"Banks are borrowing from the gov't for free, then lending to another arm of gov't at interest"

[Hannah Bell]

Headed for a double dip?

(Data on job growth, profits, etc)

WHAT THE Fed is doing is known in central bankers' jargon as "quantitative easing"--that is, printing money. However, the Fed has kept interest rates around zero since December 2008, and the economy still hasn't responded with strong growth. And the latest injection of cash--around $200 billion--is small potatoes compared to what's come so far. The Fed's balance sheet has expanded from around $800 billion in 2008 to $2.3 trillion today. That means the Fed's purchase of mortgages and other dubious assets have added around $1.4 trillion in cash to the economy.

The Fed has already pumped money into the system on a scale that dwarfs both the TARP program and the stimulus package. Banks have been able to borrow from the Fed at near-zero interest rates and then buy U.S. Treasury bills paying around 4 percent. In other words, the banks are borrowing from the government for free--and then lending the money back to another arm of the government and collecting interest. Then there's the alphabet soup of special loan programs that prop up the banks and other financial institutions in other ways.

When all this is factored in, the various arms of the U.S. government loaned, invested or guaranteed around $13 trillion in the U.S. economy in the wake of the economic crash of 2008, according to Bloomberg. Neil Barofsky, the inspector general for TARP, last year estimated that the total cost of bailouts could exceed a mind-bending $23.7 trillion if the economy tanks again...

By throwing trillions into the economy, the U.S. was able to avoid a Great Depression-type collapse. Still, growth remains stagnant. The U.S. finds itself in a position similar to that of the Japanese economy in the 1990s--in what economists call a "liquidity trap," when zero percent interest rates weren't enough to revive the economy.

Today, the flood of money from the Fed and other central banks can't overcome the basic problem of the world economy: the crisis of overproduction on a world scale. The collapse of consumer demand following the credit crunch of 2008 has made this problem all the more acute. As a result, U.S. corporations are reluctant to use their existing capacity to its fullest, let alone invest in new production that could create jobs...


http://socialistworker.org/2010/08/12/headed-for-a-double-dip


Why would they invest in production & jobs, when they can borrow free money from the government & lend it back to the government at interest?

wotta racket.

REMEMBER WHEN THEY TELL YOU THEY HAVE TO CUT SOCIAL SECURITY OR INCREASE SS TAXES -- IT'S SO THEY CAN GIVE MORE OF YOUR MONEY TO BANKSTERS.

[leveymg]

1. This also explains the Jobless (so-called) Recovery, and continuing decline in most sectors

of the economy despite the stimulus. Large multinationals are taking these public bail-out funds and moving operations offshore, meanwhile the banks are refusing to fund or invest in domestic projects.

The Fed and Obama Administration are simply encouraging capital flight and printing the money to facilitate it.

[midnight]

2. Why can't we print our own money. Why do we need the

private bankers "the fed" to do this? But this would explain why we can't get mainstreet out of the ditch?

[girl gone mad]

3. I agree to an extent..

but I don't think it's valid to say quantitative easing is "printing money". The Fed is simply swapping high-yielding assets for low-yielding assets. No money is created in the process. It's basically an exercise in futility, as Japan's decade long experiment clearly proves.

[Junkdrawer]

4. Add to that proprietary lending: They lend to each other so that they can leverage....

a Fed loan 10, 20 sometimes 40 times. And then they take the leveraged money and invest it in stocks, currencies and foreign treasuries.

Basically, the Geithner Plan for fixing the Sub-Prime Banking Crisis was to allow banks to keep the loans on their books at face value while allowing then to "earn" their way back to health with proprietary lending. And, yeah, IF it works, it wouldn't help Main Street one little bit. But if there's even a small crash in any of the investments, there's another big crash because of the leverage.

Great plan, huh?

[dipsydoodle]

5. May help explain

why they won't divulge who buys what.

There was a suggestion here on DU last week, ridiculous as it might sound , that the Fed was actually buying its own bills.