One of the burning questions regarding the recently passed bailout, and the one that almost no one has bothered to answer, is how the government intends to pay for it. Governments have three main methods by which they can raise funds: taxation, printing new money, and debt. As our $10 trillion national debt shows, the federal government has always enjoyed raising money by issuing new debt. Money is gained upfront, while the cost of repaying that debt is pushed onto future generations.
The "liquidity" problem is often discussed as though there is not enough money to go around. We have lots of money because the government printing presses have been running 24/7 for years, but where is it and why aren't we buying things with it? Well, a large portion of it is overseas where it has been sent to pay off debt for goods and services and they are becoming more worthless with each additional dollar we print. At some point, these dollars will come home to roost.
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