"The government has introduced a pair of new programs that will provide $800 billion to help unfreeze the market for consumer debt which Treasury Secretary Henry Paulson calls vital to supporting the economy. "
Several weeks ago there was a huge congressional vote on $700 billion to prop up banks. Where is this extra coming from? WHy no vote on it? I don’t get it.
The additional money is coming from the Federal Reserve, which has heaps of money and can essentially lend it as it sees fit. The original money came from the Treasury, which has very little money but can issue T-bills and can spend only at the behest of Congress.
The purpose of the FR is to fine tune the economy- to rein in growth (to check inflation) and to encourage it (to check stagnation). Congress isn’t in session most of the time, and somebody has to be around to adjust lending rates on a daily (or even hourly) basis; that’s why the FR only has Congressional oversight in a broad sense.
In the short term it is borrowed money, added to the total national debt.
The US debt ceiling was raised from about 9.5 to 10.5 trillion (in round numbers) if I recall correctly.
It may be that some of the money will find its way back into the national treasury. Not all of it is a direct giveaway. Yeah, right.
Technically it’s borrowed against the future. We assume that we will be able to pay it back in times of prosperity, so we loan it to ourselves.
Right. Think of it like a version of the “Paycheck loan store” that the entire nation (or world, even, since everyone’s being affected) has gone to all at once.
Also, they’re simply printing more currency.
Check your pockets.