

Secrets and Lies of the Bailout - bcn
http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104

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digitalengineer
TLDR: _"So what exactly did the bailout accomplish? It built a banking system
that discriminates against community banks, makes Too Big to Fail banks even
Too Bigger to Failier, increases risk, discourages sound business lending and
punishes savings by making it even easier and more profitable to chase high-
yield investments than to compete for small depositors. The bailout has also
made lying on behalf of our biggest and most corrupt banks the official policy
of the United States government. And if any one of those banks fails, it will
cause another financial crisis, meaning we're essentially wedded to that
policy for the rest of eternity – or at least until the markets call our
bluff, which could happen any minute now."_

I agree with the author except with the markets calling the US's bluff. The
FED is in every market worldwide with _QE to eternity_. Other nations follow
the FED.

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kaonashi
QE only affects reserves, if anything it decreases net private assets as it
takes interest bearing assets out of the private sector. Credit creation for
bidding up existing assets is where the instability comes from.

Tighten regulations and increase net private assets through fiscal policy;
preferably as diffuse as possible, e.g. full payroll-tax holiday.

~~~
digitalengineer
QE effects everything. The government needs to inflate away the debts left
behind by the housing bust and the enormous amount of public debt created to
offset the impact of the global financial crisis of 2008. Inflation goes up
and the real value of those debts goes down. (I think the official inflation
figures are selective. Have a look at <http://www.shadowstats.com> to see how
_the way to measure inflation_ changed over the years. The same thing with
measuring unemployed people).

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kaonashi
Public debt is just bonds, i.e. the private sector savings. Why is it
problematic that the private sector has savings? Why would we need to inflate
that away, rather than letting it continue to exist to support people during
their retirements?

Private savings (public debt) is not inflationary, private and public SPENDING
is inflationary. If it's too much for the capacity of the economy to absorb
it, then it bids up the prices goods (demand pull). If the economy is running
below capacity and extra funds are injected to facilitate demand, then
economic activity revs up to meet the extra demand.

As to the CPI, I'm sure it has its flaws, but I'd trust it more than a website
offering $150+ newsletter subscriptions. The CPI changes over time because
people buy different things, and tying inflation estimations to a static set
of goods carries its own problems.

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RyanMcGreal
Here's Matt Taibbi on Democracy Now talking about this:

<http://www.youtube.com/watch?v=8OsqAhYb9Fc>

