A new (old) model of the largest heist in history

The last events of pumping ever more money into the financial system seems to have revealed how it works and why banks are still making profit despite the economic gloom.

The government gets into debt as it pumps in taxpayers money into the financial system. The financial institutions take the money and lend it back to the government charging interest. Not exactly a rocket science of the financial engineering. This is one of the mechanisms how banks make money despite gloomy economics. The government is borrowing money from the banks that it put there in the first place. This puts the government into further debt. Quantitative easing (QE) is a part of the same process.

Then, the financial institutions, having made money (by exploiting taxpayers) pay back some in taxes. However they will get it again, and more, from the government in form of some subsidies, bail-outs, QE etc and the cycle repeats.

This is a loanshark's business model of spiralling the country into ever more debt.

The lending with loan to deposit ratio above 100% cleared the capital reserves out of cash causing the liquidity crisis. It appears that the heist is continued. This time government is giving money to banks only to borrow (the same money) from them at the costs later. As a result banks are making money and pay taxes. This is used as a false argument that banks, in the shape as they are, are good for the economy making profit despite economic gloom. It all looks like an organised scam as these are bogus profits.

This cycle of getting taxpayers further into debt also has an exponential growth like lending with loan to deposit ratio above 100%. With base slightly above 1 (i.e. 1% - 2% - 3% interest) it will increase at first slowly. But it is a time bomb as at some point it will start accelerating very rapidly.

The bankers’ bonuses are the ultimate insult. It is like paying a burglar for doing your home. Although emotive, it is financially of little significance to the system. In reality there is a risk of a complete break-up of the public finances as this taxpayers robbing scam is a pyramid which may reach a tipping point and collapse leaving the country with unrepayable debt. Then only hyperinflation, on a Weimar Republic or Zimbabwe scale, could balance the financial books of the country.