Comment: US govt continues to throw money into meltdown fix
The latest plan by Treasury Secretary Hank Paulson is to directly inject money into faltering banks by buying shares with money from the $850 billion bailout package. The purpose is clear. They want to make money quickly available for credit purposes.
But what about the bad mortgages? Again, the government is trying to solve one debt problem by introducing more debt.
And anytime large amounts of money are injected rapidly into the system, we can expect inflation.
Max Keiser, the controversial American financial activist who appears mainly in overseas media, believes that the next debt meltdown will come in the credit card industry. Inflation will cause many people who survive day-to-day to prioritize their expenses.
Water, food, housing, heating bills will be high on the priority list. Credit card bills will be relatively low on that list. After all, defaulting or becoming irregular on credit card debt at the most means losing the credit card and some harassment by collection agencies. You can survive all that of course.
If credit card debt gets hurt, institutions in the credit card business, like Bank of America, will be hurt as well. Basically inflation will just spread the damage putting more businesses in the bailout mode.
Consumers will tighten up spending at least until they see inflation settling, so the overall economy will slow.
Interestingly, the government no longer provides stats for M3, the overall money supply, probably because it fears the numbers would curb support for its easy money policy.
One website, shadowstats.com, has estimated these and other statistics that have been impacted by changes in government economic information collection and reporting. Their chart shows the estimated sharp rise in money supply arising from the flood of corporate welfare being spent by the government since official M3 statistics ended.
Charts of M1,M2 & M3 Levels