Why is this important? California is out of money. And yet they refuse to cut their spending. So the only way they can continue to spend this kind of money is to borrow it since the states do not have their own printing press.
But this money that is being loaned to California is money that was given to the banks as part of the Federal Reserve’s money printing program. Since California will probably never pay this loan back, the Federal Reserve has in effect printed money for the State of California.
I was wondering how the federal government was going to bail out the states that have overspent. And this appears to be how they are going to do it. And they did it in such a way that the vast majority of the people will never figure out that it was a bailout.
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