Gary North

September 30, 2008

The bankers lost round one. They will be back, maybe before the end of the week.

They want the voters' money. My guess is that they will get it. My guess: Friday or next Monday.

See if the media switch from the word "bailout" to "rescue." The word "bailout" -- totally accurate -- helped defeat the bill.

Expect an attempt soon. The bankers still want the subsidy. The Administration and Congress's leadership want it. I think they will lobby hard for three days until they get 12 House members to switch.

The will of the people? Forget about it.

The sign of this will be the Senate's vote. If the Senate returns on Wednesday and debates the supposedly dead bill, it will pass. (I wrote this late on Monday evening. By early morning on Tuesday, the financial press had reported on Wednesday's vote in the Senate.) Then there will be another vote by the House, unless Pelosi thinks it is utterly hopeless. The leaders will point to the stock market and say "depression!" They need to persuade only 12 people.

If this is really over, the Senate will not vote on the bill. Dracula never dies. I don't think this bill is dead yet.

Why push this bill? Because the Federal Reserve System must otherwise go it alone. It must inflate. It had hoped that the Treasury would provide the funds. That is what the bailout was all about: taking the heat off the FED.

The FED has begun the injection of funds. It will not stop until the House reverses the vote.

Henry Paulson is already working to organize another vote.

The helicopter has taken off. The FED is the lender of last resort. We are now at last resort. The word is that it will inject over $600 billion of new money and swaps.

Bernanke is stuck. He will imitate Greenspan.

There is no turning back from inflation now. It will take months to overcome the recession, but monetary stability is now a thing of the past.

I don't see how this can do anything but force prices higher over the next 12 months. But not housing prices.

Don't expect the stock market to collapse in one fell swoop. The hope of a bailout will bring it back up. But I think pessimism is so bad that the bailout will not reverse the psychology of loss. (Again, I wrote this late Monday evening. By 5 a.m. Tuesday morning, Bloomberg ran an article on the break in investor psychology.)

Investors are slow learners. They are not blind. They will be ready to sell in any recovery.

Voters are also slow learners. They are truly blind. They believe that the charade is real. It isn't. What is real is conspiracy. You can read my book on it here:

When the reversal takes place, and the bailout gets enough votes, a tiny handful of voters will figure out that the system is rigged. It has been since at least the election of 1896. On peripheral issues, the voters are allowed to get their way. Not on the issues crucial to the elite that runs America and is interlinked to similar power elites internationally.

When the bailout comes, the political charade will lose legitimacy in the eyes of a few million people. Bailout by bailout, legitimacy will drain away. They will need many bailouts.

That will be a great opportunity for dedicated people to get involved politically at the local level. That is where successful resiatance must come from -- not national politics or third party politics, both of which are 100% futile. That is also where this nation must be restored to its original roots. It will take a few generations, but it will happen.

The elite rules by stealth. The coming bailout will force them to lose some of this stealth. "But the people's representatives voted!" And they will vote again, until a majority votes for the bailout. Then there will be no more votes.

If you want to see how the game is played, watch this video of an outraged Democratic Congresswoman from Ohio on Monday. She said it as well as anyone could in five minutes.