General Question

SquirrelEStuff's avatar

Where does the bailout money come from?

Asked by SquirrelEStuff (9189points) October 26th, 2010

Clarke and Dawe ask the Million Dollar Questions.

If every countries economy is in debt to other countries economies, where does the bailout money come from?

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52 Answers

shilolo's avatar

China (and Japan).

Of course, this is an oversimplification. They have a national program of savings, rather than spending, but also a massive trade and currency imbalance with Western countries. Thus, the “extra” money to lend to us to spend more money on their goods.

Response moderated (Unhelpful)
Response moderated (Unhelpful)
anartist's avatar

Have you ever heard of the shell game?
Or have you ever had temporary credit card offers of 0%?
I rode these for 3 years once, using Peter to pay Paul without accruing interest.
Until they wised up and figured out an appropriate transfer fee.
Governments do the same thing.

Pazza's avatar

No really, its borrowed by the goverment from a central bank.
The central bank creates the money from nothing, hense the term FIAT CURRENCY, fiat meaning ‘FROM NOTHING’.
The ‘bail-out’ money then adds to the total amount of money in the ecconomy creating inflation at the end of the financial year.

mrrich724's avatar

I’d have to say you end up paying for it yourself.

THANK YOU OBAMA. Today I just found out that my monthly deduction for medical insurance is going up from $80/month to $140 due to the Patient Care Reform act Obama signed. . . FREE HEALTHCARE ISN’T FREE . . .

Bottom line is, the money always has to come from somewhere, and if you are legally earning money in America, odds are decent that money is coming (partially) from you!

Granted, this is a biased rant based on today’s observation.

MeinTeil's avatar

Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers Us taxpayers.

josie's avatar

see @MeinTeil
Anybody who says otherwise is guilty of total bullshitting. Too bad there is no law against bullshitting.

Cruiser's avatar

From your children and your children’s pockets….oh and you really young Jellies pockets here.

MeinTeil's avatar

Glad to be of service all.

Disc2021's avatar

The way I was explained in an Economics class, it comes from our (taxpayers) money. There are a few different ways the FED goes about collecting it; it’s more complicated than that, but in short, the money comes from our government.

josie's avatar

@Disc2021 Who takes it, by force, from you and me.

marinelife's avatar

As of June 2010, 75% of it had been repaid, so what does it matter where it came from?

Source

Jaxk's avatar

It’s Obama money. It’s free.

The Treasury prints it. The Federal reserve distributes it. When the Fed needs more the Treasury prints more. The only byproduct is inflation (soon to be hyper-inflation). Our currency has lost 30% of it’s value in the last couple years. And it’s only just started.

Most of our debt to China and other foriegn governments is from the trade imbalance rather than direct loans.

Oh BTW @marinelife , that is only the TARP funds. The rest of the $3 trillion won’t be repaid by anyone other than taxpayer. I just heard the debt commission is proposing an elimination of the home mortgage deduction and the child credits. If you think housing is bad now wait til they get rid of the deduction. Of course the child tax credit will only apply to working people. If your on welfare, I’m sure you’ll still be paid by the child.

SquirrelEStuff's avatar

Did anyone watch the video?
Im not talking about the TARP. Im asking where the money is coming from to bail out countries throughout the world, not banks and car companies.

SquirrelEStuff's avatar

@marinelife
“So what does it really matter where it came from?”
Thats a great attitude. I hope thats not how you teach your children.
Could you please watch the video first?

@jaxk
I hope they do get rid of the homeowner and child deduction. I am a single male, non- homeowner with no kids, and am sick of hearing about gay “rights,” when we should be talking about equal rights(really priveleges) for all individuals. There is no reason that home-owners or people with children or even married people should pay less taxes than I do, in a society where “all men are created equal.” If anything, they should pay more, since over-population is becoming one of our biggest problems.

ETpro's avatar

A little over ¼ of all Treasury Bonds are owned by foreign nations, primarily China, Japan and Germany. The rest are held by US citizens, investment funds, insurance companies and so forth here. The orange portion of this chart shows the distribution of ownership.

By the way, the Republican bashing of the bailouts is as silly and disingenuous as election issues can get. George Bush asked for the TARP, Republican house minority leader John Boehner actually pleaded with Republicans in the House to vote for it, and Bush signed it into law.

If it had not been done, most economists agree that all the major financial institutions would have failed in a cascading domino collapse that would have led to a second Great Depression. And the funds have been fully repaid. The taxpayers actually earned $83 billion in interest on the TARP funds. That’s a better return that any safe investment instrument is yielding these days. But they say the first casualty in political warfare is truth, and the second is obviously common sense. Hate and bile play much better than things that call for actual thought.

josie's avatar

@chris6137 I figure most people who watch the video won’t get it anyway. Good effort though.

SquirrelEStuff's avatar

@josie
Why do you say that? Its pretty straight foward…
Greece is $367 Billion dollars in debt to other European countries.
Ireland is $865 Billion in debt to other European countries.
Spain and Italy is $1 trillion dollars in debt to mostly France, Germany, and Britian.
France, Germany, Britain,etc. are struggling because they lent money to other economies that cant pay them back.
How can broke economies, lend money it doesnt have to, to other broke economies, and where does the money to bail out these countries come from?

