The $$ head ache continues

This is from the member side Of Gary's specific answers and illuminates clearly what has been happening with the economy.

"House" and "Bernanke" Gary North
.....IATROGENESIS
In medicine, there is a phenomenon called iatrogenesis: side effects caused by treatment. (A side effect is an effect we don't like.) In economic policy, this phenomenon is called the law of unintended consequences.
To keep the lawyers away, physicians blame iatrogenesis on the complexity of nature. To keep Congress away, Federal Reserve economists blame unintended consequences on the complexity of the derivatives market. To keep voters away, Congress blames unintended consequences on speculators, price gaugers, and CEOs who refuse to fly on commercial airliners......

...CONTAGION
Public health officials worry about contagion. The operative words are "plague," "epidemic," and "pandemic."
Central bankers worry about contagion. The operative words are "systemic failure," "gridlock," and "cascading cross defaults." In today's economy, the interconnections that we call the social division of labor are all tied to fiat currencies, fractional reserve banking, just-in-time production, and digital money. These connections are astoundingly complex.....

....All over the West, commercial banks have bet their solvency on lending money to hedge funds, which invested the money in the stock market. These funds also wrote highly complex futures contracts that are now unraveling. As hedge funds are hit with margin calls, they must sell marketable assets. This has driven down the price of stocks. Hedge funds are defaulting. They are defaulting on money owed to large banks,
Central banks have two primary functions: (1) to keep large banks solvent; (2) to keep new banks from entering the field, which would otherwise increase competition for large banks. Central banks are therefore the linchpins in a government- created, officially regulated, but in fact self-regulating cartel of commercial banks.

The leverage of the banking system in the United States is the inverse of the Federal Reserve System's reserve requirements. This has been no higher than 10%, which means the banking system is leveraged at least ten-to-one.

To this is added leverage of hedge funds. One of them was Carlisle Capital, which was leveraged 30-to-one. It went bankrupt in March. This took only a few days.

Around the world, with trillions of dollars on the line, we are seeing a working out of one of the rules in Paul Dickson's book, "The Official Rules" (1978): "Things are easier to get into than out of."

The deal-doers believed that central banks can save everything, that commercial bank leverage is forever, that moral hazard is a guarantee for people with connections to avoid bankruptcy, that if your company gets too big to fail, it will not be allowed to fail. They believed in high profits and low risk.

They were wrong....

Bottom line is that the Fed will inflate the Dollar to pay for all this debt.