The Silver Bomb: The End Of Paper Wealth Is Upon Us by Michael MacDonald

Author:Michael MacDonald [MacDonald, Michael]
Language: eng
Format: epub, azw3, mobi
Publisher: BookBaby
Published: 2012-04-26T22:00:00+00:00

Chapter 4

It Takes Inflation To Make A Bubble

Welcome to the World of Too-Big-To-Fail-Bailouts, Ballooning Sovereign Debt Bubbles, and the Big Bang Theory of Fiat Currency

The Debt Bubble had burst, and suddenly the US Taxpayer was going to have to pony-up and bail out the banks. The public was told that it was their fault for living so far beyond their means and buying things they could not afford. They were informed that it was poor performance by borrowers that had been the cause of the dilemma. They were told that it was going to be the-end-of-the-world-as-we-know-it scenario, if the financial institutions were not propped up, since they were so crucial to the economy, that they were too big to fail.

What convincing rhetoric that was. No one had heard the likes of it before. It sounded so grave and so important that it had to be true. In addition, what was being asked for was so enormous, that it really had the ring of actually being the conceivable size of the price tag to fix it all, when everything goes wrong at the same time.

That was just the first round. It was announced shortly thereafter that the situation was worse than had been suspected. It was broadcast how the delicate markets had been so hard hit that there had been a spillover effect in other sectors of the economy and how a feared crash of the U.S. economy was shaking the economic confidence of markets worldwide. In other words, the public was told that this was again about to become the financial apocalypse.

More banks needed rescue, both at home and abroad. It was not just banks that needed rescue, but businesses, and government, and the Federal Reserve System, known as “the lender of last resort,” was just the entity to do it. There would of course be the usual exchange of securities plus the customary payment of interest as allowed by law.

Still that wasn’t enough. The search for the guilty found no one in particular to pin the whole mess on. The discount mortgage underwriters and big banks, which being sure of governmental guarantee of insured deposits, made untold billions and billions of dollars in shaky loans and caused the whole solvency crisis in the first place, went un-prosecuted for fear of speeding up the pace of economic implosion. Even when convictions of wrongdoing were obtained against some of the most flagrant violators, the fines levied were infinitesimal compared to the profits made and were paid off as simply part of the cost of doing business. Giant financial corporations would simultaneously offer bundled investment products like Mortgage-Backed Securities, but would sell Credit Default Swaps which would pay off upon the default of the same paper and hedge their earnings by betting on both sides. Anything the big banks wanted to do seemed to be the new way of things.

The paralyzed, or in large part, uncomprehending U.S. public witnessed the nationalization of industry, including the takeover of General Motors, now disparagingly referred to as Government Motors.

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