Well...That's Comforting

At prophecy lunch today we were discussing again the Ponzi scheme that is going on between the U.S. Federal government, the U.S. Treasury and the Federal Reserve. It should comfort no one that the Federal Reserve has been "buying" 70% of the U.S. Treasuries over the last few years.

So when I got back to the office I was reading emails and received one from a really big investment house talking about the great buys that are available through the municipal bond market. For those who don't know what a municipal bond are...they are IOU's issued by states and local cities for sewer, water, schools, etc...

Now pay attention to paragraph number 5 as to WHY they think municipal bonds are pretty safe;

5. States cannot go bankrupt. States and many municipalities are not legally allowed to
file for bankruptcy, and would therefore be highly resistant to default, for fear of severe
repercussions in the investor community. We believe that the federal government will
intervene prior to any state default and that state governments will intervene prior to any
major default at the municipality / city level, to avoid the fallout that such an event would
create. Remember, the Fed is worried about the fragility of the economy, and a major
default would have an adverse impact on the ongoing recovery. Municipalities also have
a variety of stop gap measures available to help them avoid default, including the issuance
of additional debt and taxing authority to fill budget gaps.

Oh goody!! Did you catch that?? They believe that if the state were about to go belly up then the Federal government would bail them out....and if the city were to go bankrupt that the state would bail them out. Boy that's encouraging!! So who will bail out the Federal Government?

Can you see how this whole financial system could come apart when no one has any "real" money left to bail anybody out?

Follow up question Mr. Investment House....if the Fed can't afford to bail out the state, and the state can't afford to bail out the city....exactly how big would the "adverse impact" be to the "ongoing recovery" that you claim we are in?

Holy Ponzi scheme!!!

Hold on tight folks....this ride we have been on may get pretty bumpy.