Where Has All The Money Come From?

This blog entry was first published here on 14 November 2008.

Hardly a month after the bailout we’ve all but forgotten about it. We’ve had the distraction of the US Presidential election in the meantime and now the media is concentrating our attention on how Obama is going to get his country out of the quagmire.

But don’t let us forget that the US government pumped over $700 billion into the banking system to save it from destruction. Actually the real figure, as far as we can establish, is around $810 billion, the extra $110 billion being for “sweeteners”, i.e. bribes and other underhand payments to ensure the whole package is glossed over and not subjected to unwanted scrutiny.

That’s a lot of money, and all the media can say about it is how it’s going to have to be repaid by our children and grandchildren, and will cause taxes to rise. That’s true enough, but the interesting point is about where this money came from in the first place.

It wasn’t the US government. The government is just the intermediary, acting as a guarantor that the money will be repaid to the ultimate lenders. It’s the same with all other countries that have adopted the same “solution” to the credit crunch.

Banks are over-stretched and losing money. Eventually they can’t afford to honour their obligations to either their own creditors or each other. They have to go cap-in-hand to the government for a “bailout”. The government gives them their bailout to the tune of hundreds of billions of dollars, which it borrows from the central bank, which in turn is owned by . . . private banks!

What a conundrum! Or is it? It only makes any sense when you realise that the banks that own all the stock in the Federal Reserve are not the same banks that have been forced to plead for government cash and accept partial nationalisation, as here in the UK. Although, of course, Lehman Bros is listed as a major shareholder in the Federal Reserve. So something’s going on that the media certainly isn’t going to inform us about.

We must keep digging until we get to the bottom of it all. In the meantime, download and read the classic “Promise To Pay” by Dr R. McNair Wilson, free of charge from our home page, and . . .

Spread the word!

Philip Gegan


Why Hyper Inflation Is The Price Of The Bailout

This article was first published in this blog on 16th October 2008.

It’s often been said that politicians can only solve a problem by throwing money at it. The same also applies to bankers and economists. The Credit Crunch is proving that.

What is happening is this. Leading banks in nearly all Western countries have lost billions on loans that have not been repaid and should not have been made in the first place. Now they demand a bailout from the government to prevent them from going under and taking everyone else with them. If only small businesses could do the same when they lose money on a deal.

The government agrees to bail them out by borrowing the necessary money from the Central Bank (e.g. Federal Reserve, Bank of England). But where does the Central Bank get the money from?

Simple. The money is created out of nothing. Let me explain. In September 2008 the Federal Reserve increased its balance sheet by almost as much as it had in the first 86 years of its existence (Agora Financial 3 Oct 2008). In around 2000 its “assets” amounted to around $700 billion. That figure increased by about $50 billion a year up until September 2008.

In September alone, the “Fed” increased its assets by a mind-boggling $600 billion. What that means is that it created $600 billion out of nothing and lent the “money” mostly to the US Government for it to be pumped into the economy via the banks that have just lent out too much promise-to-pay money already. And that was before the much-vaunted $700 billion bailout.

Now what is all this really going to do for the US economy? And the economies of other countries, come to that. Well, let’s take gold, for example. In July 2008, before the financial crisis became a disaster, the total value of all the gold in the world (above ground) was estimated at $4.2 trillion. With over a trillion dollars added to all the other trillions the price of gold, currently hovering under $1,000 an ounce, is set to take off dramatically.

And the same, of course, applies to just about anything else you can think of. It’s obvious, really. The more money you pump into the economy without an accompanying increase in the amount of goods and services circulating in that economy, the less it is worth in comparison, and therefore the higher the inflation.

Hence, hyper inflation is the price of the bailout of the toxic banking system.

Philip Gegan

Get YOUR free Guide to the financial madness, Promise To Pay, the classic written by Dr R. McNair Wilson, by visiting our main site at www.ancientbankingsecret.com.