The Bailouts: The Greatest Heist In Our History

I found this video while reading news articles online.  These guys summarize what this bail-out garbage is about. In the past I’ve talked about this same thing. Bankers inflated the markets lending out tons and tons of money (much of it cooked up out of thin air through fractional reserve banking). They loaned money to anyone and everyone, not even necessarily intending to be paid back. They were making money off lending fees, passing debt around among themselves, selling these debts to other institutions (giving them triple A ratings), and other schemes. They didn’t even run proper credit checks on most people. They knew the loans were bad, and wanted to discard them as quickly as possible.

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As for the insane lending, I can testify to this first-hand. I know of people who were getting huge loans and had just recently filed for bankruptcy. This huge influx of fake money blew housing prices out to Pluto, but eventually people couldn’t make their bill payments. Too much debt and those who dug themselves too deep couldn’t pay the bills. Having gas prices shoot to the roof didn’t help either. A lot of companies were making their big profits under this Ponzi scheme, such as the auto industry (which is why car prices went to insane levels). $30,000 for a normal car! General Motors was making fortunes selling cars.

One of the main problems was that homes were being valued way too high, and banks were letting people refinance. People were handed huge wads of money to spend. Everyone had a mindset that home values would continue to increase indefinitely. We were all told that buying a new home was an investment!  Just look at how much money people were making, holding onto their homes!

I remember back in 2003 or 2004, my parents told me, “Jason, you’re making good money. You should go out and buy a new home while the interest rates are so low. You can get a good deal.” I told them, “Real estate is in a bubble. These prices are bloated, based on bankers loaning out huge sums of fake money. I’m not buying a home until the bubble pops, and prices get realistic again.” They gave me a confused look, thought I was crazy, and the conversation ended there. But I study economics and saw this coming back back in 2002. Greg and I sat in the office and talked about the stock market, and the real estate bubble. While everyone else buried themselves in student loans, new car loans, and mortgages, Greg and I stayed debt free. We knew this was coming.

I remember sitting in our Pine Street office suit on the 3rd floor, looking out the window. Greg and I sat on his black leather couch and wondered when it would hit. After all, with Austrian economics, you can’t quite tell exactly when the bubble will pop, you only know it will relatively soon. We then passed around various economics books, like Robert Prechter’s “Conquer the Crash”, and prepared ourselves.

People who had bought their homes in the 1970s and 80s for $30,000 now found their homes worth $150,000 or $200,000. This fake money being pumped into the system by these bankers had shot up prices way beyond what they should be, but the average person on the street thought this was a good thing. People thought this represented prosperity.

People took this new found mortgage equity, borrowed money against it, and then blew it on cars, home renovations, big screen TVs, and what not. But once people’s previous home equity had been spent, and no more credit was being dished out, the jig was up. People couldn’t purchase the cars. They couldn’t buy new computers. They couldn’t build new swimming pools. What then? The economy started to contract, and quickly. People had no more fake money to spend, and the economy went south.  Take the auto industry for example:

U.S. Auto Sales

Auto companies profits sank, and when profits start to drop there’s one of two things that happen: 1) Job loss or 2) Pay cuts. Initially companies compensate for this by firing excess workers, but eventually they have to start cutting pay.

The majority of Americans at this point are living paycheck to paycheck. They have zero savings, as is shown by this chart (1959 to today):

US savings rate

Only recently have people realized that we have to save money — I’m guessing out of fear for the future. But when the crisis hit people had no savings to handle the job loss, and started defaulting on the car loans and their mortgages. Everything tied to industries based on debt started to go under. The economy was caving in. All the factories producing parts for the auto companies were going under. The computer companies couldn’t sell you a new computer on payments  and had to lay off workers. Furniture companies went under when they couldn’t sell “no money down” living room sets anymore.  Basically any company making their money through debt financing was going under.

Since these unemployed workers had no job, they had no money to pay their bills. They also had no savings. They begin to default on their loans. (These are the loans the bankers sold off to other institutions). Anyone holding this bad debt goes under.

Some financial institutions make huge profits. As for the other financial institutions who ended up holding onto this bad debt, they begin to go under. It’s a big mess.

At this point the bankers have made fortunes, but many are in trouble because the Ponzi scheme is collapsing on itself. The head of the banking cartel, the Federal Reserve, steps in and bails-out the bankers by purchasing all of the bad debts. The American public is then scammed into this deal, sold a bunch of bloated, fake, debt garbage. What’s in the bag? Our own over-valued mortgages and other bad debt!  (And remember, all that debt was created out of cooked up, fake money)

This is exactly what Austrian economists talk about.  The Federal Reserve, and the banks, expand the money supply, then they contract it and create recessions.  They get the economy dependent on their fake money to operate, then they pull the plug.  They cut off the flow of the fake money and everything tanks.

As for the bail-outs, we (the people) are lied to from every angle. The majority of worthless commentators, politicians, and journalists were telling us “we have to act now”, this is to save “main-street, not just Wallstreet.” No time to think it over. No time to investigate it. We have to get this legislation passed NOW. And Obama smiles at the camera and assures us that we need to go through with it. The mass of people reluctantly go along with it.

Not long afterward we discover that ungodly sums of money are being handed to the bankers, and we are stuck with the bill. Our taxes are going to increase, and our entire future is put on the line. $13 trillion dollars… How many kids could that send to college? How many people’s healthcare bills does that represent? A LOT. But it instead goes to the bankers to bail them out of their Ponzi scheme.

Our politicians are worthless. They’ll speedily pass a bill which screws all of us out of our money. Hand trillions of dollars to bankers. But then they scream out, “We have no money for healthcare. We have no money.” That’s what I saw Fox news commentator Glenn Beck telling us.  He’s clueless and is missing the entire point.  No money.  Psshhh.  And why is that, worthless politicians? Why’d you sign off trillions to bankers? Why are we fighting these wars in the middle-east, if we’re so broke? You guys have no problem finding money for bombs, tanks, and fighter jets. Get some spine. Stand up to the bankers, take our money back, and reallocate it to things that actually help the American people!  They say Ron Paul is an outsider, on the fringe.  As far as I’m concerned, he’s one of the few politicians in there with any brains!  He’s been fighting against the Fed since the 1980s.  He’s voted against all the wars, and every budget that wasn’t balanced.  He was against things like the Patriot Act, stealing our civil liberties.  Sounds like a good guy to me.

As if all of this isn’t insane enough, Ben Bernanke and the Federal Reserve act like it’d be detrimental to the economy if we were able to look at all this bad-debt we’ve been forced to purchase. Why? Because if we found out what we’ve been scammed into, there’s going to be a lot of bankers and other financial goons in some BIGGGG trouble.

Then we’re told that unregulated free markets caused this problem.  RRIIIGGGHHTTTT.  The ONLY reason this happened is because the government allows the Federal Reserve, the mastermind center of the banking cartel, to continue to do what it does — screw around with the money supply, fractional reserve banking, create fake money galore, and all of that.  This has NOTHING to do with free markets.  Nothing is free about this system.

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