QUARTER TRILLION US DEBT IN ONE MONTH!

[Joanne98]

The world continues to slide into a depresssion. Since this whole mess began deep inside the banking systems as the flood of super-cheap loans from the Japanese carry trade overwhelmed the world’s ability to park debt on top of assets and future earnings, we are now in a 0% system where money is not created but continues to vanish. Why is that?

Money is vanishing because jobs are vanishing. This, in turn, cuts down on not only simple consumption but also the very vital aspect of future earnings. Bankruptcies are now soaring, commodity prices dropping and industrial output is crashing. These are all signs of depression. The US and the G20 nations hope to get money creation re-started but it isn’t all that simple. As we know from previous depressions.

First off, credit creation has not disappeared.

This is easy to understand. Someone is creating more credit like crazy. This someone is the governments of the G7 nations. In particular, the biggest debtor nation on earth, the one who owes the most money to the most people, the US, is creating credit out of thin air at an insane rate.

Washington’s $5 Trillion Tab - Forbes.com

According to CreditSights, a research firm in New York and London, the U.S. government has put itself on the hook for some $5 trillion, so far, in an attempt to arrest a collapse of the financial system….The estimate includes many of the various solutions cooked up by Paulson and his counterparts Ben Bernanke at the Federal Reserve and Sheila Bair at the Federal Deposit Insurance Corp., as the credit crisis continues to plague banks and the broader markets.

The Fed has taken on much of that total, including lending a cumulative $1 trillion in overnight or short-term loans since March to primary dealers through its emergency discount window and making a cumulative $1.8 trillion available through its term auction facility, a series of short-term transactions it began making available twice a month in January. It should be noted that a portion of the funds lent in these programs has been repaid and that the totals represent what has been made available.

Basically, the entire US banking system has gone bankrupt. The fiction of banking continues so that the economy doesn’t totally shut down. But it is supported by creating credit for the US and then basically selling it to the US government which is the thing that is deep in debt. These debts are being held against the US taxpayer’s future earnings. And with layoffs skyrocketing, this is not going to hold.

When Paulson and Bernake went to Congress with a one page proposal to let these twin troublemakers create $700 billion in US taxpayer credits, it was, as I surmised back then, merely the camel’s nose under the tent. I never owned any camels. But I have owned cows, sheep, goats, horses and other critters.

The idea is, when these large mammals get their noses under a fence or door or something movable, they will shove forwards if there is grass on the other side. With my oxen and my Haflinger horse, mere fences didn’t keep them in. They would merrily go right through. Only barbed wire worked.

The banking gnomes needed to break down the fence and feed in the Federal fields after they utterly ate up everything in their own pastures. So the $700 billion was cooked up as a scheme to gain permission to do what they are now doing: creating credit with no reserves to back any of this. Only more IOUS. Once they got permission to do this slightly, they did it merrily and continuously. With no debates, no laws. Totally via fiat.

Readers of monetary history can clearly see that these things happen all the time. Namely, huge, huge, gigantic monetary changes are always done via fiat and usually, only three or four people at the very apex are involved. Usually, a President. In this case, our present occupant of the White House being a lunatic, he was cut out of the deal and the unelected Treasury Secretary unilaterally did this with the privately owned Federal Reserve banks assisting.

http://emsnews.wordpress.com/2008/11/14/quarter-trillion-us-debt-in-one-month/#more-218