I have a serious question for the financially astute on this board; Where is this money coming from?

[debbierlus]

70 billion 'infused' into the banking system....

80 billion dollar bailout for AG

110 billion for Fannie & Freddie

Wachovia, Washington Mutual, and others stand on the line....

I know they don't release the figures of how much money they print - so is this just the reserve printing up gobs of worthless money that will drive our economy into quick ruin?

We don't have any money. Are we borrowing this money? I don't understand.

[AllieB]

1. China and the US taxpayers.

[TransitJohn]

2. Our children

n/t

[Winterblues]

22. Children's children's children

It will not be paid in our childrens lifetime. Probably not even the interest on the new Debt accumulated under the Bush* Cabal an be paid.

[TechBear_Seattle]

3. I work in the financial sector. None of my co-workers have any idea.

I asked around yesterday, "Where is the money for these bailouts coming from?" No one knew, and that scares a lot of them. We all agree that the plummetting US market indexes is not so much about the failures as it is a mark of uncertainty about the bailouts themselves.

[Suji to Seoul]

4. The magic Money Tree Fairy?

[Cessna Invesco Palin]

5. Start here:

http://en.wikipedia.org/wiki/Federal_reserve#Purpose

http://en.wikipedia.org/wiki/Lender_of_last_resort

[jovi]

6. Good Question- My thoughts also

I was wondering if the feds are just behind closed doors printing off the money as fast as they can, making the value of the dollar worthless. Where did you hear/read that wachovia is in trouble?

[debbierlus]

29. It has been repeated in a few different places - I did a quick google here is one:

http://blogs.financialcontent.com/financial_stock_news/...

[smoogatz]

7. Great question!

It's coming from future tax revenues, we hope, and more immediately from the sale of treasury bonds which help to finance our debt in the near and long term. The more bonds we're forced to sell, the higher the interest rate we'll have to offer. Deficit spending long term can also trigger inflation or even hyper-inflation, especially when coupled with shortages of essentials like energy. Bottom line, stock up on staple foods and keep a sack full of cash under the bed--it's going to be a wild ride for the next year or so, most likely.

[EV_Ares]

8. Taxes, confiscation of the public's money thru raising of taxes, yours and

mine to give to whomever, i.e. bailouts.

The Fed printing money out of thin air which also causes inflation of goods and services that we each have to pay for to live, i.e., gas, food, utilities, our health insurance, etc.

[Junkdrawer]

9. Short Answer: Printing Money....

The longer answer has to do with T-Bills and money creation.

Next up: Dollar devaluation and double digit inflation...

[trof]

18. The Gutenburg Gambit

I crack myself up.

[arcadian]

10. Thin air.

[Sanity Claws]

11. Printing press

It seems to be money not backed by anything.

[rucky]

12. Watch This Film...

"Money as Debt" It covers the Fed Reserve system quite well...

http://video.google.com/videoplay?docid=-90504743625834...

[El Pinko]

13. Your pockets.

The government (fed) prints more money. The money therefore loses value. You and I and everyone else end up paying more for EVERYTHING as a result.

It's a way of jacking up taxes without it ever being called a tax increase.

It'll be interesting to see just how worthless the dollar will become.

Rubbermaid is already discontinuing a lot of their cheesy plastic storage containers because the resins (petroleum) are too expensive for them to be made profitably.

How long will it be before even the plastic crapola from China is too expensive to import?

Oh well, at least we will be able to buy a house for 1/4 what it cost 3 years ago (assuming we can get a loan)...

[Locrian]

14. wizards of money...

Go here and read 1 "How Money is Created" and 2 "Financial Risk Transfer"

One "cure" (or bailout) leads to another crisis down the track, leading to another bailout, another crisis and so on. For every bailout income and wealth gaps increase, because the funding of the bailout must come from places that are not accounted for in the financial system. This is simply because the financial system would be put at risk if the full costs of the risk taking were born by it. Then investors would lose confidence and the whole financial system may collapse. The costs that do not appear on financial accounts are additional burdens to the poor and excessive natural resource extraction. In effect, that is what funds bailouts so that the cost of the bailout will not hit the books of the financial system. This is the mechanism whereby risk takers do not take full responsibility for the risks they assume but rather pass that responsibility on to those outside the financial system. This system of cure over prevention obviously provides higher overall returns to the banking system than would a corresponding regulatory regime focused on prevention.

http://www.robinupton.com/people/WizardsOfMoney /

mp3's available here:

http://www.radio4all.net/index.php/program/3550

[Yavin4]

15. Two Sources: Your Tax Dollars and Inflation

The money is coming from your tax dollars which will crowd out any social spending. So, when you cannot get SS or medicare or money for school or the infrastructure is crumbling then you will know why your govt cannot afford to address these issues.

Also, when you buy food and other goods and services, you will be paying more and more because your dollar will be worth less and less, and since most of us are not a part of labor unions, our salaries won't rise to keep pace with the inflated prices.

This mess has the potential for screwing up our economy for the next 25 years, and that's why this election is so critical.

[DemoRabbit]

23. and, in case you're wondering, inflation = printing more money

which makes it worth less. That's at least partially why prices go up and your wages stay stagnant.

[HamdenRice]

16. Generally by selling treasury bills. The Treasury has become a Hedge Fund

According to the Fannie Freddie bailout, as the Fed buys mortgage backed securities they sell treasuries to raise that money. A lot of these treasuries will be bought by the Chinese who are trying to get out of mbs.

