Printing (Lots) More Money With No Increase in Production Leads to Hyperinflation

This month on Friday the 13th, the FDIC closed 4 more banks which brought the number of bank failures for 2009 to 12 and a total of 37 since the start of the credit crisis. These bank closures hardly make even honorable mention in the news because they are so commonplace now. The cost to the FDIC insurance fund will range from 28 million to 201 million dollars for each bank. For the sake of discussion, let's round that out to 100 million dollars per bank. The latest stimulus plan is 787 billion dollars. If you divide 100 million into 787 billion, you could give 7,870 banks 100 million dollars each. Maybe that would spur some lending and help shore up the banking system.

But then you have to ask which banking system does the Fed and Treasury want to shore up? Theirs? or ours? There is an obvious double standard in the banking system. If you're one of the major banks in the country, you get bailed out time after time again with billions, and hundreds of billions of dollars with zero accountability. Small and regional sized banks get their fingers smashed in the lid of the cookie jar for mere millions of dollars. Why are there consequences for these smaller banks and far fewer consequences for the chosen few? Why are the biggest players given preferential treatment, like a teacher's pet, when the rest of the class gets extra homework, detention or even expulsion?

The first bailout was sold to us on the idea the American taxpayer would make money on the government's investment (i.e. nationalization) of Fannie Mae and Freddie Mac. We were told, and many of the ventriloquist dummies in congress parroted these ridiculous comments back to their constituents, that when property values eventually rebound, the government would be paid back. In other words, Uncle Sam was making a sound investment.

Any imaginary gains they thought they might make, have already evaporated with the continued loans, guarantees, bailouts and now stimulus plans being invented every week. Kind of like the social security trust fund, the lock box as it was called. It never existed. The money from current receipts all went to pay current recipients and what was leftover, got spent. Just another form of the ponzi scheme. Another double standard that is becoming painfully obvious is that ponzi schemes are illegal in private sector, but are business as usual in the public sector.

The US and much of the global financial system is being held together by scotch tape, silly putty and bandages. Printing more money with no corresponding increase in production leads to hyperinflation and a more severe economic collapse. The Fed and Treasury, and yes, even some in congress, already know this. It's as if they are dragging this story out until something happens, something bigger than the current economic crisis, so they can stop these economic charades and blame the ultimate collapse on someone or something other than themselves.