Phantom dollars, printed out of thin air, backed by nothing and producing next to nothing, defines the "-Bailout Bubble.' Just as with the other bubbles, so too will this one burst. But unlike Dot-com and Real Estate, when the "Bailout Bubble" pops, neither the President nor the Federal Reserve will have the fiscal fixes or monetary policies available to inflate another.

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First, some excerpts from Mike Whitney's excellent article at http://informationclearinghouse.info/article23214.htm click click here

The Fed has complete control over monetary policy and, thus, the country's economic future. Bernanke doesn't even pretend to defer to Congress anymore. The $13 trillion the Fed has committed to the financial system since the beginning of the crisis -- via loans and outright purchases of mortgage-backed garbage and US sovereign debt -- was never authorized by Congress. In fact, the Fed stubbornly refuses to even identify which institutions got the "loans," how much the loans were worth, what kind of collateral was accepted for the loans, or when the loans have to be repaid.

In truth, the loans are not loans at all, but gifts to the industry to keep asset prices artificially high. Asset prices are kept artificially high so that the entire financial system does not come crashing down. To wit:

In an analysis written by economist Gary Gorton for the Federal Reserve Bank of Atlanta's 2009 Financial Markets Conference, he states:

"All told, more than $20 trillion in securitized debt was sold between 1997 and 2007."

$20 trillion! How much of that feces paper -- which is actually worth just pennies on the dollar -- is sitting on the balance sheets of banks and other financial institutions just waiting to blow up as soon as the Fed asks for its money back?

The Fed's lending facilities are designed to pump liquidity into the system and inflate another bubble by generating more debt. Unfortunately, most people accept Bernanke's feeble defense of these corporate-welfare programs and fail to see their real purpose. An example may help to explain how they really work:

Say you bought a house at the peak of the bubble in 2005 and paid $500,000. Then prices dropped 40% (as they have in Calif) and your house is now worth $300,000. If you only put 5% down ($25,000), then you are underwater by $175,000. Which means that you owe more on the mortgage than your house is currently worth.

And this is essentially what has happened to the entire financial system. The equity has vaporized, so institutions are using dodgy accounting tricks instead of reporting their real losses. It's as if Bernanke came along and gave you a $175,000- no-interest, rotating loan so that no one would know that you are really busted. Now you can continue spending just as you had before, maintaining the same life style as before "" even though in secret you are really still busted. Not bad, eh? And this is, in essence, what the big lending institutions are doing. It is a charade to conceal the fact that a large portion of the nation's financial institutions are insolvent and propped up by state largess. But there's more.

Now that Bernanke has given you $175,000- no-interest, rotating loan, you expect that eventually he will ask for his money back. Right? So your only hope of saving your home, in the long run, is to engage in risky behavior, like dabbling the stock market. It's like playing roulette, except you really have nothing to lose since you are underwater anyway.

This is exactly what the financial institutions are doing with the Fed's loans. They're betting on equities and hoping they can that way avoid the Grim Reaper.

Here's how former hedge fund manager Andy Kessler summed it up last week in the Wall Street Journal: "By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn't put money directly into the stock market, but he didn't have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear. Stock and bond funds saw net inflows of close to $150 billion since January. The dollars he cranked out didn't go into the hard economy, but instead into tradeable assets."

Bernanke's back is against the wall. The only thing he can do is print more money, shove it though the back door of the stock exchange, and keep his fingers crossed. The rest (hiding the terrible truth from us) is up to CNBC and the small army of media cheerleaders.

Yes there is some truth to the claim that Bernanke saved the financial system from a Chernobyl-type meltdown. But that doesn't change the underlying reality:

The economy is now balanced on the rickety scaffolding of the dollar. As the Obama stimulus wears off, the rot in the economy will become more apparent. Household red ink is at record highs, so personal consumption will not rebound. That means US assets and US sovereign debt will become less attractive. Foreign capital will flee. The dollar will lose a lot of its value in comparison to other currencies. Ever fewer investors will be inclined to buy our Treasury certificates, and the return offered to those who purchase them will have to be increased. But this will drive up interest rates in the US, causing our recession to ramp up worse than ever.

In its role as the policy arm of the big banks and brokerage Houses, the ultimate task of the Fed is to continue shifting wealth from one class to another. And it succeeds at that task admirably. http://informationclearinghouse.info/article23214.htm click here

Additional remarks from Gerald Celente and Andrew Gavin Marshall:

While the bailout, or the "stimulus package" as it is often referred to, is getting good coverage in terms of being portrayed as having revived the economy and is leading the way to the light at the end of the tunnel, key factors are again misrepresented in this situation.

At the end of March of 2009, Bloomberg reported that, "The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year." This amount "works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation's gross domestic product was $14.2 trillion in 2008."

Gerald Celente, the head of the Trends Research Institute, the major trend-forecasting agency in the world, wrote in May of 2009 of the "bailout bubble." Celente's forecasts are not to be taken lightly, as he accurately predicted the 1987 stock market crash, the fall of the Soviet Union, the 1998 Russian economic collapse, the 1997 East Asian economic crisis, the 2000 Dot-Com bubble burst, the 2001 recession, the start of a recession in 2007 and the housing market collapse of 2008, among other things.

On May 13, 2009, Celente released a Trend Alert, reporting that, "The biggest financial bubble in history is being inflated in plain sight," and that, "This is the Mother of All Bubbles, and when it explodes [...] it will signal the end to the boom/bust cycle that has characterized economic activity throughout the developed world." Further, "This is much bigger than the Dot-com and Real Estate bubbles which hit speculators, investors and financiers the hardest. However destructive the effects of these busts on employment, savings and productivity, the Free Market Capitalist framework was left intact. But when the 'Bailout Bubble' explodes, the system goes with it."

Celente further explained that, "Phantom dollars, printed out of thin air, backed by nothing ... and producing next to nothing ... defines the "Bailout Bubble.' Just as with the other bubbles, so too will this one burst. But unlike Dot-com and Real Estate, when the "Bailout Bubble" pops, neither the President nor the Federal Reserve will have the fiscal fixes or monetary policies available to inflate another." Celente elaborated, "Given the pattern of governments to parlay egregious failures into mega-failures, the classic trend they follow, when all else fails, is to take their nation to war," and that, "While we cannot pinpoint precisely when the 'Bailout Bubble' will burst, we are certain it will. When it does, it should be understood that a major war could follow."

http://informationclearinghouse.info/article23224.htm click here

Authors Bio:

Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've always been more interested in political economics and what's going on behind the scenes in politics, than in mechanical engineering, and because of that I've rarely worked more than 8 months a year, devoting much of the rest of the year to reading and writing about that which interests me most.