Rebate Checks

Because they don't want a reccession, they want to increase the money supply because they fear deflation. Our money is entirely create from debt. If ALL debt was retired in our country, there would be NO money. Deflation is defined as a reduction in the credit/money supply. Everytime a loan is created it increases the money supply. Once that loan is retired, the money that was created is also retired.

This would all be different is the money was actually printed. But only a very small fraction of money created is actually ever printed. Only the money needed to carry our day to day transactions is printed. Near ALL of our money is nothing more than book entries, or today, a computer entry.

Our fiat debt based money system REQUIRES inflation. If you go and buy a house on debt, at first you may have a hard time affording it. But due to inflation your wages increase and after a few years your mortgage payment becomes less and less of a percentage of your income. Same with the government. They borrow, get in over our heads, but they know that due to inflation they're revenues will increase. So this HUGE debt, in theory, becomes less and less percentage of revenue. Problem is they keep increasing debt...

In 2001 as the reccession set in, the borrower lost confidence in bororwing, as is normal in a reccession. Lower rates persuaded borrowers to borrow. Borrowers are not as smart as lenders, and more easy to persuade into borrowing.

Currently the subprime markets are seeing increasing defaults. Remember, when a debt is retired, it decreases the money supply. That computer entry that created the money is now zero. That money is gone. Into thin air, from which it came. Another way debt is retired, default, or when the debt is forgiven. So massive defaults are deflationary, they take money out of the system.

Lately the FED has lost its control, as Greenspan has openly talked about in a n interview a couple months ago. When he dropped rates to near zero, mortgage rates followed. But recently as rates have been increased, mortgages did not follow. Mortgage rates did increase but not proportionately to the previous decrease.

For those who remember, in 2002 Greenspan was talking a lot about "the risk of deflation" to our economy. This was the purpose of cutting rates to near zero. This was to encourage borrowing. Borrowing increases the money supply. At the same time, for those who remember, Bush issued tax rebates. Another increase in the money supply. Both are only temporary bandaids, and result in a larger problem late on (which is nearing).

So inflation is kept going to avoid deflation. Inflation is a increase in the credit supply, increasing debt. To increase debt REQUIRES 2 things. A willing borrower and a willing lender. When the banks lose confidence, they stop lending. When borrowers lose confidence, they stop borrowing. This is what controls the FEDS effectiveness. The FED raises and lowers rates to encourage/discourage lending. But this is their only control, they can't fully control the emotional side, the confidence equation.

Recently, as the subprime markets crumble, the banks have lost confidence. The FED has been injecting 100's of billions into the credit markets. But the credit markets have still stopped a large portion of lending. They are holding onto the cash as they fear that as this unwinds they may need it to cover their ASSetts. This reduction in lending creates a reduction in the money supply, deflation.

So bottom line. Bush is borrowing for us, increasing the money supply, to avoid deflation. He is borrowing for us because, well because he can, and we can't. When I say we can't I'm referring to the banks loss of confidence, they have cut back significantly on lending.

Fiat debt based money systems are ALL ABOUT ever increasing debt. Without it, they collapse into deflation through defaults.

Note: If the FED starts actually printing all the money, then we're in for hyperinflation, as once the money physically exist, it does not dissappear when a default occurs as it does currently. Germany, before they totally collapsed, was printing physical moeny so fast the they started printing on only one side of the bill, to speed up the printing. One side of their money was blank.

I can't believe there hasn't been more discussion about this, though maybe no discussion is necessary because we know what's really going on. King Bush is going to let the serfs keep $800 of their own money. How gracious. It seems to be one last futile attempt to Band-aid what is already broken in multiple places. Why don't they just give everyone a million dollars? We could all be millionaires! (as long as you don't mind a $10,000 Big Mac or a $50,000 gallon of milk)