Cruiser's avatar

@chris6137 It comes from trade agreements….fancy term for international I.O.U.‘s. You buy my goods and services and I will buy your goods and services at a greater rate that will exceed the amount of money you lend my country as in buying our increasingly worthless treasuries. It’s all about jobs…and paying the government bills.

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Jaxk's avatar

@ETpro

You need to put some actual thought into your own responses. The Tarp funds have not been fully repaid. They like to try and make it look that way but if you look at the money, the banks have done well in repayment but not the big loans. Companies like AIG that got $182 Billion have repaid about $4.5 billion. The auto makers have repaid a small piece and that was from their own TARP money. The trick is to make it look better by converting the debt to an equity share in the company. We still made the investment, they still got the money, but they don’t owe us anything because now we own the company. If we could ever sell the stock we might get some of it back. Companies like Freddie and Fannie will probably never be sold they will remain government owned and remain a sinkhole.

But the truth is, the TARP was not the biggest issue. It may have actually done some good. But it was only $700 billion of the $3 trillion we spent. Where’s the other $2.3 trillion. That is what the complaint is all about. And since it hasn’t done anything to improve the economy or jobs, it is a legitimate complaint. The only thing it created was debt..

ETpro's avatar

@Jaxk Thanks for sending me to look it up instead of just listen to political talking points on TV. The projections for TARP are that 4eh final costs will be about $30 bi lion. That is significantly less than the two savings and loan bailiouts cost in the 1980s.

Jaxk's avatar

@chris6137

We are in this recession as a result of the housing crash. Creating another even deeper housing crash may give you some self satisfaction but the economy is unlikely to weather another round of foreclosures and bank bailouts.

Everybody sing

Trailers for sale or rent
Rooms to let 50 cents
no phone no pool no pets
I ain’t got no cigarettes
ah but 2 hours of pushin’ broom
buys an 8 by 12 four bit room
I’m a man of means by no means
King of the road.

gorillapaws's avatar

The same place both Bush tax cuts, funding for the wars in the middle east, Medicare part D, and the rest of the expenses the Republicans have dumped onto the future generations have come from…

palerider's avatar

From the under-appreciated overburdened taxpayers of the world, and mainly the American taxpayers. Governments don’t have money unto themselves that they don’t first confiscate from the people.

gorillapaws's avatar

@palerider you realize that taxes are the lowest they’ve been since the great depression? We still haven’t paid for WW2, because every time we generate a surplus the Republicans decide to have a massive party for the Bernie Maddoffs and Donald Trumps of the world, instead of paying on the debts we owe.

palerider's avatar

do you realize they were up to 90% back then?
and we would always have an balanced budget or a surplus if not for all the democrat-advanced entitlement programs which started, amazingly enough with FDR, right before WW2.

palerider's avatar

But back on topic, if not the citizens of their respective countries paying taxes which are then used to pay for the bailouts, then where does the money come from?

gorillapaws's avatar

@palerider you mean like the 2 wars in the middle east, the creation of the department of homeland security, and the passing of Medicare part D… all while passing 2 massive tax cuts for the richest Americans, many of whom hid their money in swiss bank accounts? And the Democrats are fiscally irresponsible?

I realize you may look to countries like Somalia, Afghanistan, or American during the Gilded Age and see unregulated capitalism at it’s best, but I’m among the rational few who realize that America’s strength comes from it’s middle-class, not the pompous 0.1%.

ETpro's avatar

@gorillapaws How true. Great answer!

palerider's avatar

I was speaking to ALL taxpayers, not just a particular tax bracket in my first post.

As for the who is more fiscally irresponsible, we could go back and forth in the programs, entitlements, etc, etc, ad nauseum. Both major political parties have passed fiscally irresponsible legislation, most of which is an overstepping of the power and authority granted by the constitution.

But, we are both straying from the original topic….

ETpro's avatar

@palerider Take a look at the graph and videos presented by zFacts. I totally agree both parties share in running up the national debt, but it is abundantly clear who first lit the fuse on the skyrocketing debt. And the Republican Party is still calling for further tax cuts without proposing any real spending cuts to offset them, much less begin to cut into the massive deficit we are already running.

palerider's avatar

If we are going to go traipsing down a rabbithole….sobeit.
The legislation the Democrats in Congress and the White House have signed into law in the past 2 years equal more debt than all U.S. debt accumulated under all previous administrations combined.
http://blog.heritage.org/2009/08/28/obama%E2%80%99s-tripling-of-the-national-debt-in-pictures/

ETpro's avatar

@palerider I don;‘t know what kind of dollars they are drawing that chart with. The National Debt at the end of the Bush Administration was $10.6 trillion, not $6 trillion. The chart must be splitting out part of the debt. Further, it makes no sense to project extraordinary spending like the Stimulus and Detroit bailouts forward to 2019.

anartist's avatar

@Jaxk
rooms to let 30 cents . . . can’t believe that was true even when the song came out in the 60s.

