US$700 billion bailout is Hippocrates and unjustified

Although US$700 billion (RM2.4 trillion) fund to buy illiquid securities is controversial and could be debated, I couldn't agree more with the US government.


Washington's bailout package though claimed to be unpopular with the public and doubted by some analysts, it is claimed to be the biggest effort yet by the US government to ease the worst global financial crisis since the Great Depression. Yet military power of the US is the main instrument to purge the world to give value to the USD which put the global economy at risk.

Ironically, USD is not being backed by gold although it has been the preferred currency of world trade; it purged the global economy at risk as USD is a worthless paper without any backing of tangible value like gold or silver as required for other countries. The value of the USD paper money is believed moving closer to zero.


It clearly stated by the official web site of the US Treasury that Federal Reserve Notes are backed by nothing.

“Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything. This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy.”


Washington's bailout package is interprets as printing the money without backing of any gold. It created too much fiat paper currency floating around in relation to current gold holdings in the current global financial system. It’s beyond imaginable but is a reality that is unacceptable by simple layman.

It was inevitable that Smithsonian system of fixed exchange rates without gold had smashed apart on the rocks of economic reality in which gold as the banks preferred interest bearing certificates to holding gold bullion. What a ridiculous for once again, the countries were pledged to maintain fixed exchange rates, but with the exception that without backing of gold or world money, US is permitted to print such a big amount of money.


The Smithsonian Agreement December 1971, hailed by President Nixon as the greatest monetary agreement in the history of the world, which was overt and covert by hidden political agenda to exploit the global financial system. It is even more shaky and unsound than the gold exchange standard of the 1920s Bretton Woods.

Undeniably, it is all the fault of Alan Greenspan to reduced interest rates to the point where almost anyone could get a home loan even if they weren't qualified for it. It caused the Lehman Brothers Holdings Inc. filed the biggest bankruptcy in US history after the failure of AIG.


While Asian Financial Crisis gripped much of Asia beginning in July 1997, above and beyond all other consideration, the suggestion of IMF through a series of drastic economic reforms was based on the neo-liberal economic principles - the "structural adjustment package".

The Americans suggested crisis-struck nations reducing deficits by cutting down on government spending, allow the insolvent banks and financial institutions to bankrupt but selling off to Americans investors at fire-sale prices and raise interest rates more aggressively.

Noted the contradiction nature of these move and the gross US external debt was over US$13 trillion as of June 2008, evidently the rescue package of US$700 billion that claimed to stabilize the economy to bailout the bad mortgage manage by looted management is such a Hippocrates and unjustified.