Kick the Can Down the Road

Many of us are aware that a big test may be coming this week for the Ponzi scheme created by the U.S. Federal Government.  Why?  Because QEII is set to expire on June 30.  QEII was the program where the Federal Reserve actually went to the U.S. Treasury bond auctions and "bought" Treasury Bonds (which are IOU's sold by the Federal Government to finance their current spending deficits) in an attempt to artificially drive down interest rates hoping this would spur consumers to keep spending money they don't have.

So really...it is a Ponzi scheme that is ENABLING another Ponzi scheme of consumer spending.

According to one popular financial news writer, Jim Jubiak, this scheme is not going to pop this week or next week or next month.  Why?  What happens if no one shows up to buy the $75 billion of IOU's we are selling every month?

In short, he says that the world's bankers all got together and came up with another "banking system" that is going to make U.S. Treasury's attractive to the world's banks....thereby making it very likely that the bankers are going to be showing up next week at the  Treasury auctions to take up the slack created by the withdrawal of the Federal Reserve.  The latest plan to save the system is called "Basel III"....so watch for it.

Get it?  We came up with some more smoke and mirrors so we can build the financial tower a little bit higher in the next few years....meaning it will be even a bigger crash when it does fall.  So eat, drink and be merry....for tonight we dance!!

Who will pick up the slack after the Federal Reserve ends its second program of quantitative easing at the end of June and stops buying $75 billion in U.S. Treasuries every month? Not exactly a minor question for a country running a national debt of $14.5 trillion.

Yep, despite the fact that the debt-rating companies have warned that they've got an eye out for a possible downgrade on U.S. and U.K. debt, and despite recent, even stronger warnings on Italy and Spain, and despite multiple downgrades for Greece, Ireland and Portugal, under Basel III rules, a bank that holds sovereign debt won't be required to adjust its core capital ratio higher to make up for any extra risk.

I'd say that the appetite for Treasuries from U.S. banks would be enough to pick up a great deal of the slack from the end of QE2.

The dangers in this "solution" should be clear to anyone who has been following the Greek debt crisis.

First, it's not really a solution. It merely kicks the problem down the road (as the proposed Greek "solution" would do), with a hope that better economic conditions in the future will provide an actual solution.

See it here;  http://money.msn.com/investing/why-treasury-crash-will-not-happen-jubak.aspx?page=2

So there you have it....Basel III is a new accounting rule which should stave off global economic disaster for at least a few more years!!!  Yeah!!!  They've done it!!  We are saved for at least a few more years!!  I knew the world's smartest people would figure this all out!!  Now please excuse me...I'm heading to the Cadillac dealer to finance me a new Escalade at low interest rates and only 7 years of payments!

Hat tip to Jared F.