The Rescue Scam

Let's say you and I do business exclusively with each other and that our respective banks are the only ones on the planet. Now we write a lot of checks which our two banks continue to cash even though both of our accounts are overdrawn. This situation can go on indefinitely so long as each was willing to honor the other guys check. But what happens when your bank discovers that I'm broke? They immediately stop cashing my checks right? Wait not so fast, who else's check are they going to cash, do they simply go under? Suppose on top of that my bank finds out your broke, what then? Well that's the fix the global banking system finds itself in. The banks cannot continue to cash checks on overdrawn accounts because they will go out of business nor can they stop cashing our checks because then neither bank gets the money back from our previously cashed checks and banking on the planet grinds to a halt. The government can make a lot of noise about bailouts telling the public that they will not let banks fail and that's supposed to fix it right? Wrong. Because we are each still broke and so the banks comfortably propped up will still refuse to honor our rubber checks. Would you lend money to me just because you knew that my bank was solvent? The banks won't cash my worthless check either, even solvent banks will stop lending. That's the difference between banks going bankrupt and the total melt down of the entire global banking system. No one will lend so no one can borrow until eventually no one will spend, this is the economic apocalypse which is now so nearly at hand.

So, all the talk of this pathetic rescue plan is just a con game, but to what end? Do you know why Paulson's mortgage bail out plan helps so few people and even punishes the people who do pay their mortgages? It's because there are a lot of rich guys who paid triple A price for the junk they're holding and Paulson&Pals are buying time for them to get at least something for it. Just so the banks can pay each others bonds off, the government wants you to have confidence in a banking system that you should have none in. The banks sure don't trust each other based on the LIBOR rates, credit default swaps, the seizing up commercial paper market, or any other metric in use. I don't think the banks can ever come clean with themselves or anyone, anymore than I think they can be truly saved. But the banks don't have to have any confidence in one another, they can't just stop lending to each other because that results immediately in the unthinkable. In the end I think the government can do no better than get the rich guys their money back by looking the other way as the banks all just agree to keep lending to each other and not ask questions.

http://www.breitbart.com/article.php?id=071216220819.8p5p5753&show_article=1&catnum=0