Great video, but I would add to the ending: they banks don't just invest in foreign countries, they also buy treasury bonds, which keeps the borrowing rate for the government low. The banks will never stop buying bonds, because its not really their money; it's funneled directly from ZIRP to treasury bonds, providing a tidy profit for the banks at no cost and allowing the government to borrow far below the rate they would otherwise be able to. That's what TBTF really means; the banks are a giant dialysis machine, cleaning the money the fed/treasury prints and returning it to the host, taking a cut along the way.
Great video, but I would add to the ending: they banks don't just invest in foreign countries, they also buy treasury bonds, which keeps the borrowing rate for the government low. The banks will never stop buying bonds, because its not really their money; it's funneled directly from ZIRP to treasury bonds, providing a tidy profit for the banks at no cost and allowing the government to borrow far below the rate they would otherwise be able to. That's what TBTF really means; the banks are a giant dialysis machine, cleaning the money the fed/treasury prints and returning it to the host, taking a cut along the way.
ReplyDeletethe Theory of Odious Debt in reverse!
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