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Where does bailout money come from?
Rows of dollar bill notes at the Bureau of Engraving and Printing in Washington, D.C.
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TEXT OF STORY
KAI RYSSDAL: The government's been throwing cash around willy nilly to do all these bailouts. Bear Stearns, AIG, Fannie and Freddie. And that doesn't even count the hundreds of billions in short-term cash loans to keep things flowing in the banking system.
Pretty soon you're talking real money. But where's it all coming from? And how often can Bernanke and Paulson keep going back to that well?
Marketplace's John Dimsdale reports from Washington.
JOHN DIMSDALE: To help pay for these bailouts, the government sells securities. And right now, there's plenty of demand because those securities are considered safe in the midst of all the turmoil.
For example, today the Treasury Department auctioned $45 billion in short-term IOUs. They'll be bought back in only 35 days.
Ward McCarthy, the managing director of Stone and McCarthy Research Associates, says investors snapped them up at some very attractive interest rates for the government.
WARD McCARTHY: There were some people who actually bid zero, just to know that they would get their money back in 35 days. They were willing to lend the money to the Treasury for free, knowing that they wouldn't lose it in the stock market or that they wouldn't have it be held by another financial institution that could undergo some difficulties.
Is there a limit to the government's largesse? Not as long as people are confident the government will pay its bills, says Wharton Business school professor Jeremy Siegel.
JEREMY SIEGEL: The government cannot run out of money. Go into your wallet and take a look at what you've got in it. It's called Federal Reserve Notes. Those are under control of the Federal Reserve. Do you notice that they don't say they are backed by gold. They are not backed by silver. They don't have to have anything behind them except the full faith and confidence of the government.
And in the AIG case, the government might actually earn money. It's demanding an 11 percent interest rate on its two-year loan, and holds nearly 80 percent of the insurance company as collateral.
In Washington I'm John Dimsdale for Marketplace.
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Michael Smith-
As "sheepish" and "semi-educated" as you may believe several of the posters to be, they at least maintain one priceless characteristic which you have obviously lost in an "investment" somewhere along the way. Humanity. The entire point of government control is to assist the people who claim ownership of its citizenship, regardless of how poor they may be. You do not determine eligibility, nor worth or quality. Please read a book on ethics before you demonstrate how void of human character you are. True worth lies in a government's population and it's resources. Business is byproduct, not the incentive.
Lets get to the root, thats what everyone realy wants. The world financial system is controlled by a couple of families, the fedral reserve, the bank of england etc etc are owned by them. Our governments are paid (well paid) employee's of these banking families. The only two US presidents that were not employee's were Lincon and Kennedy and what did they both try and change ?We are in a recession because it is all part of the plan. The trillions of debt the people are in mostly comes from the fed, IMF,world bank,bank of England etc all owned by the same families, China is simply a divert. If you completely control the financial world, media, governments printing presses etc you can loan as much money as you want from nothing other than a few keys on a computer.A world recession is the best way to turn this illusion of money into land, buildings, oil reserves, ie real things, more control, and we keep on going for it....Sorry people its that simple. The sad thing is that all the time ordinary people to change this BS without any violence by simply waking up on mass. Meanwhile brace yourselves for the second dip....
Money is not what we need, but resources. A global resource-based economy WITHOUT MONEY is difficult to imagine, but possible. Think about it; money only brings us problems. We all think money, money, money! But, there's plenty of resources out there for whatever we need, as long as they are managed and developed well. A resource-based economy is not a new kind of communism. It is a system where everyone gets what they need in abundance. Read more on http://www.theresourcebasedeconomy.com/
There is no doubt in my mind that the worst is yet to come... it seems to me that many investors purchased these CDO's
which were pretty much not worth the paper they were printed on... all this money the gov. is printing will be additive once the economy recovers which will take time but the trick is that the stockmarket a foward looking price mechanism...basically because greed doesn't wait it prices future growth through recovery ahead of the actual recovery the rub is... all this money being pumped into the economy will have to be pulled back out somehow before inflation increases quite quickly... the vehicle is to increase interest rates but... then the stock market again looks foward declines in anticipation of lower economic activity through the erosion in consumer purchase power the trick will be when will this occur? my guess is within 3 to 4 years
If the government is borrowing the money from the people in order to pay for these massive bailouts, how is the government going to pay those people back?
$45 billion in short term IOU's are...well...IOU's, you have to pay the people you borrow the money from BACK in 35 days. How is giving bail-out money to people going to make the goverment money?
There is nothing at all in this article about where the bailout money comes from...it's just saying they're borrowing to bail someone out, it DOESN'T MAKE SENSE.
I agree with Michael Sullivan and want to take it some steps further even: if the US were Smart they'd unite with Europe: 1 currency, 1 ID, 1 Federal Law, no VAT in between members, 50+27 States and we would call it Eurica.
Optionally the UK could join in, then we would call it the United Eurica.
Ofcourse some Asians might become interested, so then we could call it United Euricazia.
When the Russians join in we'd have to call it United Euricasszia.
And by the time we finally get the Middle-East to join, it would probably be called United North-East-South-Western-in-the-Middle of Euricasszia.
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