US bailout – 700Billion is a designer number.
At last things are starting to make sense!
Why $700 billion? Why not $4.65 billion? Or $1.17 trillion?
Gus Faucher, director of macroeconomics at Moody’s Economy.com., said, “It’s a number that is designed to reassure the financial markets that the government is serious about getting the financial markets back into shape.”.
Yes, but is there any economic or scientific rationale for the figure? “Not that I can tell,” Faucher responded.
The rest all makes sense, this is how all this banking stuff gets to work.
The taxpayers (represented by government) lend money to the banks . . . . . however the taxpayers don’t have any money. OK. . . then the taxpayer borrows money from the banks to lend it back to the banks (so the banks have reserves). Little problem now . . . . the banks have no money to loan back to the government. So they simply make it up and turn it into reality (through a mechanism called fractional reserve) and then loan it to the man in the street, the consumer, with interest added, so we can then give it back to them.
What about fractional reserve? All is revealed – here is a LINK