Jaxk's avatar

@anartist

Got my first apartment in 1964. The rent was $35/mo. Unfortunately I had to let it go, I just couldn’t afford it.

palerider's avatar

@ETpro Try these if the previous charts did nothing for you.
http://www.babylontoday.com/national_debt_clock.htm

gorillapaws's avatar

@palerider I’m sorry but you don’t get to lay the cost of financial bailout in the lap of the Dems. It was Republican voodoo economics that lead to the swelling of the debt, the anti-regulation that caused the crisis, the expense to mop up perhaps the biggest financial clusterfuck in the history of mankind goes in the Republican column.

It’s like me lending you my beautiful new surplus-producing business, you run the thing into the ground, and then I get it back 8 years later and have to borrow tons of money to repair it, and then you turning around and calling me financially irresponsible. Sorry but that shit doesn’t fly.

palerider's avatar

@gorillapaws The president does not hold the purse strings, the congress does. Most of the debt has been piled on by Democrat-led congresses. And as far as the current debt crisis, (root cause-the housing market/mortgage meltdown) thereagain you can thank Democrats starting with the Community Reinvestment Act (Carter administration, doubled down on by subsequent Democrat congresses) and the NGEs Fannie Mae and Freddie Mac which Bush did try to regulate and Barney Frank didn’t think it was necessary.
http://startthinkingright.wordpress.com/2010/08/10/barney-frank-and-democrat-party-most-responsible-for-2008-economic-collapse/
Several quotes from Barney Frank and others….along with a few more charts.

iamthemob's avatar

Are we focusing here on partisan blame-games instead of looking at the actual policies or legislation that actually increased the debt, and produced no ancillary benefits, to our detriment?

Declaring something the fault of the republicans or democrats get us nowhere unless we know what was done that get us into the mess. That can be done without reference to a party at all, I find.

palerider's avatar

I tried to go that route. Look at some of my previous posts. I tried to avoid the partisan bickering/blaming. But when in Rome….

iamthemob's avatar

I’ve never trusted a Roman, @palerider ;-)

SquirrelEStuff's avatar

Both parties are the same. They both work for Industrial Complex’s. Take your pick… medical, military, financial, corporate, etc. They dont work for the people. When they say “we,” they dont mean we the people, they mean we the rich.

palerider's avatar

@chris6137 That’s a very cynical approach and most times I am likely to agree, but I think we have some on the way that truly have the good of the people on their minds and in their hearts.

ETpro's avatar

@paleride If you and your sources are all going to use deliberate talking point war language like the Democrat [sic] Party then what am I to do, respond back about what the RepugniCons [sic] did? I don’t care to play such partisan games.

If you want to debate who is actually most to blame for the budget disaster we now face and how to fix it without destroying the nation in the process, I am happy to deal in facts relevant to that. But your link to a right-wing attack site with distorted statistical charts isn’t going to do anything but cover up what’s really wrong and let it keep right on as it goes. The first two charts there show nothing more than spending being attributed to one or the other party based on how many seats they held in congress at the time. The two lines are reciprocals of one another. That tells NOTHING. And throughout the site are slurs. This is not a site I would trust for non-partisan advice.

Your claim here that the root cause of the 2007 recession was the housing crisis is not true. The total mortgage debt at the time was no more than $5 trillion and only a small part of that defaulted in 2007–2008. The financial community could have easily absorbed that hit. What made it so devastating was that a deregulated Wall Street had leveraged that mortgage debt into a $62 trillion per year derivatives market. When the sub-prime debt soured, that pulled the rug our from under the derivatives house of cards.

It was the deregulation and the predictable casino capitalism that followed it that made the problem we face. Barney Frank lending to poor people may make a great feeling scapegoat for right wingers, but if you fall for that lie, then get set to play the same game all over again. Wall Street is paying both parties to leave that derivatives door open.

palerider's avatar

@ETpro Well, I have to at least give you credit for perusing them. Most folks here just keep on arguing their point oblivious of any evidence provided regardless of origin. I don’t know how we can have a debate when we can’t agree on what numbers are right and which sites are credible. Thanks for the very lively debate.

ETpro's avatar

@palerider Sorry for the long edit. Looks like You replied before I added the last 2 paragraphs.

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Pazza's avatar

2 Ozzie’s talking about the European debt crisis. Very funny.
http://www.youtube.com/watch?v=I5QwKEwo4Bc

ETpro's avatar

@Pazza One of the stunning success of faux currencies is that they are faux. The EU just needs to get its “union” into a Union that truly is one for all and all for one. They need a central bank capable of managing the money supply. Given that, and given that they boot out the Con Men who have convinced them that the only way to financial vitality is in cutting one after another vital organ off the body politic, the EU under aggressive quantitative easing could rapidly get out of recession and bring their crushing debt down to manageable levels. But of course, that assumes that governments like Greece and Italy actually start collecting the taxes they are owed. That failing, their bond debt is an excellent short sale.

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