Gary North: Ben Bernanke’s Hush Money
Posted July 27th, 2008 by Michael Nystrom
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by Gary North | July 26, 2008
The bailout of IndyMac’s depositors will probably deplete 10% of the FDIC’s reserves.
Congress will back up the FDIC if the FDIC ever (1) runs out of T-bills to sell (2) to raise money (3) to pay off depositors of insolvent banks. But where will Congress get this money? From the Federal Reserve System, if lenders will not fork over the money.
The Federal Reserve System backs up Congress. This is the heart of the threat to the solvency of the dollar.
The $4 billion that the FDIC will pay to a handful of depositors at IndyMac is hush money. It is paid to them to silence every other depositor in the country. "Don’t spread rumors about any insolvent bank." Why not? "Because, in a fractionally reserved system, all of them are technically insolvent."
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The law of diminishing returns.
This was an excellent article by Gary North.
I also agree that the Fed will try to fight deflation with inflation, but only up to a point. My opinion is that inflation will eventually lose its effectiveness to fight deflation. I agree that inflation is likely to continue for now and perhaps accelerate, but eventually, it would lose its effectiveness to fight deflation, in my opinion. For example, what if the gas price continued to go up? I would think that people would spend less on other goods and services. Then, I would think that more businesses would fail and more banks would fail. So, I think that at one point, it would become pointless to try to save the economy by goosing up the demand by inflation. Or, I think it would become pointless to prop up a failed bank only to cause two more to fail.
"Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters." Benjamin Franklin
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Good analysis by Gary North.
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"An economy built on fiat money is a society on its way to ashes."
I read last night
that australia is fed up and will be calling in all US loans tomorrow on housing ? they say that this could tip the iceberg showing the nasty underside of it.
very well said-this is the
very well said-this is the heart and root of many of our problems- bad money, down with the FEDERAL RESERVE.
I believe two other banks
I believe two other banks went belly up Friday evening, conveniently after the markets closed...
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