It is amazing how Bernanke and Paulson were able to scam America into believing the $700 billion in “illiquid” mortgage-backed securities they are about to purchase, will somehow be resold in the future to recoup the money or potentially even make a profit.

If a homeowner stops paying their $400,000 mortgage, instead of the bank foreclosing on the home… they will simply sell the mortgage to the government. A year later, the government will call the borrower and offer to reduce the mortgage to only $200,000 and refinance it at a 30-year fixed rate… allowing them to stay in the home.

If all these borrowers pay their new reduced mortgages, it is theoretically possible the government could recoup $350 billion of the $700 billion over the next 30 years.

What these Congressmen are too stupid to realize is… the millions of responsible Americans who are paying their mortgages on time… will realize they can get their mortgages cut in half too if they only stop paying. Therefore, the $700 billion in bad mortgages will quickly multiply to as much as $3 trillion.

At this point… everybody will rush to max out their credit cards and not pay any of that money back… which will add another $1 trillion. Of course, nobody will pay back their student loans either.

So while the intention of this bailout was to get credit flowing again, it will have the complete opposite effect… and destroy what is left of the credit market.

The dow dropping another 600 points today is a painful reminder that Ron Paul was in fact correct about the consequences of our monetary policy.