So Who’s Bailout Money Is It Anyway? The Great Keynesian Conundrum

A Bill of Goods

I’ll never forget years ago when I was looking at buying a new Nissan Altima. I went to the dealership and this salesman tried to sell me on a below base model without air conditioning in HOT as a firecracker Florida.

This clown was telling me, “Yeah man, just install your AC later, people do it all the time, don’t worry you can take care of it down the line.”

All I could do is laugh.

Such is the case with Paul Krugman and the product he trying to sell you Keynesian economics. If you’re not up to speed with how this theory works in short it’s the opposite of common sense.

It’s like paying it forward in reverse or something. #PayItBackward

Basically it says during economic downturns and recessions the many should go into unlimited debt in order to bailout the few at all costs.

This is sold as the only solution when there are big problems in the economy. Keynesian proponents insist that huge oceans of money must be filled to the rim by the masses and handed over to the “wise guys” in order to “fix everything”. It doesn’t matter if you don’t have six thousand dollars to your name; simply put, the Keynesian says the big banks need it.

TARP BAILOUT (2008) – $700 billion
COST per U.S. Taxpayer – $6,146.72 

They also say, “Don’t worry about the debt you can take care of it down the line.”

Sounds like that car salesman doesn’t it? Let’s look at how well that’s been going. Since October of 2008 when America was slam sold into the first TARP bailout by Hank Paulson and George W. Bush what’s happened?

Did it work?

Well in a way it did. It helped lure Americans into another bailout quick. Just four months after TARP 1 “the new guys” Tim Geithner and Barrack Obama suplexed America into TARP part 2. Like most sequels this one was worse than the first.

TARP 2 BAILOUT (2009) – $2 trillion
COST per U.S. Taxpayer – $17,562.05

Yes… You are reading this correctly. That’s $17,000 that each taxpayer agreed to lend to the government to start 2009. If it makes you feel queasy don’t worry this is just an effect of quantitative easing or QE1.

Did it work?

It worked exceptionally well at paving the road for another bailout, QE2. One year later in November of 2010 the private Federal Reserve announced that it would inject liquidity by “buying” US treasuries.

This is where it starts to get complicated.

The FED creates US currency on demand so whenever it “buys” securities from the treasury the US treasury actually owes the FED a return on this “investment”. They call it a purchase, but ultimately it is money that the US treasury has to pay back in the future plus interest.

If the government pays in full, that means you pay…

QE 2 (2010) – $600 billion
COST per U.S. Taxpayer – $5,268.62

That’s five grand more from each American taxpayer direct to the treasury. Surely after two rounds of “quantitative easing” the problem should be at ease, right?

WRONG.

Ten months after QE2 the bailout hits just keep on coming. In September of 2011 The FED announced “Operation Twist”. This was the latest scheme to purchase more treasury bonds, i.e. lend the government money while calling it something else. It also carried the additional caveat of the FED selling treasury bonds that it already held back to the US treasury. This was a great deal for the private banks that are the FED.

They got to sell US treasuries that no one in the world would buy and get new one’s that they can sell later. This was a TWISTED deal for the US government and treasury.

Operation Twist (2011) – $400 billion
COST per U.S. Taxpayer – $3,512.41

The US received billions from the FED’s “bond purchase” but then it had to give billions right back when the FED “sold treasury bonds”. After the smoke settled the only thing clear about this twisted operation was more debt. And that’s another $3,500 bill for the American taxpayer. Do you have an extra $3,000?

So We’re Done Now… Right?

Was this payment finally enough to, “Get-R-Dun” as Larry the cable says and finally solve the problem?

NOPE and NOPE.

Twelve months later the FED announced QE3 which has been called “QE infinity” because it has no pre-set end date. This is the FED’s open-ended program to “buy” $40 billion dollars in mortgage backed securities from the US Treasury every month until unemployment improves “substantially.”

“It’s interesting to note at this point that bailouts are now being used to support unemployment even though they were originally said to be needed for a one time only EMERGENCY FUND to save the economy.“

QE 3 (2012) – $480 billion
COST per U.S. Taxpayer – $4,214.89

What does QE3 mean?

If you’re a connected banker it means billions in funds available at an extremely low interest rate.If you’re an American taxpayer it means another $4,00 per year that you owe to the Quantitative Keynesian’s, a.k.a. the current federal government.

They say third time’s a charm so did QE3 finally “fix the fucking problem?”  Does Barrack Obama have small ears?

Three months after QE3 started QE4 was Announced

This time it’s another deal between the good old boys at the FED and the Treasury. The FED will buy from the US treasury $40 billion per month in “mortgage backed securities” and $45 billion per month in treasury securities. That’s $85 billion per month.

QE 4 (2012) – $1.02 trillion
COST per U.S. Taxpayer – $8,956.65

Do you think it will work? If you’re a Keynesianite you probably say, “IT IS WORKING THE STOCK MARKET IS ON FIRE AND THERE HASN’T BEEN ANY NEW BAILOUTS.” Don’t forget. When Ben Bernanke hinted at “slowing” QE recently the stock market took a dive. QE3 and QE4 are still rolling along at $40 Billion and $85 Billion per month. It’s like bailout autopilot that costs each American taxpayer $1,097 per month.Another nine grand from every single American taxpayer per year to a handful of dudes that Paul Krugman says are “saving us”.

Also, don’t forget QE1, QE2, and Operation Twist all must be paid back as well. Add here another $32,489 to Jane and John Q American’s tab.  Even if this HUGE bill is 50% paid off as some Keynesians claim, it still leaves a balance of $16,244.

It’s Getting Worse

How are Americans ever going to pay back all this debt when according to a recent survey 75% of Americans are living paycheck-to-paycheck? This is evidence the bailouts are making the situation worse as a similar survey in 2012 found 60% of Americans were living check to check.

WHY? Many of them were laid off while the companies they used to work for got bailed out. The execs took the bailout money, gave themselves a bonus, and handed out pink slips.

Solutions

Simple.  If Paul Krugman is corrent, and “some type of bailout” is inevitable, how about making the next round of bailouts payable to the American taxpayer. How about redirecting the $1,097 per month that QE3 an QE4 cost directly to the individual taxpayers who are the collateral for the loan in the first place. If the people have to repay the debt isn’t it only right that they receive the proceeds of the loan?

Wouldn’t this solve the Keynesian conundrum? How would we know if we never try? #BailoutThePeople