I was just listening to Ron Paul on the latest Bail-Out

of banks. He disapproved of the Bail-Out because he

claims that it will destroy the financial system as we

know it by destroying the dollar's value and creating

hyper-inflation.

Ron Paul said "you can not just create trillions of

dollars out of thin air without creating inflation".

Paul's conclusions are based upon the idea of demand

pull inflation. This means a situation where excess

amounts of money are chasing a static or near static

amount of goods and services.

This monetary theory was elaborated upon by Milton

Friedman for which he was given the Nobel Prize in 1976.

The idea is that when the Money Regulators increase

the supply of money, the increase causes consumers

to demand more goods and services causing inflation.

Suppliers recognize the demand and start producing

more goods and services thereby creating jobs and

prosperity. This idea assumes that the increase in

the money supply makes its way into the hands of

the consumers who create the extra demand.

Freidman claimed that the Federal Reserve allowed

or caused the monetary aggregates to decrease by

33% during the 1930s, thereby creating and prolonging
 
the Rosenvelt depression.

However, it is possible that the extra money created
 
by the Regulators never makes its way to the

consumers. If it does not, then there is no extra
 
demand for goods and services and no inflation and

no extra production, no extra jobs and no prosperity.

So the question is whether the extra money supply from
 
the Bail-Out will reach the consumer/taxpayer. The sad

answer is that very little will. Almost the entire Bail-Out

will go to the banks and insurance companies, where it is

intended to go. Its purpose is to secure holders of bank

bonds, the holders of credit default swaps guaranteed by
 
investment banks and insurance companies and secure

past and future  excessive executive compensation paid

by those banks and insurance companies.

The banking and insurance "industries" made sure of that

by making enormous campaign contributions to such

notables as Senator Christopher Dodd, Chairman of the

Senate Banking Committee ($13 million since 1989) and

to the lisping Representative Barney "My-o- My"

Frank ($2.5 million).

Although the "taxpayers" will get little benefit from the trillion

dollar bail-outs, they will get the entire bill as the "taxpayers"

will be given more debt to repay with interest.


Now to digress a bit.


Most middle class Americans have substantial home

mortgages, large credit card balances and other future

required payments of Federal Reserve notes for medical

care, insurance, real estate taxes, car payments, gas
 
expenses and schooling costs for their children.
 
Essentially, the middle class is up to its eyeballs in debt

and as a result has a short position in dollars. They are

long on houses, cars and investments in the stock and

bond markets. For the past year, there has been a short

squeeze on people who owe Federal Reserve Notes which

has accelerated in the past months as people seek to

pay bills and sell assets such as real estate and stocks.

At least the people received some value when they
 
built their own debt and will get something of value
 
in exchange for future payments if they can indeed make

those payments.


Back to the Bail-Out


What the Bail-Out does is saddle the country and all its

"taxpayers" with with new trillions of debt and makes it

such that every "taxpayer", regardless of how wise,

cautious and frugal he may be, owes loads of Federal

Reserve Notes (money) to the Federal Reserve Banking

system. What will the "taxpayers" receive for this new tax

saddle? The answer is that they have received and will

receive nothing. Almost all of the Bail-Out money goes

to the corporations whose errand boys like Greenspan,

Paulson, Bernanke, Dimon, Mozilo and Fuld carried out

the debt trap that was set 9-10 years ago.

This Bail-Out puts a further short squeeze of dollars
 
into play. Perhaps the 50% drop in the price of oil, gold

trading below 800 and the recent strong dollar portends

more ugly things to come.

Contrary to Ron Paul's forecast of hyper-inflation,

which will only take place if the increased money

supply goes to the hands of the consumers and

does not create a corresponding amount of debt, there

may be a severe demand for dollars and hyper-deflation,

where the country and the people have no money to

buy goods and services but only debts.

The bankers have discovered a way to force the people

of America and the world into an intense form of debt

slavery and that is the reason for their reckless past

lending practices, credit cards for all and now this

massive Wall Street Bankers Bail-Out.

In the past, only wars created that amount of national

debt. But now those debt creating war mongers have

found the more friendly face of public bail-outs.

http://www.youtube.com/watch?v=3pwAFohWBL4

John Olagues
olagues@hotmail.com
www.optionsforemployees.com
504-305-4449