G. Edward Griffin: The Name of the Game is Bailout

This is the second installment in a series of chapter summaries from G. Edward Griffin’s must-read book The Creature From Jekyll Island.  This book may be the most important “red pill” available and we highly recommend that you buy and read the full book at RealityZone.

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Chapter 2 Summary: The Name of the Game is Bailout

Although national monetary events may appear mysterious and chaotic, they are governed by well-established rules which bankers and politicians rigidly follow.  The central fact to understanding these events is that all the money in the banking system has been created out of nothing through the process of making loans.  A defaulted loan, therefore, costs the bank little of tangible value, but it shows up on the ledger as a reduction in assets without a corresponding reduction in liabilities.  If the bad loans exceed the size of the assets, the bank becomes technically insolvent and must close its doors.  The first rule of survival, therefore, is to avoid writing off large, bad loans and, if possible, to at least continue receiving interest payments on them.  To accomplish that, the endangered loans are rolled over and increased in size.  This provides the borrower with money to continue paying interest plus fresh funds for new spending.  The basic problem is not solved, but is postponed for a while and made worse.

The final solution on behalf of the banking cartel is to have the federal government guarantee payment of the loan should the borrower default in the future.  This is accomplished by convincing Congress that not to do so would result in great damage to the economy and hardship for the people. From that point forward, the burden of the loan is removed from the banker’s ledger and transferred to the taxpayer.  Should this effort fail and the bank be forced into insolvency the last resort is to use the FDIC to pay off the depositors.  The FDIC is not insurance, because the presence of “moral hazard” makes the thing it supposedly protects against more likely to happen.  A portion of the FDIC funds is derived from assessments against the banks.  Ultimately, however, they are paid by depositors themselves.  When these funds run out, the balance is provided by the Federal Reserve System in the form of freshly created new money.  This floods through the economy causing the appearance of rising prices but which, in reality, is the lowering of value of the dollar.  The final cost of the bailout, therefore, is passed to the public in the form of a hidden tax called inflation.

So much for the rules of the game.  In the next chapter we shall look at the scorecard of the actual play itself.

Bonus quote on the hidden tax of inflation:

“The American people have no idea they are paying the bill.  They know that someone is stealing their hubcaps, but they think it is the greedy businessman who raises prices or the selfish laborer who demands higher wages or the unworthy farmer who demands too much for his crop or the wealthy foreigner who bids up our prices.  They do not realize that these groups also are victimized by a monetary system which is constantly being eroded in value by and through the Federal Reserve System.” — G. Edward Griffin, The Creature From Jekyll Island, pg. 33.

Get the book for yourself or for others you want to wake up.  It reads like a mystery novel and is filled with colorful metaphors to make the seemingly complex world of banking very easy to comprehend. 

Visit RealityZone for your copy today. Summary is re-printed with permission from G. Edward Griffin.

PART 1: The Journey to Jekyll Island