on, as the price of almost everything for sale, world wide, in almost any currency, fell over the last few months by historically massive amounts.

Finally in this last month we're starting to see the expected affect of a weakening dollar, due to the printing of all the bailout dollars. The dollar has fallen sharply in the last month. That is, we have more dollars, worth less each.

For a chart of the U.S. Dollar, relative to other currencies, see the chart at http://stockcharts.com/h-sc/ui?s=$USD.

Notice how the dollar became much stronger (not weaker as one would expect with all the printing of new dollars) during the months of August through November, 2008.

In the last month, since late November, the dollar has fallen sharply against other currencies. All these freshly printed bailout dollars are finally catching up to us.

[ThePythonicCow]

I notice that I did not distinguish between whether the Fed borrowed or printed the money in my post above.

Actually, when you own the worlds reserve currency, these are indistinguishable. You can call it all borrowing, and then when the time comes to pay back the debt, if you don't have enough money then, print or re-borrow again, as needed.

Not until the other nations of the world get their act together enough to remove the Dollar from its role of the Worlds Reserve Currency will we have to actually Pay the Piper. Of course, the more we abuse our role of managing the Worlds Reserve Currency, the more we hasten the day that the other nations of the world will be motivated to remove the Dollar from that role.

[csmusaret]

Ask Pelosi and Reid. They are the leaders of the gutless, clueless mob of 535 who begged Paulson to take the problem off their hands and gave him the nation’s checkbook to do it with.

[The Conservative Yogini]

Good points. But Inflation is a hidden tax. You forgot that one in your list. That is how it is taken. And it will be taken some more. It has also been taken through the stock market, investments, pension plans, 401K, which for many people are wiped. All their years hard work - gone. All they hope for is that the Fed will turn the markets around and they will get at least even on their investments.

We haven’t even felt the enormous pain of the inflationary dollar yet. The money is still being hoarded by the banks. People can’t even get loans unless their credit is absolute gold. They can’t buy homes. The housing market is collapsing and will stay that way for some time. Prices are falling, but that is because the market is correcting itself. Yet in the Fed’s eyes, this is not a correction, but a recession that has to be stopped at all costs. God forbid if we let the real market show the way. The Fed prints bills to counter this recession. It takes quite a while for all this hot currency to “trickle” down in the system and ultimately dissolve the power of the dollar, raise prices and then artifically redistribute the wealth as those who benefit from the extra cash (few of the wealthy) dominate the market with their artificially inflated purchasing power. The regular guy who works for his dollars? He is out of luck. The Fed doesn’t tell us what it is doing with those dollars? Because it is not doing anything really to benefit the taxpayer or “America”. It is just doing everything it can to save itself and its friends.

[ThePythonicCow]

But Inflation is a hidden tax. You forgot that one in your list.

No - I didn't forget it. I just described it differently, as:

They can print it, reducing the value of pre-existing dollars.

Otherwise, I agree with your post - good comments.

[ThePythonicCow]

And then I went futher, connecting the dots between printing this extra money and price inflation, when I wrote:

The usual affect, all else being equal, of printing money is inflation - rising prices paid for by weakening dollars.

I think we are in violent agreement <grin>.