The problem with this is that it turns the treasury department into a giant hedge fund -- buying one debt (mbs) and financing it with another (treauries).

That's scary.

[Yavin4]

17. And Those MBS Are Worthless

Confederate money from the Civil War has more value.

[HamdenRice]

19. Wrong. They still have value

It doesn't help our understanding of the crisis to exaggerate. They have declined in value and if the underlying real estate market bottoms out their value will stabilize. Moreover, unfortunately, according to their terms, even if they pay a little less than face value interest, they are considered to be in default.

Finally, the fed is accepting them at discounted values. So it doesn't help to overstate what's going on.

[Yavin4]

20. Bullshit.

"They have declined in value and if the underlying real estate market bottoms out their value will stabilize."

These fucking MBS are based on a bubble in Real Estate values. Hell, if they did have any value at all, then why are we in a crisis? The underlying Real Estate market aint bottoming out any time soon. We have yet to get to the real bad stuff, Alt-A loans which are due to reset big time later this year. The Alt-A crap makes the Subprime crap look like child's play.

You cannot overstate a financial crisis that has seen the Fed govt buyout Bear Stearns, AIG, Fannie and Freddie, and seen the collapse of Lehman Bros.

[HamdenRice]

21. If they had zero value, there wouldn't be any bailouts

We'd already be in some sort of zero cash/capital society. It doesn't help your understanding of the situation to make up extremist fantasies.

They have declined in value, but they are not at zero value. For them to have zero value, the situation would have to be not one single American paying his her mortgage and every single citizen in foreclosure.

There is no reason to create a fantasy world in order to understand the severity of the problem.

[Yavin4]

34. There are MBS That Have No Value

People with subprime mortgages are not paying their mortgages. People who have Alt-A won't be paying their mortgages. Foreclosures and Notices of Defaults are at record levels. That's what is in these MBS. That's why Bear, Lehman, AIG, Merrill, et al. need bailouts. That's why the markets are tanking.


Hello, McFly, this is a crisis for a reason. This is not some small hiccup.

[Junkdrawer]

36. Look at these two graphs...This time next year will be BRUTAL...

http://calculatedrisk.blogspot.com/2008/08/subprime-and...

[HamdenRice]

37. So now there are only some mbs with no value?

So they are not all worth as much as confederate money? And do you know how many mortgages are pooled to make one tranche of mbs? How many of those mortgages would have to be non performing for a particular tranche to have no value? How many mbs series or tranches can you cite that you know of in which all the mortgages have ceased performing? And are these the ones against which the treasury is selling t-bills?

Or are you just pulling this stuff out of thin air?

[Blue Diadem]

24. They've just started a new program selling bonds for the federal reserve.

http://money.cnn.com/2008/09/17/news/economy/treasury_f...

[HamdenRice]

28. Ironically, despite the turmoil and record deficits it's now EASIER for the fed to raise money

That's because in the financial sector, one of the biggest headaches money managers have is where to park money. Up until about a year ago, the answer was always, park it in mortgage backed securities.

Now that no one will touch them, treasuries are the only option, and the market's appetite for them is drastically increasing.

[APPLE_PIE]

25. The Federal Reserve prints it.

We have a stock market valued at over 35 Trillion dollars and according to the Federal Reserve the money supply is around 1.4 Trillion dollars.
Conclusion: There are not enough dollars on Earth to buy all the stocks listed on the Exchanges. Even if they were to print another Trillion dollars to cover the current Financial crisis in the end it will never be enough. That is the real problem facing the United States of America.

In the interest of fairness all of the other currencies in the world are in the same predicament. They are all over pledged against assets, the only difference being in degree.

THE FED PRINTS IT.

[fed_up_mother]

26. This is just to tide us over until the election, then the house of cards will fall

I think that even these fuckups know that this is only buying time.

[debbierlus]

32. I don't know if it won't fall before then - this is snowballing fast - the fact this is happening

Now, instead of in November indicates, to me, it has really gotten away from them.

And, Bush wouldn't even talk about it yesterday after he was briefed.

This is REALLY bad.

The banks are failing.

[old mark]

27. It is not actual paper dollars - it is like credit.

Think about a credit card.
You buy something for $70 million, for example.
You are giving the seller credit for $70 million dollars, even though you don't have it.

SO - you must pay back the $70 million a little at a time for a long period of time, plus interest on the money you haven't yet paid. This means you have less money to spend on other things you want or need, and it means you may be paying several times the original debt in interest as well.
( I hope you bought something useful and enjoyable for your $70 million, so at least you got some good out of it.)

We had a budget surplus when Bush was elected President.
We owe more money than at any time in our history right now, and it is getting worse by the minute.

Our future generations will have less because of what is being spent right now, because they will still be paying off the Bush debt.


mark

[cleveramerican]

30. don't forget the big three automakers and the airlines.......

...lined up right behind the banks and insurance companies.


the profits are private, the risk is public and the taxpayers get screwed, another day in Washington DC.

[debbierlus]

33. That is all well and good, but the taxes won't cover this - even generational

[bushmeister0]

31. I'm sure the Chinese will just be snapping up those new T-bills we're issuing.

Of course, this guy is in the charge of handling the crisis so . . .



I think he's saying it's fourth down.

[TornadoTN]

35. Thin Air

We are devaluing the Dollar at such a pace, I fear a complete disaster of epic proportions in our economy.